offshore bank accounts


Do you have an offshore bank account? If the answer is yes, you could be one of 8.7 million Americans living abroad. Or, you might have decided to move cash out of the US to diversify and protect your portfolio.

An offshore bank account can have many benefits, such as:

  • Privacy; if you have under $10,000 total and don’t have to report your foreign accounts to the IRS.
  • Diversify your savings into different currencies.
  • Have options for choosing banks with greater cash reserves and more conservative management than US banks.
  • Protect savings from the reach of US government agencies and lawsuits.

However, many owners of offshore bank accounts mitigate these benefits by not having a plan in case of their disability or death.

In the worst scenario, the offshore bank accounts that provided safety and privacy during your lifetime can be lost forever if your family members have no clue about their existence. When an offshore account remains unclaimed, the foreign bank is not required to report it to the government, as they are in the US.

Even if your family located your accounts, it might take much time and hassle to claim them through local court systems. For example, in Singapore, if you have a deposit larger than $5,000, you have to engage a Singaporean lawyer and obtain letter of administration from the court in order to claim the fund.

If you have a significant amount deposited in offshore banks, leaving it without a plan is not an option. Below is what you need to consider when you are ready to create an estate plan for your offshore bank accounts.

Your US executor or administrator has no responsibility to locate foreign accounts

An executor or administrator in the US does not have authority to enter a foreign jurisdiction and exercise power over property there. Consequently, he is not liable for any loss of assets in a foreign jurisdiction. As a result, foreign accounts that you didn’t identify in a will or trust can be easily lost and never claimed by your beneficiaries.

Your executor or beneficiaries can even encounter problems accessing bank account information in a country like Switzerland, where bank secrecy laws protect account information tightly.

Make a list of all your international assets, and update it annually

Since foreign properties can be lost if beneficiaries do not claim them, it is important that you leave records of the properties so that beneficiaries can locate them after you pass away. Making an inventory of all your assets should be a regular practice, and your foreign properties should be included.

You have to pay estate tax on foreign accounts.

Even though estates of US citizens have a high exemption amount of $5,450,000 (as of 2016) before having to pay tax, don’t forget to include your foreign accounts into taxable estate totals. US citizens and residents are liable for estate taxes on their worldwide assets.

Determine if your account is subject to a probate in the foreign country.

In most countries, personal properties such as bank accounts follow the law of domicile or citizenship of the deceased, instead of where the account is located, to determine transfer at death. As a result, if you have a bank account in a country where you don’t live, the probate is not necessary, and transfer of your assets after death does not have to go through a court process.

However, if you have lived in a country where you have a bank account, you could have established a domicile according to local law definitions. Then, your properties will require a probate process to transfer ownership.

Keep records of where you have lived and where you are planning to live, so that you can plan accordingly.

Be aware that, even if your beneficiaries don’t have to go through a court process, it can take a long time for them to claim properties in some countries if you don’t have a plan in place.

Some countries allow nominating a beneficiary of accounts after death.

One of the popular ways to avoid a probate in the US is to use Transfer on Death (TOD) or Payable on Death (POD). You can use them to name beneficiaries of your accounts, and the ownership can be transferred as soon as beneficiaries show evidence of death and their identification.

Even though TOD and POD can make it easy to transfer offshore accounts at the owner’s death, it could cause more problems if it does not match an overall plan. For example, unhappy family members can dispute that the transfer outside of probate should be canceled because it did not pay a portion of estate tax or because beneficiaries of the account received an amount that conflicts with a will or legally specified shares.

Use non-probate transfer methods available in the country where your account is located

Another way to transfer your fund outside of probate is to have a beneficiary as a joint owner of your account, with the right of survivorship. If one of the joint owners dies, the surviving joint owner has full ownership of the account without going through a probate process.

However, joint ownership in some countries does not offer the right of survivorship, and the shares owned by the deceased owner still have to go through a court process. Make sure to confirm with your offshore bank how the joint account is treated in the case of incapacity or death.

The country where you have a bank account might have other ways to facilitate transfer of funds at death. For example, in civil law countries, usufruct grants a person the temporary right to use property during the owner’s lifetime. It is similar to a life estate in the US. Upon death, the temporary right expires, and the new owner, often a surviving spouse, retains the full ownership without needing to go through a court process.

Determine if Power of Attorney can be utilized when the account owner is incapacitated

Your estate planning for offshore bank accounts should include a plan contingent upon your incapacity, when you are unable to manage your affairs.

A Durable Power of Attorney can be used to give someone you trust the power to manage your financial affairs, including your bank accounts.

Most countries have some form of power of attorney you can use to protect your assets in case of your incapacity.

However, keep in mind that a Power of Attorney you drafted in the US will not be automatically accepted in a foreign country. You might have to authenticate or apostille the document in the US embassy before it can be used in a foreign country. If the account has significant value, and you have other assets in the country, if might be a good idea to invest in drafting a local power of attorney which will be more readily acceptable.

Use a corporation and/or a trust to hold your bank accounts

When your bank account is owned by a corporation or a trust, the ownership can continue without interruption by an individual’s death or incapacity. However, it assumes that you have a solid succession plan in place for your corporation or trust, so that the interests can transfer efficiently.

Owning a bank account through an entity also provides additional privacy and asset protection.

Call your offshore banks and find out how you can prepare for your incapacity or death and make sure your family receives the fund. If you need assistance with planning your offshore assets, please contact us.

Get International Estate Planning Help from Jiah Kim & Associates

Attorney Jiah Kim provides experienced legal representation for US expatriates to protect their assets in the United States and abroad. If you would like more information about preparing a cross-border estate plan, contact Jiah Kim & Associates today. To arrange an initial consultation, you can call (646) 389-5065, or simply schedule a time that works for you.

This blog post is written for educational and general information purposes only, and does not constitute specific legal advice. You understand that there is no attorney-client relationship between you and the blog publisher. This blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

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