California Probate - Law Offices of Janet Brewer Blog

Where in the World Do You Go to Retire If You Like The Snow?

“Retirees who relish the pleasure of watching the seasons change, and love the special energy of winter, should consider these five affordable countries that feature colder winters and offer residency visas.”

There are many people who imagine playing golf in Arizona or lying on the beach in Florida during retirement. However, that is not everybody. There are some who would rather bundle up and enjoy the snow, says Investopedia in its recent article entitled “5 Best Countries to Retire to If You Love Winter.”

Let’s look at some of the snowy spots around the globe where retirees who like to ski, ice state, and make snowmen or snow angels can retire.

Italy. Most everyone knows about the art, food, and rich culture in Italy, but the country’s inland is a winter lover's dream. Specifically, the Abruzzo region is a great place for retirees who like to ski. Retirees can apply for an elective residency visa with the Italian consulate. This permits a retiree to stay in Italy. However, this visa doesn’t allow you to work. In five years, you’re eligible to apply for a long-term resident visa.

France. You have certainly seen that this country is beautiful all year round. However, it’s fantastic during the winter when snow can be found in many regions. France has several spots where retirees can ski, including the Northern and Southern Alps, the Pyrenees and Massif Central—Europe’s largest volcanic site. Although the overall cost of living is a bit higher than in the U.S., the expense of renting an apartment or a home is quite affordable. Retirees can apply for a long-stay visitor visa through the French consulate. It’s valid for a year, and if you want to stay in France for a longer period of time, you’ll must apply for an extension. Similar to the Italian visa, the French visa doesn’t let you to work while you are there.

Switzerland. This country enjoys lower taxes and extremely good healthcare. These are two good reasons to consider retiring in Switzerland. Along with skiing, retirees can participate in curling, snowshoeing, and many other cold weather activities. Another advantage is Switzerland’s central European location which makes it ideal for winter breaks in Germany, France, or Italy. Like the other European countries mentioned, to retire in Switzerland, you’ll need to apply for a visa through the consulate.  Like in France and Italy, you’re not allowed to work there. It’s also important to know that Switzerland is not keen on foreign nationals applying for public benefits. As a result, it’s important that you have enough saved up to support yourself if you move.

Let’s now look at a few countries outside of Europe that promise plenty of fun during the winter:

New Zealand. This country has become an increasingly popular spot for expatriate retirees. The northern island has a warmer, more temperate climate. However, the southern island gets a good deal of snow in the winter. Remember: the seasons are reversed, so winter with the snow is between June and October. Unless you have children who live in the country, you’re required to apply for a temporary residency visa that’s renewable every two years. If you’re thinking of moving to New Zealand permanently, you'll need to apply for a resident visa. It’s also important for retirees to know that the financial conditions in New Zealand may be difficult for the average retiree. That means it’s expensive!

Chile. A quick look at the map will tell you that Chile is geographically diverse. Running more than 2,600 miles, the southern region of the country is a skier’s paradise during the winter months. The Portillo Ski Resort is world-renowned. There are also almost two dozen skiing destinations sprinkled through the Andes. The Chilean government issues temporary visas for retirees that are good for a year. You can renew your visa for an additional year, but then you must apply for “definitive residence” or leave the country.

Retiring overseas is a big move, so be sure to calculate what retiring abroad will cost to determine whether it’s a good fit for you financially.

Reference: Investopedia (January 14, 2020) “5 Best Countries to Retire to If You Love Winter”

What Happens If a Non-U.S. Citizen Dies in the United States?

If a non-U.S. citizen dies in the United States, relatives probably have many questions about what to do next. From an estate planning perspective, this is usually not an obstacle to distributing the estate according to the deceased person’s wishes if proper planning was done before.

Practical Problems When a Non-Citizen Dies in the U.S.

When a non-United States citizen dies in the United States, his or her family often want the body buried in the country of origin. It can be expensive and difficult to transport a body overseas. As a result, people making their estate plans who want to be buried in other countries may want to account for the cost of transport by specifying that funds may be used for this purpose.

In contrast, some people want to be buried in the United States although they are not citizens. Others die without estate plans and their families cannot afford the cost of transporting the body overseas. It is perfectly legal for a non-citizen to be buried or cremated in the United States. Further, the burial location does not affect probate or estate distribution at all.

