Executive Summary
- High-value probate cases may involve assets from multiple countries, which will have unique requirements based on the country where assets are located.
- International assets must pass through probate in the country where they were located at the time of the owner’s death, which involves inventorying the assets, valuing them, and complying with local laws and regulations.
- To prepare for international probate, you should consult legal professionals who understand local laws and regulations surrounding how to manage and distribute assets during probate.
- International probates require a network of legal professionals within countries where assets are located
Introduction
As people choose to diversify their assets and seek financial gain from an expanded investment portfolio, it’s commonplace for high-value estates to have more international assets. International assets are just as important in your estate planning as any assets that you own in your home country, so it’s crucial that you include them in any will or trust you create.
The distribution of international assets during probate can be highly complex, as there are varying laws and regulations around probate and inheritance across country borders. With the expanse of differing laws, it’s crucial to consult experts in any jurisdiction where you or a deceased loved one owned assets so that you follow their legal processes appropriately.
Proper and comprehensive estate planning can help eliminate some of the complexity. By the time an estate has made it to probate, consulting a team of experienced, professional probate administration attorneys will make this process even smoother. Understanding how to deal with international assets will help facilitate a seamless distribution of assets from the estate to its beneficiaries.
Understanding international assets
International assets may include any assets, either financial or tangible property, located outside of an individual’s home country, such as:
- Real estate properties like vacation homes, condos, or mansions
- Vehicles
- Yachts
- Financial accounts
- Investments in international markets
- Business interests abroad
Globalization is making international assets more common as people consider investing in international markets or business interests during their lifetimes for considerable financial gain. However, this makes estate planning and distributions during probate more complex.
In high-value probate cases, it’s important that individuals incorporate all of their assets into their estate planning. International assets can be included in a will or trust just like any other assets, to outline how they should be managed and distributed upon the owner’s passing. If these assets are not clearly accounted for in an estate plan, then they will need to pass through probate and be carefully managed in accordance with laws in each jurisdiction.
Legal considerations
When you have international assets overseas, there are various legal considerations to make. Your international estate property is just as important as any assets you hold in your home state, so you should include them in all of your estate plans.
There is a complex network of laws and regulations you will need to navigate in order to handle your international assets appropriately. So you should seek the support of estate administration experts in both your home country and in any country where additional probate is necessary. Many countries, like Australia, Mexico, France, the UK, and others in the European Union may require their own form of probate proceedings before assets can be transferred back to your home state.
It’s also important to understand how your home state treats international assets being submitted in the probate process. For example, both California and Texas recognize foreign wills regardless of their country of origin, so if you created an estate plan elsewhere, it will still be valid and apply to your assets if you reside in one of these states at the time of your death. Similarly, there are other countries that will accept as valid wills and trusts that are validly executed within the United States, allowing for a smoother “collection” process upon the passing of the decedent. However, it is not the case that all countries or localities recognize foreign wills, so you should consider creating a will or estate plan for each country where you own property and ensure it complies with their local laws.
Anyone who receives an inheritance from a foreign country should also consider that they must report the inheritance to the IRS. Individuals receiving a foreign inheritance should complete IRS Form 3520. If the individual wishes to keep assets overseas, then they may need to file IRS Form 8938, Statement of Specified Foreign Financial Assets, to declare these assets. It’s a good idea to consult a tax lawyer for any questions surrounding requirements to fulfill with the IRS.
Valuation of international assets
If you have assets internationally, it’s important that you receive an accurate valuation of these assets so that you know how to manage them. Valuing assets will depend largely on the type of asset, but seeking the support of an expert will be key regardless of the asset type involved.
Valuing international assets involves the following steps:
- If the decedent had financial assets like stocks, bonds, or other investments, you should consult a skilled financial advisor who can assist you in understanding the closing price of the assets at the date of the decedent’s death.
- For intellectual property or physical assets, like real estate properties or mansions, you should begin the process by engaging local appraisers and experts to appraise the value of these assets.
- Using the valuation you receive in the local currency, convert it to the primary currency of the estate based on the current foreign exchange rate.
- Consult a tax expert to determine whether you should use the average exchange rate for the year or if you should use the exchange rate at the date of death.
Throughout the process, you should also maintain detailed documentation of all the factors related to the valuation of assets. This includes documenting exchange rates, appraiser credentials, and any local regulations that impacted the valuation of your relevant assets. This documentation is valuable in case you will need to answer any questions about how assets were valued.
You may also need to consider that some international markets are more volatile than others, which may result in changing values as the probate process continues. Local tax experts and financial advisors in the location where your assets reside can offer more guidance on what you should expect when valuing assets.
Managing international probate procedures
International probate procedures can be considerably complex, specifically because probate processes depend on where the assets are located and the legal requirements where probate takes place.
Every estate will have a primary probate proceeding conducted by a personal representative known as an executor—this process should take place at the location where the deceased individual resided at the time of their death and presumably where the majority of their assets are located.
