Even though the American real estate market is still one of the country’s most profitable industries, many investors choose to invest in real estate abroad.
This particular method of investment is a diversified manner to make money while owning properties in different countries. Nonetheless, how is it possible to structure an estate planning that includes property located in distinct countries?
In this article, you will discover how to set up an estate planning while owning foreign property.
International Real Estate Markets – Location and Profitability
Generally, the profitability of an investment in real property is associated with the property’s location.
In this sense, owning real property in several countries can give you a more diversified investment portfolio with long-term profitability and, in most cases, the possibility to generate passive income.
Many factors will affect the real value of a property located in another country, including the average prices in the local real estate market, the level of touristic activities developed in the place, and the life quality of its citizens.
Owning real property in a foreign country also requires knowledge about the location’s geography, the local culture, or customs that could end up being a burden.
In this sense, culture shock can affect the profitability of the foreign property, especially in countries where the local culture is utterly different from the western culture.
US Citizens Estate Plan vs Foreign Property Ownership
Many US citizens who own real property in a foreign country do not have a clear estate plan if they pass away.
However, foreign property is one of the most crucial aspects of a well-structured estate, especially as owners are exposed to taxes in two different countries (the US and abroad).
Upon its owner’s death, a foreign property can be submitted to the laws of the country where it is located. Even worse, if the owner dies without a will, the property may be submitted to local laws of intestacy.
In this sense, individuals who own foreign property must prepare a valid and self-proving will with the help of an expert lawyer.
In the US, a last will may be recognized in most jurisdictions around the world, but only if the document also satisfies the local formalities required for the last will.
There are countries in which there is no recognition of any wills drafted in any country under any circumstances. In such cases, the ideal approach would be to draft an international will.
International Wills – Understanding the Concept
In 1973, the enactment of the UIWA, an acronym for the Uniform International Wills Act, created international wills.
An international will has the purpose of making the process of estate planning with foreign property smoother. When an international will is structured the right way, the last will is considered valid in any country that has signed/enacted the UIWA.
US estate succession laws are governed by state laws. Consequently, international wills were adopted in 23 states and the District of Columbia. Several countries have signed/enacted the UIWA, which include:
- United States
- United Kingdom
- Sierra Leone
The validity of an international will depends on several requirements, as this type of will must:
- Have an exclusive beneficiary
- Be in writing (written in any language)
- Be witnessed and signed by 2 distinct individuals
- Be witnessed and signed by an attorney (cannot be a notary)
Moreover, US citizens can add another layer of protection onto their international wills by drafting a supplemental will in the foreign country where they own property. Consequently, it is possible to refer to the supplemental will within the international will to avoid any mistakes regarding the property’s disposition.
Owning Real Property Abroad – The Legal Aspect
Unfortunately, many people think owning real property abroad is simply buying a house in another country. Instead, it is crucial to understand the legal parameters regarding foreign land ownership in the country where you want to invest.
In many countries around the world, there are restrictions to the type and location of the property available for foreigners to buy.
For instance, some countries may even allow foreigners to buy land, but they do not permit foreigners to build. In other cases, foreigners can buy properties already built, while not being able to acquire land.
In some countries, foreigners need to have special permission from the local government to purchase property over a certain acreage.
Hence, make sure you have the proper legal guidance from an expert attorney to instruct whenever is necessary.
Estate Planning with Foreign Property – We Can Help You
At Jurado & Farshchian, P.L., we have expert attorneys that will help you saving time and money with estate planning. Call us today at (305) 921-0440 or email Romy@jflawfirm.com to schedule a consultation.