Estate planning is the process of anticipating and
arranging for the disposal of an estate.
Estate planning typically attempts to eliminate uncertainties over the
administration of a probate and maximize the value of the estate by reducing taxes and other expenses.
A knowledgeable international
estate planning attorney will generally provide in-depth analysis and guidance
on U.S. income and wealth transfer taxes affecting cross-border planning,
foreign death taxes, including:
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Planning techniques for the U.S. estate,
gift and generation-skipping transfer taxes;
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The impact of U.S. estate and gift tax
treaties;
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Structuring of cross-border charitable
planning;
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Transnational entity structuring in foreign
countries;
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Marital planning;
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Pre-immigration planning;
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Conflict of law issues;
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Forced heirship statutes;
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The use of domestic and offshore trusts;
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Asset protection; and
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U.S. information reporting requirements.
The uninitiated
international estate planning attorney, and seldom some “experienced”
professionals, recommend the use of two wills – one for each country in which
the assets are located. So, for example,
if the testator lives in the U.S. but has a vacation home in Los Cabos, Mexico,
these attorneys would recommend one will in the U.S. and another will in
Mexico, with the second one covering solely the Mexico assets. The alleged benefit of this strategy is that
it results in less paperwork and avoids the need to enforce a foreign judgment
(i.e., the judgment issued in by the probate court in the U.S.).
Despite the
apparent benefits, the two-will strategy has tremendous downsides and should be
avoided if at all possible. For
instance, the issues that may arise from a two-will strategy are:
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Having to go through probate in the U.S.
and in the foreign country;
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Conflicting judgments (e.g., one
declaring A as the heir and another declaring B, perhaps a pretermitted heir or
an ex-wife, as a sole or co-heir);
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Service of process and court hearings in
more than one country;
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Translation costs and delays;
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Language, legal and cultural barriers;
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Potential for having the prior will
voided due to the existence of a subsequent will;
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Unnecessary attorney fees and court
costs; and
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Unwanted tax liabilities.
Furthermore,
most countries would recognize and enforce a judgment entered by a U.S. probate
court. For instance, Mexican courts have ruled that (a) as long as the will has
not been rendered void, it is to be enforced in Mexico and (b) a foreign
judgment recognizing the will as valid is presumed valid in Mexico, just as if
it had been recognized as valid by another Mexican court, unless the plaintiff
or appellant proves otherwise. While the
recognition proceeding may not be a quick and simple proceeding, it is generally
more so than having an additional, perhaps adversarial, probate proceeding.
There are much more efficient and effective strategies for clients in need of cross-border
estate planning solutions. There is no
boilerplate solution. The ideal strategy is subject to the nature and location of
the assets, the domicile of the testator, the legal systems involved, and, more
than anything, the intent of the testator.
Mauricio Leon de la Barra is an international law
attorney licensed to practice law in Mexico and California, and has more than
15 years of experience representing clients in cross-border matters involving
international, U.S. and Mexican laws.