Foreign Wills And Applicable Laws: Understanding The Legal Landscape

A foreign will is a last will and testament that was executed in another state or country. The laws that apply to a foreign will depend on the country or state in which it was executed, as well as the domicile of the testator. For example, in the US, the validity of a will is governed by the laws of a particular state, and each state has its own laws governing wills. In contrast, many European, South American, and Middle Eastern countries have forced heirship rules, which restrict how a testator can distribute their property after death. Therefore, it is essential to consult with legal experts who specialize in international law and estate planning to ensure that a foreign will complies with the laws of all relevant jurisdictions.

Requirements for validity

The requirements for the validity of a foreign will depend on the country and state in which it is executed. In the US, for instance, there is no federal law governing wills, and the validity of a will is determined by the laws of the particular state. Each state has its own statutes regulating the disposition of property at death and will require that there be some type of connection or "legal nexus" with the state. This can be achieved by the individual being a resident of that state, owning property in that state, or by purchasing shares of stock in a corporation incorporated in that state, for example.

For a will to be valid in the State of Washington, it must meet certain minimum requirements. A foreign will may also be valid in Washington if it is executed "in the mode prescribed by the law of the place where executed or of the testator's domicile, either at the time of the will's execution or at the time of the testator's death". However, due to differences in laws, a foreign will may not accomplish what the testator intends for it to do after their death.

In the UK, it is recommended that individuals with property abroad make a will in the country where they own that property, in addition to a UK will. This is because different countries have different inheritance laws, and creating separate wills ensures that any differences in inheritance rules are accounted for, and the individual's estate is protected and distributed according to their wishes.

International wills, also known as foreign or global wills, are legal instruments designed to address the complexities of estate distribution across international borders. These wills can help prevent disputes among family members and avoid multiple legal proceedings in different countries. When creating an international will, it is important to consult legal professionals with expertise in estate planning and international law to ensure the will complies with the laws of all relevant jurisdictions.

Interaction with domestic wills

When it comes to the interaction between a foreign will and a domestic will, it is important to consider the laws of the country where the individual is domiciled or resides. In the United States, for instance, the validity of a will is governed by the laws of each state, and each state has its own statutes regulating the disposition of property at death. Similarly, in the UK, it is recommended to have both a UK will and a foreign will to ensure compliance with the inheritance laws of the respective countries.

In cases where an individual owns property in multiple jurisdictions, it is common to have multiple wills, with each will addressing the specific laws and requirements of the respective jurisdiction. This approach helps to ensure that the individual's wishes are respected and that their estate is distributed according to their intentions. However, it is crucial that these multiple wills do not conflict or unintentionally revoke each other. Seeking legal advice from professionals with expertise in international estate planning can help navigate these complexities and ensure that the wills are valid and executable in all relevant jurisdictions.

It is worth noting that some countries have adopted the Washington Convention, which aims to make wills recognizable across international boundaries. As a result, an international will that meets the minimum standards set by the convention will be valid in those signatory countries. However, the applicability of international wills is quite narrow, as not all signatory countries have introduced the necessary domestic legislation to recognize them. Therefore, it is essential to consult with legal experts who have specific knowledge of the laws and requirements in each relevant jurisdiction.

Additionally, when dealing with cross-border probate, it is important to understand the concept of domicile, as it can have implications for inheritance tax. Domicile is different from residence and can affect an individual's probate status, especially when foreign nationals are involved. Understanding these nuances can help individuals with overseas assets effectively plan their estate and ensure their wishes are carried out.

International tax implications

Taxation of Inheritance:

According to US tax laws, there is no direct taxation imposed on inheritances or gifts received by US citizens or residents from non-US persons (non-resident aliens). However, informational reporting requirements must be met, and any inheritance or gifts exceeding specific amounts must be reported to the IRS. For example, inheritances or gifts from non-resident aliens exceeding $100,000 USD must be reported using Form 3520. Additionally, if the inheritance is received from a foreign corporation or partnership, the threshold for reporting is $16,388 for the year 2020, with annual adjustments for inflation.

