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Foreign Property Considerations In California Estate Planning and Probate

Henry J. Moravec III

Estate Planning

As global mobility increases, many California residents hold assets outside of the United States. Whether it's a vacation home in Mexico, an investment property in Europe, or inherited land in Asia, foreign property can complicate the estate planning and probate process in California. Estate planners and executors must navigate not only California’s probate laws but also the laws of foreign jurisdictions when dealing with international assets.


This blog post will explore the key considerations for handling foreign property in California estate planning and probate, as well as strategies for avoiding potential pitfalls.


Why Foreign Property Complicates Estate Planning and Probate

Owning property in multiple countries means that both the estate planning and probate processes are affected by various legal systems. Different countries have their own rules on property ownership, inheritance, taxes, and probate procedures. As a result, estates that include foreign assets may require coordination between legal professionals in multiple jurisdictions.

Here are some specific challenges:

  1. Diverging Property Ownership Rules: In many countries, real property ownership and inheritance laws differ significantly from those in the U.S. For example, some countries may not recognize joint tenancy with rights of survivorship, while others may impose forced heirship rules that limit the ability to freely bequeath assets.

  2. Complex Probate Procedures: When a decedent owns foreign property, that property must often go through probate in the jurisdiction where the property is located. This means that, in addition to the California probate process, the executor may need to initiate a separate probate proceeding in the foreign country.

  3. Tax Implications: Foreign property can trigger tax obligations in both California and the foreign country. Estate taxes, inheritance taxes, and capital gains taxes may be due in multiple jurisdictions, potentially creating a double-taxation scenario.


Estate Planning Strategies for Foreign Property Owners

For California residents who own foreign property, planning ahead is crucial to avoid complications in probate. Below are some estate planning strategies to consider:


1. Create a Separate Foreign Will for Foreign Assets

One option is to draft a separate will to deal specifically with foreign property. This will should comply with the laws of the foreign jurisdiction where the property is located. For example, if you own a home in France, you may want to create a French will that directs how that property should be handled according to French inheritance laws.

A foreign will can streamline probate in the foreign jurisdiction and avoid potential conflicts with a California will. However, it is essential to coordinate the California and foreign wills to ensure they do not contradict one another, which could lead to legal disputes.


2. Consider a Living Trust for Foreign Property

For California residents who own substantial foreign assets, placing those assets into a living trust can simplify the estate administration process. While California real property can be easily transferred into a revocable living trust, foreign property may require additional steps, depending on the laws of the country where the asset is located.

A trust allows you to avoid probate in California and can potentially avoid probate in the foreign jurisdiction as well, depending on local laws. By including foreign property in a trust, you ensure that the assets are managed and distributed according to your wishes, potentially bypassing complex foreign probate procedures.


3. Understand Foreign Inheritance Laws

Many countries have specific inheritance laws that may affect how your foreign property is distributed upon your death. For example, forced heirship rules in countries like France, Spain, and the Philippines require that a portion of your estate be left to certain heirs, such as children or a spouse, regardless of your wishes.

In such cases, it’s crucial to work with an attorney familiar with both California and foreign law to ensure your estate plan complies with the laws of the foreign country while still reflecting your intentions.


4. Address Tax Considerations Early

Foreign property can introduce complex tax issues during probate. Both the U.S. and the foreign country may impose taxes on the transfer or sale of the property, leading to potential double taxation. However, many countries have tax treaties with the U.S. that can help reduce or eliminate double taxation.


For example, the U.S. estate tax applies to the global assets of U.S. citizens and residents, which includes foreign property. At the same time, the foreign jurisdiction may impose inheritance tax or capital gains tax on the property. To mitigate these taxes, consider working with an international tax advisor who can guide you through the tax treaty provisions and help structure your estate plan to minimize tax liability.


5. Use Beneficiary Designations or Joint Ownership Carefully

In some cases, transferring foreign property to a co-owner or naming a beneficiary in the foreign jurisdiction may help avoid probate. For example, holding property in joint tenancy with rights of survivorship may allow the property to pass directly to the surviving co-owner without going through probate. However, it’s essential to check whether the foreign jurisdiction recognizes such forms of ownership.

Additionally, some countries allow for the use of beneficiary designations on financial accounts or real property, similar to Transfer-on-Death (TOD) or Payable-on-Death (POD) designations available in the U.S. If available, this can help bypass the foreign probate process, but it’s crucial to verify the local legal requirements.

Probate Process for Foreign Property in California

When a California decedent owns foreign property, the executor must navigate probate both in California and abroad. Here’s how the process typically works:

  1. Probate in California: The executor will initiate probate in California for the decedent’s U.S. assets. The foreign property must be listed in the probate petition as part of the decedent's estate, even though the California probate court does not have jurisdiction over foreign real property.

  2. Ancillary Probate: For the foreign property, the executor will often need to open an ancillary probate in the foreign country. This is a separate probate process in the jurisdiction where the foreign property is located. Local courts will oversee the administration and distribution of the foreign asset according to the laws of that country.

  3. Communication with Foreign Professionals: Executors may need to hire foreign legal professionals, such as an attorney or notary, to assist with the probate of foreign property. Having legal representation in the foreign country can ensure that the estate complies with local probate laws and avoids delays.


Conclusion: Navigating Foreign Property in California Estate Planning and Probate

Owning foreign property adds an extra layer of complexity to estate planning and probate in California. By planning ahead, including drafting separate wills, using living trusts, and addressing tax considerations, California residents can ensure that their foreign assets are handled smoothly after their death. Executors must also be prepared to work with foreign legal professionals and navigate ancillary probate procedures in other countries.


If you own foreign property, contact the top-rated California probate attorneys Moravec, Varga & Mooney – today to schedule a telephonic consultation. Have questions, call (626) 460-1763 or email LV@MoravecsLaw.com.


Southern California Probate Lawyer Serving all counties in California, including Los Angeles, Riverside, San Bernardino, Sacramento, Santa Cruz & Beyond.

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