Probate and Estate Distribution for Non-Citizens Who Died in California

When a non-citizen dies in California, the California probate court may have jurisdiction to oversee the distribution of his or her estate. Usually the court has jurisdiction if a deceased person was domiciled in California (lived here permanently or for a long time) and owned property located in California. If, for example, someone had lived in California full-time for several years and owned a home here, then the probate court could oversee a California personal representative. That representative (also called an executor) would then distribute the home and other California assets to heirs.

In contrast, if someone owned property in California but was not domiciled here, then the probate court might need to open an “ancillary proceeding”. This probate action would cover only real property such as a home located in California. All other assets would get distributed according to the laws in another state or country. If someone neither is domiciled here nor owns property here, then the probate may take place in another state or country altogether – usually the one where the person did have significant assets.

Further, the estate executor or representative may need to file United States and California taxes for the deceased person, including both regular income taxes for the year of death and an estate tax return. The estate also may owe taxes in other states or countries. Families confronting the death of a non-U.S. citizen in California should talk to an estate planning lawyer about what happens next.

Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.

Choosing the Right Estate Planning Lawyer for Your Family

There are a lot of estate planning lawyers out there, but not all may be right for your family. When choosing an attorney, ask yourself a few key questions along the way.

What Are Your Goals in Estate Planning?

Think about the goals you want to achieve by making an estate plan. For example, would you rather get a basic plan done very quickly, or spend a bit more time tailoring the plan? You may think that you need only a will or only a trust, but after talking to a couple of attorneys it could become clear that you need more planning done. You also may have the goals of peace of mind that your plan is done, and comfort in working with a lawyer who understands you.

What Are Your Expectations for Your Lawyer?

Also think about your expectations for a lawyer, and talk to potential lawyers about those expectations when you meet them. You might prefer communication via email only, or you might want to meet in person several times. You might want to review all documents in advance before you sit down to sign them. Or you might want the lawyer to show you where each of your wishes are listed in your estate plan. Different lawyers have different styles of working and communicating, so thinking about what you prefer can help you decide whether someone is a good fit. But also be aware that most lawyers are very busy and may not respond to your emails or calls right away, though they should get back to you within a few days.

Do You Have Any Special Circumstances?

One big reason that you might want one lawyer over another is special expertise in a certain area. Your family might have circumstances that require a lawyer with related knowledge to make a proper estate plan. For instance, you might need a particular lawyer if you:

• Are not a U.S. citizen or have relatives who are not citizens
• Own a small business
• Have a child with special needs
• Are wealthy or earn a high salary
• Own a lot of real estate

Some estate planning lawyers focus on clients who need international estate planning or who have tax and business planning needs. Others have special knowledge of disability planning, high net worth estate options, or real estate management. Your needs can help you narrow down the pool of estate planning attorneys to find a good fit.

Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience and her knowledge of international and tax issues will give you confidence and peace of mind. You can read more about Janet here. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.

Problems with Dual Ownership of Real Estate

When someone who owns real estate leaves it to two or more people, many problems can result. Even siblings or close relatives may disagree about what to do with the inheritance. Some simply may not want the hassle of owning real estate – especially with an unexpected co-owner. What should you do?

First Option: A Buyout

If you and a relative inherit a house, you probably each own half unless the giver stated otherwise in the will. The giver could specify ownership as a joint tenancy with right of survivorship or as tenants in common. When one co-owner does not want to keep the house, the other co-owner can choose to buy him or her out. This involves obtaining financing on only half the house’s value, getting an appraisal, transferring title, and paying any closing costs.

Second Option: Sale or Rental

If neither co-owner really wants to keep the house, you should consider sale or rental. Rental also could be an option if one co-owner wants to use it in the future (such as for a child’s housing when he or she gets older). Take into consideration the realtor costs if you are selling, and the property management costs if you are renting. Also consider the costs of future maintenance problems and regular upkeep. In either case, make a written agreement with the other co-owner specifying who receives what money and which tasks each person must perform.

Third Option: Private Dealings

If only one of you wants to sell but cannot afford financing, consider a private loan arrangement. Instead of an official bank loan, the co-owner who is keeping the house could make a loan to the other co-owner. If taking this route, write up a promissory note and consider including interest payments as well as a principal payment schedule.

Final Option: Partition

If you and the other co-owner truly cannot agree what to do with the house, you could file a request that the court partition the property. Partitioning means that the court orders sale of the house with proceeds divided among the co-owners. This process can be expensive and time-consuming – often far more than if co-owners simply agree to sell the house in the first place.

