Estate Planning Tips If You Have Assets Outside of the U.S.

Do you have foreign assets and related documents (e.g. documents of title, stock certificates) that are recognized in a foreign jurisdiction?  Local wills or will substitutes, beneficiary designations, or certain ways of holding title may be appropriate to most effectively achieve you overall estate planning goals.  But take note: it is imperative that you first look to U.S. tax principles and consider how these rules may potentially conflict with the laws of the country where your foreign assets sit.

For example, you are a U.S. person (as defined under U.S. income tax rules) and are domiciled in California (as defined under the U.S. transfer tax rules).  You and your spouse jointly own real property in Taiwan.  At first blush, because Taiwan follows a community property regime and California is a community property state, you may think that there would be no difference upon the disposition of your real property in Taiwan under either Taiwan law or California law.

Many countries in Asia, including Taiwan, contain some form of forced heirship laws that require spouses, descendants, and sometimes parents to inherit property outright upon the death of the first spouse.  These local inheritance rules, which are based on civil laws of succession, may unwittingly rewrite your intended plans for disposition. 

There are several options you should consider to regain control over directing the assets in a local jurisdiction.  Consider creating and executing a will or will substitute in the local jurisdiction and include choice of law language to elect the application of California law.  Alternatively, if beneficiary designations are permissible with respect to the assets, it may be more effective to dispose of your foreign assets that way.  Another option is to explore whether there are specific ways you may hold title to the properties there to avoid application of unfavorable local inheritance laws.  

Finally, consult with your attorney to make sure that your U.S. estate planning documents are up to date and properly address your objectives with respect to the disposition of all of your properties, whether situated within the U.S. or outside U.S. borders.