For the next few posts, I'll be doing a series on a topic that I've had an interest in for a long time: how not being a US citizen can effect estate planning. I'll try to address what a non-citizen, or their spouse, should think about and make certain that their estate planner is considering when constructing an estate plan, including what tax issues to consider. I'll also try to hit on what a US citizen should be concerned with when inheriting property from outside the US. I'll refer a lot to German law because I've specifically looked at the law in that country. Today, I'll mention some non-tax issues to consider when setting up the estate plan.
First of all, if you or your spouse is not a US citizen, make sure your estate planner knows about it. As I post on this subject, you'll see that non-citizens have a lot more to consider and if your estate planner doesn't know your status, the plan will almost certainly not meet your needs. Most good planners routinely address status in the first meeting. If they don't, it might be a sign to move on to a planner with experience in the area.
Additionally, many countries do not follow American notions of what probate and estate law applies to an individual. Most states apply the law of where the person was domiciled (basically, living) or where they died. Some countries, including Germany, apply the law of the person's citizenship. So, a German court, or possibly a US court, would apply German law to a German citizen who lived and died in the US. If this happens, the foreign law will have a big impact on what happens to the estate.
One of the big non-tax issues for the non-citizen is whether the country of citizenship recognizes a children's right to take against the will. In America, a testator (the fancy legal term for the person who make a will) has an unlimited right to disinherit the children... and the children can't do a thing about it. In many civil law countries, a testator doesn't have this right. For example, in Germany, a disinherited child can make a claim for half of what they would have been entitled to, if no will had been in place. This means that if you want to give everything to your spouse, with the idea that the spouse will get taken care of during their life and pass the wealth on to the kids when they die, your kids have the right to interfere with that plan.
This is a lot of information, but gives you an idea of how different law can be between countries and how important it is for your planner to be aware of those differences and how it can affect you.
So, what can a non-citizen do to deal with some of these non-tax issues? A helpful thing for your estate planner to do to deal with the non-tax issues is to put your country's consulate number on speed-dial. Many consulates have a legal department especially for legal questions from their citizens. With a quick call to your consulate, your planner can learn what your country's law is, how it may affect you, and what property it will affect. Additionally, your planner can work together with a planner in your home country to implement your plan and make sure that your will will be recognized in either country. Ultimately, the goal is for your planner to be able to craft a plan to meet your, or your spouse's, particular non-citizen needs.