What happens to foreign real estate when you pass away?

We have many clients buying property in foreign countries. Compared to holding assets like cash (in a foreign bank account), stocks or bonds (in a foreign investment account), precious metals (in a foreign vault), or other “movable assets”, foreign real estate almost always falls very clearly under the jurisdiction of the country in which it sits. It’s a “situs” asset.

This is important for US clients buying overseas for a number of reasons.

One of those reasons involves something no one really wants to talk about… what happens when you head on up to the pearly gates.

But if you’ve purchased foreign property — and you plan to hold it indefinitely — then estate planning will come into play at some point. And it’s something that needs some thought, no matter how uncomfortable.

Because if you don’t, your heirs are going to have to… meaning foreign probate in the worst possible scenario.

Best Practices

Now it’s virtually impossible to tell you here how to deal with foreign probate in every possible situation since:

• It has to be done country by country
• And it has to be coordinated with your US planning.

But here are a couple of rules of thumb to get you started:

EU countries

Countries in the EU are generally quite easy and straightforward. There’s an EU directive that allows foreigners holding local property to bypass the worst of local inheritance law. You do need a local will, however.

Common law countries

This includes countries that were once part of the British Empire (including Canada, the UK, and the US, broadly speaking), as well as certain other countries or areas that have specifically opted into common law to attract investors (certain places in the UAE, for example).

Generally, because they share the same legal system as your home in the US, such planning tends to be fairly easy and familiar to US clients.

Civil law countries

Countries that use civil include much of Europe outside the EU, most of Central and South America, and large swathes of Asia. They are generally harder to deal with compared to other areas.

All of this assumes you continue to be resident in the US and are not resident in the country where your property sits (residency can complicate things a bit).

So what’s the next best step?

Ask yourself these key questions

#1: Do I plan to hold the property for the long-term?

#2: If so, do I care about making it as easy as possible for my heirs?

#3: If so, what‘s the simplest way to address this estate planning issue?