An Overview

For Non-Residents

Minimize contacts with the U.S. to avoid becoming a U.S. resident for income or estate tax purposes.

Minimize U.S. situs assets to avoid estate taxation. Hold U.S. real estate, tangible located in the U.S. and shares of stock of U.S. corporations through non-U.S. corporations. 

Minimize taxable U.S. source income to avoid U.S. income taxation. Increase bond interest income and decrease stock dividend and rental income.

International Wills

Under the rules of the International Convention of October 26, 1973, a Last Will and Testament is international if (1) the testator signs all of the pages of the documents, (2) the Will is witnessed by two witnesses and in the presence of a notary public, and (3) the attorney complete a certificate. The name, addresses, date of birth and birth places of the witnesses will be reported. There should be a declaration on where the Will will be kept. The commonwealth of Virginia has a provision in its Code to provide a government storage place for Wills. This has not yet be implemented.

Assets Located Outside the U.S.?

Any attorney will be challenged with not being licensed in the foreign country. The best approach is to work with a local foreign attorney in order to coordinate the planning and understand the foreign estate planning implications. 

If such a setting is not available you should ensure to limit the estate planning for assets located in the U.S. A letter should follow the estate planning and request that the client seek foreign counsel as soon as possible to complete his/her estate planning. I prefer to include a paragraph for the foreign assets with a language saying that if there is no foreign will executed before or after this Will, then the foreign assets should be included in the residue of the testator’s Will for distribution purpose. 
Planning for Minor Children

It is crucial to non-U.S. citizen to select guardians for their children in order to their foreign guardians to obtain a visa. In addition, when possible, I recommend selecting temporary guardians. With this provision, the children will not be placed with foster parents. 

The selection of trustees for trusts for minor may have adverse tax consequences if the trust is later qualified as a foreign trust. Drafting of the trust should be carefully made in consideration of the selection of the trustee, the nationality of all of the children, and where they may end living. Many civil code countries do not recognized trust. A beneficiary  of a trust may be heavily taxed in the foreign country.

Planning for a non-U.S. spouse

Some spouses are dependent on the working spouse for their visa. It is crucial to name the dependent spouse executor. Because the day the working spouse dies, his/her family looses the visa. 

The marital status of the spouse needs to be reviewed. In some situation, an affidavit from the country of origin and marriage could be useful with a translation of the pre-nuptial agreement if any. You may want to include a declaration in the estate planning documents.

Because of the unavailability of the unlimited marital deduction, it is very important to balance the assets between the spouses. Therefore, holding assets in joint names in not recommended. 

Another alternative is to create an Irrevocable Live Insurance Trust which can be funded with the special annual exclusion available for non-U.S. spouse.