Easiest (and Hardest) International Investments to Inherit

No one knows their time. And it may come sooner than we think.

That’s what happened to two potential clients who have just inherited “a mess” and are having a hard time of it.

As a bit of background, their dad set up three structures in Panama some time ago. They held various types of assets, including a property.

Upon review, it was clear to us that the professional who helped him wasn’t familiar with US issues – probably a local lawyer in Panama.

It was a lot more complicated than it needed to be and came with some hefty accounting and legal fees – adding up to a few thousand dollars in unneeded expenses every year.

Although their dad had been “perfectly healthy”, he passed away suddenly. His kids were only vaguely aware of his foreign structures and didn’t know how to manage them on their own.

They came to us with a simple request – please help them shut everything down, close the structures, sell the assets, and bring it all back to the US.

This is not an uncommon request.

Because the reality is, most kids don’t want to deal with international assets themselves. It’s complicated, confusing, and (from their perspective at least) expensive.

And that’s fine – to each his own.

So what can you, as the responsible parent, do to make things easier for them?

The first, and more straightforward option, is to plan to sell your international assets before you pass.

But let’s say you don’t want to do that. Let’s say you want to hold them for the long term. How can you make it easier for the kids?

One option is to choose international investments that are simply easier for your heirs to close down if they want to. To help with that, here is a selection of foreign assets ranked from easiest to not-so-easy…

Easiest: Foreign bank accounts.

Liquid by default. Depending on the jurisdiction and the bank, closing the account will typically require proof of death of the accountholder and proof that the executor or other authorized person has the legal power to act on behalf of the estate.

If the account is held in an entity (trust, LLC, etc.), you’ll need the legal representative (trustee, member, etc.) of that entity to take charge.

Second Easiest: Swiss IRA accounts.

Because IRA accounts held in Switzerland are still required to have a US legal representative (custodian), they are handled as if they were a domestic asset; your heirs will take possession under the same rules as any inherited IRA.

Third Easiest: Swiss investment accounts.

Swiss investment accounts consist of two pieces – a portfolio (securities and precious metals generally) and a Swiss bank account. Depending on the type of account (personal, joint, LLC, trust, etc.) your heirs will need to provide a death certificate and any other documentation required to prove that the person acting has legal authority to take control.

Most of the time, the portfolio will be sold, which should not create any tax obligations thanks to the step-up in basis. The proceeds of the portfolio will be put into the bank account and a wire can be sent from the bank back to the US.

Fourth Easiest: Precious metals.

There are a wide variety of precious metals options out there, some of which are fairly straightforward and work much like a foreign bank account, except that it holds metals instead of cash.

Other options are very cumbersome and involve your heirs either making a personal visit to a foreign facility or paying a lawyer to do it for them through an explicit power of attorney.

It’s important to get this right. We’ve seen plenty of foreign-held metals “stranded” overseas because the process to repatriate them was so convoluted.

Hardest: Foreign Real Estate.

People sometimes underestimate the difficulty of transferring foreign property to the next generation. Every jurisdiction is different and some are easier than others. But even in the easier countries, without extra planning, it can take many months or even years for your heirs to receive the property before they can sell it.

Structures can definitely help but, if done without US compliance in mind, create a whole new headache you might not want to pass on to those you care about.

With that all said, what’s the best approach?

Quite simply, we recommend…

• Choose investment options that won’t commit your heirs to any great foreign legal process (broadly, the first four options above).

• If you are serious about buying foreign assets that will expose them to foreign probate, check to see if they’re even interested in that. If not, have a plan in place to either sell the asset before passing or, at a minimum, make the transition as easy as possible. Seek professional help from a firm that understands US planning.

• Make sure your heirs have the details of all overseas assets and all of the contacts needed to keep everything in good order.

For our part, we are routinely asked to help with cases like this. When the time comes, our clients’ heirs know we exist and are available to help them with whatever they would like, whether that means liquidating the assets and bringing the proceeds back to the US, or continuing to hold them abroad.

The worst time to do planning like this is just after a loved one has passed. Rash decisions get made that can have long-term consequences. If you already have international assets, or you are looking into it, feel free to get in touch to see if we can help you set things up in a way that makes it a lot easier on your heirs when the time comes.