As you can see, many problems might arise if you and a relative inherit a piece of real estate. For more solutions, talk to an experienced estate planning attorney.

When a non-U.S. citizen co-owns real estate with a U.S. citizen – especially if the co-owners are spouses – many problems may result. For example, the non-citizen could end up owing a lot of money in estate taxes. Also, distribution of the non-citizen’s estate could be very complicated.

Estate Taxes and Real Estate with a Non-Citizen Co-Owner

Besides the difficulty of obtaining a mortgage, non-U.S. citizens usually have few problems owning United States real estate during their lifetimes. One big problem, though, can occur when the real estate is co-owned with a citizen and the citizen dies. If the non-citizen and citizen were married, the non-citizen likely will inherit the entire property. This could result in very expensive gift tax and/or estate tax liability due to the limited tax exclusions available for non-U.S. citizens.

Because of the all-too-common problems that arise when a non-citizen spouse inherits real estate, U.S. citizen spouses should consider forming QDOTs in their spouses’ favors. A qualified domestic trust maintains some of the tax benefits that a non-citizen spouse would enjoy if he or she was a citizen. The U.S. citizen spouse could even place his or her interest in the real estate into the QDOT trust.

Estate Disposition and Real Estate with a Non-Citizen Co-Owner

When a non-citizen co-owns real estate with citizens, the death of the non-citizen could cause a real estate headache for the other co-owners. In theory, the non-citizen would have made a will passing on his or her interest in the property to a specific person, making the transfer simple. But in practice, matters can be far from simple. The non-citizen may have citizenship in a country that requires expensive estate taxes even on U.S. real estate, or may have citizenship in a “forced heirship” country like France. Several different foreign heirs could now have co-ownership of the property along with U.S. co-owners. The new set of owners may disagree about what to do with the property.

This host of potential problems can be avoided if the non-citizen takes the time to do estate planning in the United States. Specifically, he or she should talk to an estate planning lawyer located in the state where the real estate stands and who is familiar with international issues.

Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.

Consequences of a Trust Being Reclassified as Foreign

One of the most important reasons to carefully draft a trust centers around the risk that it will be reclassified as “foreign”. Unlike a United States trust, a foreign trust has different reporting requirements, and the trust creator may have to pay more taxes.

What Is a Domestic Trust? What Is a Foreign Trust?

It is easier to understand the IRS’s definition of a foreign trust by learning what it is not. A domestic trust meets two requirements: (1) a U.S. court can exercise “primary supervision” over the trust’s administration, and (2) one or more U.S. people can control all substantial trust decisions.

If a trust does not meet those two requirements, it is a foreign trust. Note that California has different requirements for what makes a trust foreign, so if your trust is established under California law you will need to understand those laws too.

Why Would a Domestic Trust Be Reclassified as a Foreign Trust?

The IRS will consider a trust to be foreign if it no longer meets the two requirements described above. In other words, its status changes if another country has primary supervision over administration, or if someone who is not a U.S. person can control trust decisions. Usually, the second requirement is the one that a trust no longer meets. A trustee may change citizenship status, or a non-U.S. citizen may take over as a successor trustee.

What Happens If a Trust Is Reclassified as Foreign?

If a trust is reclassified from a domestic trust to a foreign trust, its creator may suddenly owe more taxes. The IRS assesses taxes on the U.S. owner of a foreign trust, based on the income of the trust.

Further, the U.S. owner must comply with reporting requirements designed to keep people from hiding assets in foreign trusts. Beneficiaries must report any income they receive from a foreign trust that was not reported by the U.S. owner. If the trust is a special type called non-grantor (the trust creator gives up control over the assets), then taxes may be due based on recognition of gain when assets are transferred into a foreign trust.

Foreign trusts can create many complications with estate planning as well. For example, trust creators could have trouble finding a trustee or beneficiaries who will stay in the United States to avoid their trusts’ reclassification as foreign. If the U.S. trustee retains control of the trust at his or her death, the estate could owe taxes in the U.S., in another country, or both. As a result, it is often better to keep a trust domestic if the creator is a U.S. citizen and the property in the trust is in the U.S.

Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.

QTIP Trust or QDOT Trust? What Is the Difference?

If you have a spouse and are doing some estate planning, you may wonder about the difference between a QTIP and a QDOT. The two have a few things in common: both are trusts leaving assets to the surviving spouse, and both help preserve availability of the marital deduction.

