Few people enjoy considering what might happen to themselves, their family and their assets down the road. Although expatriates are often successful in business and future-oriented, they are busy and tend to be no exception. The following are six common mistakes expats make, and some of the consequences:
- Not Making a Will or Living Trust
Estate tax is levied on worldwide assets, including not only accounts and real property but retirement plans and life insurance policies. U.S. assets may be subject to the probate process in the state last resided, costing one’s family money and time, and property in different states may give rise to multiple proceedings. An estate planning attorney can advise you on which types of documents are appropriate and what the process will look like given your assets and priorities. A revocable living trust is often an effective way to avoid paying an estate tax.
- Not Addressing Foreign Legal Requirements
Countries differ in probate and estate laws. They may not recognize a US will, but beware! A will in a foreign country can revoke the U.S. will, leading to a legal nightmare. Drafting a foreign will therefore requires a U.S. attorney and a foreign attorney working in concert together. Without careful planning, assets may be subject to inheritance tax in the foreign country.
- Not Having a Power of Attorney
In the event of death in a foreign country, a consulate acts to help family and friends to return remains and to transmit personal property abroad. But what if you are incapacitated in a country without family? In that event, you may need a foreign power of attorney appointing a local agent to make decisions during your disability. Often, family or a U.S. agent cannot travel to where you are within a reasonable time frame. You may need a power of attorney that gives some decision-making authority to a local person and some to a foreign person, to plan for every eventuality.
- Not Having a Health Care Directive or Living Will
Most non-lawyers envision estate planning as centered around avoiding taxes or distributing one’s estate, but just as crucial is to plan for when you may not be able to make your own decisions. In the event of a serious health crisis, a standard Power of Attorney is useful, but doesn’t tell healthcare professionals, business partners and creditors/debtors how to behave. A living will (or, in some states, an Advance Directive) can be drafted by an attorney to enact any wishes you may have during an unanticipated disability.
- Not Providing For a Local Temporary Guardian for Children
Families residing abroad may be faced with a crisis where one or both parents are incapacitated, whether by illness or emergency. Most estate planners focus on taxation issues, to the exclusion of important choices such as who will care for your minor children in those circumstances. Having a trusted person who can serve as temporary local guardian, and providing for that person’s help in the country of residence, is an important component of estate planning.
- Not Knowing About Non-U.S. Spouses
The non-citizen spouse of a U.S. national is considered to be a “non-resident alien,” unless he or she has a green card (permanent residency status). While a U.S. citizen can give unlimited assets to a U.S. citizen spouse, he or she can only give up to $145,000 per year (as of 2015) to the spouse without tax consequences. In addition, there can be complicated questions surrounding whether to file taxes jointly with a non-U.S. spouse. An experienced estate planning attorney can help you with these difficult issues.
We focus on helping US expatriates meet unique challenges of living in a foreign country. Contact our office to discuss how to protect your family and wealth by having proper documents in place.