Why U.S. Residents Owning Foreign Homes Need a U.S. and a Foreign Will

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Why U.S. Residents Owning Foreign Homes Need a U.S. and a Foreign Will

In today’s highly mobile world, it is increasingly common for U.S. citizens and permanent residents to own homes abroad. These properties may have been acquired as vacation homes, inherited from parents who remained in their home countries or maintained as dual residences for work, particularly by executives of international corporations. Even after retirement, many individuals choose to retain their non-U.S. homes. In my practice, I have encountered all these scenarios involving U.S. persons who own second homes outside the U.S., including Canada, Mexico, France, Italy, Korea, Israel, Ireland, Germany, England and the Virgin Islands.

For clients and their spouses who are U.S. citizens or green card holders, non-U.S. homes often do not require intricate estate tax planning. New York estate tax does not apply to real property located outside the state, and U.S. persons benefit from the full federal estate tax applicable exclusion amount, commonly referred to as the “unified credit.” Unless Congress enacts changes, the federal exclusion amount for 2025 is nearly $14 million per person.

Challenges of Using a Single Will

For U.S. persons who currently benefit from the large U.S. estate tax exclusion, a tax-free bequest of a non-U.S. home is still difficult. If only one will is used, several complications may arise:

Translation Issues: The original will must be translated, and some legal terms may not translate precisely.
Execution Requirements: Will execution standards often vary between countries, potentially leading to a claim of undue execution in one of the relevant countries.
Filing Requirements: The original will may need to be filed in both jurisdictions. Some foreign courts accept exemplified, authenticated or court-certified copies of the will with an apostille, while others may not. Certain courts may even require a bonded attorney from the first country to personally hand deliver the original will to the second country for inspection and copying.

A notable example of these difficulties occurred in 2013 when a New York Surrogate’s Court admitted to probate the will of a U.S. decedent who owned property in Israel. The New York executor petitioned for ancillary probate in Israel, submitting an exemplified copy of the U.S. will to the Israeli court. However, the Israeli court required an affidavit from a New York attorney confirming that, under a New York statute, the inheritance rules governing the property outside the U.S. were subject to local Israeli laws. No such New York statute existed, complicating the process.

Risks of Local Intestacy

If there is only a U.S. will, and it fails to effectively dispose of a non-U.S. residence, the property may default to the intestacy rules of the foreign country. If these rules align with the client’s wishes, a non-U.S. will may not be necessary. However, if the foreign intestacy rules conflict with the client’s intentions, a non-U.S. will is essential to ensure the property is distributed as the client desires.

Two Wills for U.S. Persons

One practical solution for bequeathing a non-U.S. home is to have two wills – one for the United States and another for the country where the non-U.S. property is located. While this approach requires two probate (or similar) proceedings – one in each jurisdiction – it is often easier than original probate in the U.S. followed by ancillary probate in the other country.

Although it is often said that an individual should have only one will at a time, multi-jurisdictional wills are common in international estate planning. U.S. estate tax may not be a factor for U.S. persons because of their large exclusion from U.S. estate tax. However, other issues must be addressed when a U.S. person considers two wills.

If the clients are U.S. persons, their U.S. will should state that their U.S. will governs their worldwide property in every country, other than the country where they maintain their non-U.S. residence.
The non-U.S. will should state that the non-U.S. will governs only property in that country.
In general terms, the U.S. will should enumerate worldwide property that the U.S. will covers, i.e., real property, banks and brokerage accounts, but not property in the non-U.S. country where the U.S. person owns a non-U.S. residence.
In general terms, the non-U.S. will should enumerate the property that the non-U.S. will covers, including the location of a residence in the non-U.S. country, but not property located outside of that non-U.S. country.
The U.S. will should designate the law of which State of the United States governs the U.S. will.
The “elective share” or “forced share” of the surviving spouse in both the U.S. and the non-U.S. country must be considered. Is it necessary to ask the client’s spouse to sign a waiver of the right of election or forced share for one or both countries?
The “forced heirship” or mandatory inheritance of the client’s children in a non-U.S. country must be considered. Is it possible for adult children to sign waivers of their forced share?
If the U.S. client agrees, the U.S. will may give the U.S. executor the power to pay estate administration expenses and taxes in the non-U.S. country out of U.S. funds. The U.S. executor may not have the power to use the U.S. funds if that is not stated in the U.S. will.
The inheritance tax of non-U.S. countries is often collected from the beneficiaries, not the estate. The U.S. will may allow the U.S. executor to reimburse the beneficiaries for the non-U.S. inheritance tax.

Residuary Clause

Using a standard residuary clause that bequeaths “all the rest, residue and remainder of my estate wherever situated” should be avoided, as it defeats the purpose of distinguishing between the disposition of U.S. and non-U.S. property. Instead, the residuary clauses in both the U.S. will and the non-U.S. will must be meticulously edited to apply solely to the property governed by each respective will.

Wills Must Not Revoke Each Other

Most important, the two wills must not revoke one another. A clause that clearly safeguards against unintended revocation is essential. The following is a clause that might appear in a U.S. will of a U.S. person:

(a) Proposed Revocation Clause in a United States Will of a U.S. Person

JOHN DOE, publish and declare this to be my United States Last Will and Testament, to control the disposition of the property hereinafter described and defined as my Estate, and I hereby revoke all Wills and codicils at any time heretofore made by me with respect to such Estate. This United States Will shall not revoke or otherwise interfere with the disposition of any property which is situated in the Republic of ABCXYZ. This United States Will can only be revoked by another Will which is later in date than this United States Will. This United States Will may not be revoked unless the revocation clause of another Will specifically refers to this United States Will by date of execution and explicitly revokes it.

The U.S. will continues with a clause that defines the “estate” that is bequeathed under such U.S. will. Usually, the “estate” in a U.S. will of a U.S. person would be the individual’s worldwide assets other than property that is in the non-U.S. country, here the Republic of ABC. In the non-U.S. will, there should be a complementary revocation clause. The “estate” should be defined as including only property located in the Republic of ABC, such as the non-U.S. residence.

Note that if the non-U.S. residence is in a country that is a member of the European Union, it is necessary to research whether an EU regulation on inheritance is relevant. In every case, it will be essential for attorneys in each country to communicate in advance and draft the two wills as a coordinated service for the client.

Diane K. Roskies, a principal attorney at Offit Kurman in New York, advises U.S. and multinational citizens on U.S. and international trust, estate planning and administration, often involving multiple jurisdictions. She represents high-net-worth and ultra-high-net-worth individuals and their families, including those with assets valued at over $2 billion. She publishes the blog “Lost in Translation: Blunders in International Estate Planning.” This article appears in a forthcoming issue of the Trusts and Estates Law Journal, the publication of the Trusts and Estates Law Section. For more information, please visit NYSBA.ORG/TRUSTS.