What Is a QTIP?

A QTIP (qualified terminable interest property) is a special kind of trust that allows married people to control distribution of assets to their spouses while still taking advantage of the marital deduction. A QDOT allows the same, but is usually used by couples that have one U.S. citizen and one non-citizen spouse. Any married couple can use a QTIP.

In a QTIP, one spouse decides when the other spouse can receive trust distributions, and in what amount. Those decisions are memorialized in a trust document. If the first spouse passes away first, then the second spouse can receive distributions from the trust.

Usually, the IRS does not assess taxes on money passed directly to a surviving U.S. citizen spouse. The spouse must have full, unrestricted ownership of the money. But a special law allows QTIP creators to take advantage of the marital deduction and still pay no taxes. The QTIP benefit is available as long as the surviving spouse has a lifetime interest in income from the trust.

What Is a QDOT?

A QDOT (qualified domestic trust) is a special kind of trust often used when one spouse is not a United States citizen. Because that spouse is not a citizen, he or she cannot take advantage of the marital deduction. The marital deduction is a tax provision that allows spouses to make unlimited transfers of property to one another without paying gift, estate, or transfer taxes, both during their lifetimes and afterwards.

Without the marital deduction, non-citizen spouses who inherit property from citizens could pay very expensive estate taxes – not to mention gift taxes on lifetime transfers. The QDOT can solve part of the problem.

When a U.S. citizen places property in a QDOT, he or she should name the non-citizen spouse as beneficiary. The IRS allows non-citizen beneficiaries of QDOTs to receive the benefit of the marital deduction – meaning fewer expensive estate taxes if the U.S. citizen passes away first. If the non-citizen spouse receives distributions from the QDOT at some point after the citizen’s death, he or she may owe taxes on those amounts. But the QDOT leaves the spouse in a better position than if he or she had inherited the trust assets outright.

Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.

Multiple Wills in Different Countries: Do You Need Them?

If you own property in multiple countries, you may need multiple wills. While not everyone needs more than one will, your situation and the countries where you have ties could require it. Here are a few tips for people who are starting their estate plans.

You May Need More than One Lawyer

First, if an estate planning lawyer decides that you need a will in another country, you will most likely need a second lawyer. You need one lawyer licensed in the United States, preferably in the state where you own the most property or spend the most time. You also need one lawyer located in the foreign country or licensed to practice law there. The United States lawyer should prepare or at minimum review the will under U.S. state law. The foreign lawyer should prepare or at least review the will under foreign law.

Contents of the Wills

The two lawyers should ensure that the two wills are consistent and do not overlap. For example, the United States will should specifically exclude all assets distributed by the foreign will, and vice versa. The U.S. will should specify the state law that applies. Also, you may want a provision mentioning that there is a second, foreign will so that your relatives know to look for it.

If the will leaves any assets to a trust, some special considerations arise. For example, it is often important that a United States citizen leave assets only to a U.S. trust because of expensive taxes on foreign trusts.  The trust should include language about migration of beneficiaries or trustees if any might relocate in the future. Further, the will should make very clear where the trust documents are kept and which part of the estate goes into the trust.

Drawbacks to Multiples Wills

Obviously, having to employ two different lawyers in different locations adds to the cost of preparing your estate plan. But in some jurisdictions, you may need to pay a notary to prepare a will instead of a lawyer. Often notaries charge a percentage of the foreign property’s value in exchange for making the will. This can increase cost above what you would pay for a lawyer.

Further, if you make any changes to one of the wills or the rest of your estate plan, your attorneys will need to consult each other. If you do not change one of the wills, it could conflict with your other will, your trust, or other documents. Talk to an estate planning lawyer locally to learn more.

Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.

Did You Just Get a Green Card? Next Estate Planning Steps

If you just received your green card, you are now considered to be a permanent resident of the United States. With this change comes a great opportunity for estate planning that can give you peace of mind in the future. While estate planning may not be your first thought, you can take advantage of the tax benefits afforded to permanent residents to hopefully better your family’s future.

Increased Estate Tax Exemption

One major benefit of permanent resident status is the increased estate and gift tax exemption. As a non-citizen and non-resident, you previously had an exemption of only $60,000, which could have resulted in expensive taxes imposed on your estate in the future. Now, you have an exemption of $11.18 million. If you are married to a citizen or permanent resident, he or she has an $11.18 million exemption too. This means that your estate is much less likely to owe taxes later on.