Step-up in Cost Basis for Tax Purposes:

Under US tax laws, inherited assets generally receive a "step-up" in cost basis to the fair market value at the time of the decedent's death or six months later, if elected. This can provide significant tax benefits to beneficiaries, especially if the assets have appreciated in value since their original purchase. This step-up in basis applies to various asset types, including real estate, stocks, private business ownership, collectibles, and other assets.

Reporting of Foreign Bank Accounts and Investments:

US taxpayers who inherit foreign assets must comply with ongoing annual reporting requirements, such as the timely filing of a FinCEN Report 114 (FBAR) and IRS Form 8938. These forms are used to report the existence of foreign financial assets, including foreign bank accounts holding cash, foreign investment accounts, and non-US investment products. Failure to comply with these reporting obligations can result in significant IRS penalties and fines.

Taxation of Income Generated from Inherited Foreign Assets:

US citizens and residents are subject to taxation on their worldwide income. Therefore, any income generated from inherited foreign assets, such as interest earned in a foreign bank account or gains from the sale of foreign investments, must be reported and taxed accordingly. It is important to carefully consider the tax implications of different types of foreign investments, as some may be classified as Passive Foreign Investment Companies (PFICs) and subject to complicated and burdensome reporting requirements.

Estate and Inheritance Tax Considerations:

While the US has a high estate tax exemption amount, other countries may have lower exemption amounts or impose an inheritance tax on the recipient of the bequest. It is important to consider the tax laws of the country where the foreign assets are located, as they may differ significantly from US tax laws. Some countries follow forced heirship principles, which restrict the distribution of assets and require that certain portions be inherited by specific individuals, such as children in the case of the first parent's death.

In conclusion, navigating the international tax implications of foreign wills can be complex, and it is essential to seek expert legal and tax advice to ensure compliance with the laws of all relevant jurisdictions.

Executor requirements

When selecting an executor, it is advisable to opt for someone with experience in international estate planning and tax implications. This ensures they can effectively minimise tax liabilities for the estate and beneficiaries, as different countries have varying inheritance and estate tax laws. It is also crucial that the executor is able to account for legal differences between countries, including inheritance laws and cultural norms, to avoid any unintended consequences.

In some cases, foreign courts may not recognise a chosen executor and may require the appointment of a local executor. This is an important consideration, and it is recommended to seek proper professional advice to ensure the will is well-drafted and compliant with the laws of all relevant countries. It is also worth noting that some countries have unique requirements for executors, such as age limits or residency restrictions, which must be considered when selecting an executor.

To summarise, the key executor requirements for a foreign will include choosing a qualified and experienced individual with cross-border estate expertise, ensuring they can navigate legal and cultural differences, and being mindful of potential restrictions or requirements imposed by the countries involved. Seeking professional advice can help ensure the executor selected meets all the necessary criteria and can effectively carry out their duties.

Language and translation

When dealing with a foreign will, language and translation are critical factors to ensure the will's legitimacy and compliance with local laws. Here are some key considerations:

Language Barriers

If the country where the assets are located uses a language other than English, an English-language will may not be valid. It is advisable to have the will translated into the language of the country where the assets are held. This ensures that the will can be understood and executed according to local laws and procedures. However, it's important to remember that merely translating a valid US will may not guarantee its validity under the foreign country's legal system.

Translation Requirements

When translating a foreign-language will, accuracy is of utmost importance. The format and wording of the will must be correctly interpreted to reflect the true intentions of the testator. Due to the potential for misinterpretation or multiple interpretations, some states have enacted specific laws regarding the admission of foreign wills in a different language. For example, Florida Statute § 733.204 requires that any will written in a foreign language must be accompanied by a true and complete English translation to be admitted to probate. The onus is on the personal representative to provide this translation, and they are generally protected from liability as long as they act in good faith.

Choosing a Translator

To avoid unintended consequences due to incorrect translations, it is highly recommended to engage professional legal document translation services. These translators have expertise in estate planning and can navigate the relevant probate laws of both the source and target languages. They ensure that the translated will meets the specific requirements of the jurisdiction where the will needs to be executed.

Probate Procedures

If the deceased owned property in multiple states or countries, there may be multiple probate proceedings required in each jurisdiction. Each probate court will determine if the will complies with its state's rules. To ensure a dependable outcome, it is crucial to obtain a complete and accurate translation of the foreign-language will by a qualified legal translation service.

Frequently asked questions