However, an estate executor will also have to conduct an additional proceeding at any place where assets like property or investment accounts were located, often referred to as an ancillary probate. In an ancillary probate, the executor of the primary probate will file for probate in the additional location in alignment with their laws and procedures.
Generally, the steps involved in international probate procedures will include:
- Consulting local professionals on what steps are necessary according to the local law
- Marshaling, inventorying, and valuing assets after verifying the decedent’s ownership
- Providing documentation of the primary probate proceeding to the local court where ancillary probate takes place
- Attending any necessary hearings for ancillary probate proceedings
- Converting currency value to the primary estate currency used in the home country
- Transferring assets back to your home country
In many cases, the probate process in other countries resembles those here in the United States. For example, France requires the designation of a “notaire” to manage real estate transactions for the deceased and either following a will or identifying and locating heirs—this process is similar to appointing an executor in your home state to distribute estate assets.
Tax implications
Tax obligations on international assets may include estate taxes, inheritance taxes, and other foreign taxes. Taxes will vary depending on the country and the jurisdiction. Estate assets may be taxed by the country where they were initially located, as well as the state where the decedent resided at the time of their death.
It’s important to research the country where assets are located in order to understand any tax obligations you may have. Similarly, other countries also collect an estate tax on assets transferred, even if the decedent did not reside in the country.
You may also be subject to taxes on international assets and should report them.
Neither Texas nor California levy estate or inheritance taxes during probate. However, the United States does have a federal estate tax.
It’s important to consult an experienced tax professional about the implications of handling international probate. RMO Lawyers does not provide tax advice, so we encourage you to reach out to an experienced tax lawyer for more detailed support and advice.
Involving professionals
It’s important to involve professionals at every stage of the probate process to avoid any legal or procedural miscalculations. Only professionals with experience in the field and a given country understand the unique nuances of probate laws, taxes, and processes.
Some of the professionals to consider include:
- International attorneys
- Tax professionals
- Financial advisors
Generally, for every expert you seek guidance from, it’s a good idea to have one in your place of residence and in any country you have assets. If you have assets in multiple countries overseas, then it is worthwhile to have a contact in each one. It may seem tedious to have so many hands in your case, but building a strong team will make the process much easier and help you avoid any hiccups, errors, or legal violations as you carry out probate and the distribution of assets.
The first step in the process is finding an experienced probate administration attorney who can help you get the ball rolling. The right attorneys, like our team at RMO Lawyers, can connect you with a long list of resources with experience in international probate cases and contacts worldwide.
Challenges involved in distributing international assets
The key challenges involved in distributing international assets are the complexity of managing a wide array of assets and the laws involved with how to distribute them. Some of the key challenges involved in managing and distributing international assets include:
- The laws and regulations surrounding probate are different in each country and jurisdiction, so it’s necessary to seek the support of an expert and familiarize yourself with the necessary procedures in each.
- Probate may have to occur in each place where the assets were located, taking up considerable time and energy to follow through the process in each location.
- Because probate may look different depending on the country where assets are located, it will require discussing with a local attorney in the jurisdiction.
- Time zones can complicate communication between advisors and attorneys overseas.
- Exchange rates and volatile economies can muddy the true valuation of assets.
- Logistics of transferring assets overseas back to your home country to be transferred to beneficiaries can be complex.
Having a team of professionals to consult in each location and establishing clear lines of communication will help alleviate some of these challenges and make probate more manageable.
What to do if overseas assets are discovered during probate
If you discover overseas assets, it’s important that you take the necessary steps to account for and include these assets in probate. Because overseas assets can be more complex to work with, it’s a good idea to address them as soon as possible and get the process started.
Upon discovering assets overseas, the necessary steps include:
- Verifying the decedent’s ownership of the assets by looking at deeds, titles, or account statements
- Consulting your attorney about next steps
- Marshaling and inventorying all assets
- Valuing the assets with the support of local appraisers
- Converting assets to the primary currency of the estate
- Consulting legal professionals in the region where assets are located in order to understand additional probate requirements
An estate executor should perform a careful review of all the decedent’s assets in order to ensure they have accounted for all the assets related to the estate. Having a team of experts on hand will be key for addressing any challenges or concerns that may arise.
Receive guidance for navigating international probate challenges
Dealing with international assets in high-value estates offers several challenges, from maintaining streamlined communication to understanding relevant laws overseas. Each country is different and may have its own unique probate laws and requirements. Given the challenges of international probate, it’s always a good idea to seek support so you don’t have to navigate the steps alone.
At RMO, our attorneys understand the complexities involved in international and high-value probate cases and have handled countless cases of overseas probate. We also have an expansive network of professionals and are connected with both local counsel and co-counsel within countries around the world to ensure a smooth probate process. We’ll take all the possible steps to help you settle a loved one’s estate, preserve their wishes, and support all beneficiaries in securing their rightful inheritance.
Schedule a consultation with our team at RMO Lawyers to learn more about how we can support you in your probate case.