Beware the Tax Implications of Foreign Assets:
Complications involved in estate planning are heightened not only by the value of an estate, but also by connections assets share with two or more jurisdictions. A connection between yourself or your assets and a foreign jurisdiction can come about in a number of ways, and often arises as a result of the increasing prevalence of the mobility of workers, which itself leads to more foreign property ownership. The growing trend of vacationing and retiring in southern places is also escalating the pervasiveness of foreign property investment. Even simply owning equity interests purchased through foreign share exchanges can raise estate planning concerns.
Especially complicated estate assets for tax purposes are equity and debt interests purchased on foreign exchanges. These assets are fraught with complications due to the fact that they represent interests in corporations that may operate in multiple jurisdictions. These entities may also have assets located across the globe, and could even be traded on multiple exchanges. For a brief rundown on when such securities may be subject to foreign estate tax, click here.
The complexity associated with foreign asset ownership arises due to the variation of tax systems between countries, as well as how estate taxes are applied where, depending on the jurisdiction, such a tax may be levied based upon the residence, citizenship, domicile or location of the individual or their estate assets, or any combination thereof.
As a result of these factors, it is not uncommon for an estate tax to be levied in multiple jurisdictions on the same assets. Conversely, this double taxation can also arise where beneficiaries or assets are located abroad.
In the interests of ensuring that an estate, or indeed a beneficiary, pays as little tax as possible, if multiple jurisdictions touch upon an estate in one regard or another, it is imperative that estate planners consult with tax advisors and legal experts in order to avoid paying what may amount to double-taxation on their estate assets on death.
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