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Katya Sverdlov Blog

Sunday, June 28, 2015

International Estate Planning

I frequently see clients with global ties. New York community is home to many multinational technology, finance, consulting, and other companies.  Frequently, skilled employees of these businesses have family ties overseas, or have worked for their companies in other countries. Workers often bring their families with them, to live and to study and to work in New York. Families like this, which are increasingly common in today’s world, require careful estate planning services, often from an international team of experts.

Hypothetical Family:

Imagine our hypothetical family owns a half-million dollar apartment in Moscow, a half-million dollar house in Queens and a half-million dollars worth of stocks in US brokerage accounts.  The family has lived in the US for two years.  All family members are dual Russian-US citizens.  Every summer the family goes back to Moscow for a month for the children to visit their grandparents, but spends the rest of the year in New York.  The family may one day return to the Russia or live in a third country, depending on where the company sends them next.

The Local Component

Because the family is living in New York, it is extremely important that the parents work with an estate planning attorney licensed to practice law in New York.  If either or both parents became disabled or die, a New York power of attorney (in the event of disability) or a well-drafted trust (in the event of disability or death) would help ensure the family is properly cared for.   Many families with this level of assets also plan ahead to avoid the difficulties of probate, typically through the use of a living trust.  Perhaps most importantly, the family should name guardians for their children in the event of their deaths, as a New York judge would ultimately decide who should serve as guardians.  Without instructions from parents, a judge may pick someone the parents would not have chosen.

So far, the family’s discussion with a New York attorney is similar to the discussion any typical New York family might have with their attorney.  However, the family’s ties to Russia add a layer of complexity.

Russian Estate Plans

Only a lawyer licensed to practice law in Russia is qualified to give advice about an estate plan in that country.  The ideal time for a family to create an estate plan for its overseas property is at the same time as when dealing with US property.

If the US and Russian lawyer are working on their respective pieces of the estate plan at the same time, the family would be wise to ask the two lawyers to coordinate.  Some potential reasons:

-Probate is aggravating, expensive, and time consuming enough in one country.  It would be unfortunate if the family ultimately had to go through the process in two countries, due to a lack of planning.  A conservative estimate would be $6,000 in legal fees per probate estate, per country. 

-Local counsel in Russia can properly advise on the formalities of Russian will execution.

 -If the family has overseas relatives, there is a chance it will inherit further overseas property    after drafting its estate plan.  This could exacerbate foreign estate tax and probate problems.     Planning ahead with Russian counsel would be wise.

EXECUTORSHIP/TRUSTEESHIP

The successor trustee of a living trust ensures that its terms are carried out after the death or disability of the settlor (the person who created the trust).  Typically this means distributing funds, maintaining accounts, ensuring children are financially cared for, etc.  Similarly, the executor of a will closes out the estate in probate, if probate is necessary.

In New York, an executor may be anyone who has attained the age of 18 years, is a resident of the United States, is not of unsound mind, is not an adjudged disabled person and has not been convicted of a felony. So for the family in question, it is important the executor appointed in any Will be a US resident, not a relative in Russia.

For different reasons, all successor trustees of a living trust should ideally be US residents.  Under IRS regulations, allowing a non-US resident to serve as trustee will cause the trust to be classified as a “foreign trust” and incur much more burdensome tax reporting obligations. 

Disclaimer: This article only offers general information.  Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions.  As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney-client relationship.


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