If you have property outside the U.S., are married to a non-citizen spouse or have cross-border families, you will need to ensure that your estate plan in Tennessee is tailored to your unique circumstances. Failure to do so could lead to your loved ones incurring hefty taxes, having to go through a lengthy and costly probate process or even losing access to your assets altogether.
Your choice of domicile
When estate planning, it’s important to decide which country you consider your primary place of residence. This is known as your domicile. Your domicile can significantly impact the taxes you pay and the regulations you’re subject to. For example, if you’re domiciled in the U.S., you’ll be subject to estate taxes on your worldwide assets. However, if you’re domiciled in a country with more favorable tax laws, you may only be taxed on your assets within that country.
Be aware of the different tax implications of owning property in multiple countries
For example, if you own property in the U.S. and Canada, you will need to file tax returns in both countries and pay taxes on any income earned from those properties. Additionally, if you sell any of your properties, you will need to pay capital gains taxes in both countries.
It’s also important to be mindful of the different tax laws in each country. For instance, the U.S. imposes estate taxes on worldwide assets, whereas Canada only taxes Canadian-situated assets.
Regularly update your international estate plans
Your international estate plan should be reviewed and updated regularly, as your personal circumstances or the laws in both America and the foreign country where your property is situated change over time. A plan that doesn’t consider these changes could be dismissed in court.
Having properties in multiple countries can be one of the best financial decisions a person can make. Most people do it to avoid paying a lot of taxes by establishing their business in a foreign country with favorable taxation rates for foreign investors. However, you or your loved ones may still pay hefty taxes if you fail to plan for your assets accordingly.