CLE presented on September 16, 2014 by Robert S. Mucklestone, Perkins Coie
Summary prepared by Jonathan M. Lloyd, WSBA IPS CLE Chair, 2014-15
International estate planning is a highly complex area that involves various U.S. federal and state laws, as well as international treaties and other countries’ laws. A fundamental goal of estate planning is to give the client’s surviving spouse maximum flexibility. It is vital to understand both the facts about the client’s citizenship, relationships and assets, as well as the interplay of the various legal regimes that may apply to those assets, to provide clients with accurate and effective estate planning advice, particularly when citizens of different countries or assets located in different jurisdictions are involved.
One fundamental step in providing effective representation is gathering extensive information about the clients and their assets. Key categories of information to obtain include (i) citizenship of all parties; (ii) location and value of assets; (iii) future intentions regarding place of residence and domicile; (iv) how property is treated between the parties; and (v) U.S. domicile or controlling law. Where the clients include a U.S. citizen and a non-U.S. citizen spouse, it is also important to consider asset transfers, both during their lifetime and at death. One other important consideration is the potentially applicability of community property laws, even when the client no longer resides in a community property jurisdiction. This would include an assessment of what assets were owned at the time the client or spouse left the community property jurisdiction, and what assets were subsequently acquired, as well as review of any agreements between the spouses designating certain assets as community property.
One key issue to consider in providing advice on international estate planning is what tax treatment may apply to different assets, under U.S. federal and state law, as well as potentially applicable foreign laws. When dealing with non-U.S. citizens or assets, this analysis may be complicated, and will likely depend on a number of variables, including the type of tax at issue (income tax, gift tax, estate tax and generation-skipping transfer taxes), the beneficiaries’ citizenship and residency, and the applicability of various deductions, exemptions and exclusions. For example, assets may receive significantly different tax treatment depending on whether the beneficiary is a U.S. citizen and/or resident, but residency is determined differently for different types of taxes: for U.S. income tax purposes, it is determined using an objective test, while for U.S. estate tax, gift tax and generation-skipping transfer taxes, residency is determined using a subjective test. These are often complex issues that require careful analysis.
One other issue to consider is the possibility the client may need to use a situs will for assets located in a foreign jurisdiction. That foreign will should be prepared or approved by a lawyer in the relevant foreign jurisdiction. The situs will must be carefully coordinated with the client’s U.S. will; it should not contain any inconsistent provisions, and the U.S. will should exclude assets disposed of by the foreign situs will. Note that there are potential drawbacks to a foreign situs will, both in terms of potential inconsistencies with the U.S. will (particularly if one of the two wills is subsequently modified) and potentially significant costs for preparation and notarization of a foreign situs will.
Consideration should also be given to general drafting issues, including certain topics that may play a more prominent role in international estate planning than in domestic estate planning. For example, the order of names may differ from country to country, and name spellings may vary in the ownership documentation of different assets. It is also important to realize that some jurisdictions permit more than one wife (but not more than one husband), while other jurisdictions recognize and grant specific legal rights to concubines.
The preceding summary discusses certain key points discussed during the CLE presentation, all of which were outlined in greater detail in the accompanying written materials. This summary is a publication of the WSBA International Practice Section, and is posted with the approval of the speaker and the WSBA International Practice Section executive committee. It is designed to inform members of the WSBA International Practice Section of recent legal developments, and may not be used to claim CLE credit. This summary is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations. If you have specific questions about this topic, please feel free to contact Mr. Mucklestone at firstname.lastname@example.org or (206) 359-8464.
For the original announcement of this CLE, please visit HERE.