Marital Deduction Still Not Available

Unfortunately, permanent resident status does not grant you the ability to use the marital deduction. This deduction allows for unlimited transfers between citizen spouses. You still have limitations on the amount you can transfer to your spouse without paying taxes. However, if your spouse is a citizen, you might consider setting up a qualified domestic trust (QDOT). The trust could defer your estate tax liability should your spouse leave you substantial assets. You would not be taxed until you received distributions from the trust.

Ties to Other Countries

Many people who attain green card status still have ties to other countries, whether through business dealings or with family. Sometimes these ties can lead to double taxation or complicated estate distribution issues. Tax treaties between the United States and other countries may help, but it is a good idea to speak with an experienced U.S. estate planning lawyer about your situation. You may need more help with your estate plan than you think.

Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.

Did You Just Become a Citizen? Next Estate Planning Steps

Becoming a citizen can have many useful benefits, including little-known advantages in estate planning for U.S. citizens. If you just became a United States citizen, now is a great time to update your estate plan. If you just became a citizen of another country, you may have estate planning needs in the U.S. as well.

Estate Planning for New United States Citizens

Congratulations on receiving your United States citizenship. You now have the estate planning advantages of the unlimited marital deduction and an increased estate and gift tax exemption. If you had a green card before receiving citizenship, then you already had these advantages. However, your estate plan may not have reflected it, so it’s a good time for an update.

Before you became a citizen, you could not make unlimited transfers of property to your spouse without paying taxes. Now, you can make as many transfers as you like – including in your will or the rest of your estate plan. Your estate tax exemption amount goes up to $11.18 million for both you and your spouse if he or she is a citizen. In addition, you and your spouse can use estate tax portability. It allows either you or your spouse to use the remaining amount of estate tax exemption left over after one of you passes away.

If your spouse is not a citizen or permanent resident, then you may need to update your estate plan too. Your current plan may not take into account the very low estate tax exemption that non-citizens receive – only $60,000 – or the lack of a marital deduction for gifts to spouses. If not, you or your spouse could end up owing significant taxes due to transfers of property to each other and relatives.

Estate Planning for New Citizens of Other Countries

People who just became citizens of other countries may need to estate plan in the United States too. If you own any property located in the United States, you may owe income taxes now and estate taxes in the future. An estate plan can help you set aside money, or even move your property to a holding company that could affect tax liability.

Further, you may need to make a will in your new country – and possibly one in the United States as well. Sometimes, more than one will is appropriate for dual citizens or people with ties in several countries. Other times, just one will or other estate planning structures are best. Talk to estate planning lawyers in both countries to find out more.

Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.

Can Foreign Tax Credits Lower Estate Taxes in the U.S.?

The interaction of foreign tax laws and United States estate tax laws can create unfair treatment for people who have to pay taxes in both countries. Fortunately, in some cases foreign tax credits may apply to reduce tax liability for estates.

What Is a Foreign Tax Credit?

A foreign tax credit is a credit applied against United States federal taxes, reducing the total amount of tax due. Foreign tax credits are only available if you paid taxes to a foreign country (or U.S. possession).

In the alternative, the United States offers possible deductions for foreign taxes you paid. The deductions reduce your total taxable income. But the IRS says that it may be more beneficial to take a tax credit rather than a deduction.

How Can Foreign Tax Credits Affect U.S. Estate Taxes?

When an estate pays estate taxes, it may need to make payments both to a foreign country and to the United States. Both the U.S. and some other countries assess estate taxes on citizens’ worldwide estates. If someone is not a citizen but owns property in a country, he or she may owe estate taxes there too.

As a result, an estate could pay taxes to two different countries on the value of the same assets. This is called double taxation. Further, some countries (including the United States) treat people who are not citizens differently for purposes of assessing estate taxes.

Foreign tax credits can lower the tax bill in the United States by eliminating or reducing double taxation or discriminatory tax treatment of non-citizens. By giving estates a break on taxes, the credits increase the possible inheritance to relatives of people with property in multiple countries. Estate tax treaties make these credits available.

The United States has estate tax treaties with many countries worldwide. In the treaties, the countries agree that citizens or people who own property in the countries will receive certain credits, deductions, or other tax treatment. They aim to reduce double taxation and redundancy when people are taxed in multiple countries. To learn more about estate tax treaties and foreign tax credits, talk to an estate planning attorney.

Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.