You have assets overseas
It is very common nowadays to own assets overseas. For example, parents sometimes buy property in Australia for their children who are studying there. An informed investor may buy and sell shares listed on Wall Street. A father may open a fixed deposit account in London to finance his daughter’s law degree. A high net worth individual may buy an off-shore private placement life policy to fund his legacy. It is also not uncommon to find adventurous property investors buying properties in the emerging markets using private property holding agreements with the locals.
There are serious estate planning issues to think through, and it is natural that most of these foreign assets promoters do not like to talk about such things.
Estate Planning Implications and Problems
- Some countries have estate duty or inheritance tax. Therefore, when you die, your asset values may be diluted by estate tax. If there is insufficient liquidity, the assets have to be forcedly sold to raise cash, and this will further dilute the value of your assets.
- Some countries have capital gain tax. If your executor clears your estate by selling the assets at a profit, such taxes could be levied.
- Lack of communication. If you do not keep proper documentation, your estate legal representative will have a difficult time in calling in the assets to settle your estate. For example, it is not uncommon for investors to buy property in emerging markets using a private trust agreement with a local. The issue is that the agreement is so private that no one else will know the existence of such agreement. Since the title deed is in the local’s name, this local will end up as the ultimate beneficiary of your overseas assets, and you that might not be your intention.
- Lack of an asset inventory. If you hold overseas assets in a piecemeal fashion, then it can be very difficult to trace these assets when you die or lose your mental capacity.
Estate Planning Solutions
- You need to do an asset inventory and write a will. Cross jurisdiction estate settlement via testacy is tedious, but it is still far better than cross jurisdiction estate settlement via intestacy.
- After doing an asset inventory, you might want to consider consolidating these assets under a holding company. The holding company could be off-shore or on-shore. Each has its pros and cons depending on your unique situation.
- Similar to item (2), you can also consider parking your assets into a trust if the assets are significant.
- You might want to consider using a trust to hold your off-shore life policy.
- In your private property holding agreements, insert an exit clause and communicate that to your stakeholders.
- Communicate your estate distribution intention clearly, especially that of your overseas estate.
- If you own assets in countries with high estate duties, like the USA, the UK and some EU countries, you might want to hold a US$ life policy to provide the liquidity to clear the taxes and estate settlement costs. Ultimately, US currency is still the most liquid and recognised currency in the world.