This column first appeared in the San Antonio Express News and other Hearst Newspapers on March 18, 2019.
Dear Mr. Premack: Ours is an international family. We are United States citizens and have businesses and property in the US and in Mexico. My wife inherited separate property from her family in the Philippines. We guess it is time to get serious about the legal implications of these decisions. Where do you suggest we start with our Estate Planning and what do we discuss with our attorney? Will the legal work we do here in Texas be legal in these other countries? Thank you. BGB
International estate planning has a long, complex history. For instance, in 1973 the United Nations adopted the “Convention Providing a Uniform Law on the Form of an International Will” (in this context, “convention” is the equivalent of a statute). The Convention was negotiated and signed by 21 countries, including the United States. However, after it was signed by the United States needed to be ratified by the Senate to become law in the United States, and the Senate never ratified the Convention. Consequently, there is no federal law on International Wills. Further, each state’s laws on Wills generally limit the state’s jurisdiction to properties located in that state.
The Texas Estates Code specifies that a Will made in Texas for a Texas resident can pass title to businesses, investments, deposits, personal property, and real property if the real property is located in Texas. Hence, if you make only a Texas Will and die in Texas, probate of that Will in a Texas Probate Court can handle your assets in Texas without any problems. Texas probate should also cover non-real estate assets located in other US States or Territories.
But any real property outside of Texas, and sometimes business interests, require a secondary probate of your Will in that jurisdiction. Within the US, this is called “probate of a foreign Will” (in this context, “foreign” means “not from the state in which you lived”). Suggestion #1: talk with your attorney about legal tools to avoid double probate.
What about your business and property in Mexico, and your wife’s property in the Philippines? Will a Texas Will be accepted in those countries? Suggestion #2: don’t take any chances on such an important issue. Consult with legal counsel in Mexico and in the Philippines for their recommendations on handling the businesses and properties in those countries. At best, when you die, your Texas Will must go to probate in Texas, in Mexico, and in the Philippines. At worst, Mexico and the Philippines may refuse to accept your Texas Will or impose a very slow, complex legal procedure that is best to avoid.
Suggestion #3: have properly coordinated Wills in each country. Have an attorney in Mexico draft a legal Will for you to cover the assets you own there (so long as it won’t be construed to revoke your Texas Will) and have an attorney in the Philippines draft a legal Will for your wife to cover the assets she owns there (again, so long as it won’t be construed to revoke her Texas or Mexico Wills).
Suggestion #4: Consult with your CPA in the US and with tax counsel in Mexico and in the Philippines. Since you are both US Citizens, the US federal government will include your foreign holdings in the value of your estate for estate tax purposes, but any tax is offset by the $11.4 million estate tax exemption. If you were not citizens of the US but reside here, your foreign holdings could be subject to federal estate taxes if they exceed $60,000 in value. Mexico and the Philippines may impose their own separate taxes.
Suggestion #5: Streamline. Sometimes simpler is better. If possible, consider selling your foreign holdings so that when you die all assets are in the US.
Paul Premack is a Certified Elder Law Attorney with offices in San Antonio and Seattle, handling Wills and Trusts, Probate, and Business Entity issues. View past legal columns or submit free questions on legal issues via www.TexasEstateandProbate.com or www.Premack.com.