American LAW

An article on U.S. tax law by one of our American lawyers.


Leigh Alexandra Basha, Attorney

Non U.S. Citizens with assets in the United States have more planning to do than most. They are faced with a myriad of choices and a greater need to plan. They usually need to coordinate advisors not only in the US, but also in their home country and elsewhere where they may have assets. Many non-US citizens will be faced with probate and estate administration not only in the US, but abroad. Fortunately, just like US citizens, they can avoid probate in the U.S. altogether by using a revocable living trust. For those from civil law jurisdictions, the concept of a trust can be a bit alien, but like many Americans just now becoming familiar with its benefits, everyone can appreciate its usefulness. So what is a revocable living trust? What does it do? How does it work? Should you have one? The following is a brief overview, together with some pointers on what options you will face.

A revocable living trust, compared to a will, provides a mechanism to deal with incapacity, avoid probate and as a result minimize court costs, legal and executor fees, and the time delay associated with probate. Further, it keeps matters private, which provides you with maximum flexibility and control.

A revocable living trust is legal arrangement where your wishes are set forth in a written instrument that you dictate during your life. Typically, you as the settlor of the trust would be the sole beneficiary during your life and would act as trustee. As trustee, you would have legal title to all the assets in the trust. Upon your incapacity and ultimately at your death your alternate trustee, whom you have named in the trust, would take over and carry out the terms of the trust as you have directed.

If you become incapacitated, your trust can be very useful indeed. Your family need not obtain a court supervision to manage your assets for your benefit during your period of incapacity. This means no court appointed conservatorship with its attendant accounting, bond and other requirements. This is a tremendous advantage. For instance, what if you became incapacitated and the stock market started to plummet? Without a trust, no one would have authority to make quick adjustments to your financial affairs. If your brokerage account is in your trust, your alternate trustee can quickly move on matters.

Ultimately, at your death your revocable trust becomes irrevocable, because you will no longer be in a position to change it! At that point it acts like a will substitute and your alternate trustee disposes of your trust assets as you direct similar to instructions under a will with one great exception no probate. Assets held in a revocable living trust avoid probate. This means no court-supervised administration with its often burdensome red tape, less court costs and executor fees and less delay. Furthermore, if you have assets located in more than one state you will typically face probate in each state where you have assets, potentially exposing yourself to 50 different sets of laws. At your death your trust will carry out your wishes including tax minimization techniques (e.g., a bypass/credit shelter trust and a qualified domestic trust "QDOT").

As a non US citizen, you will face some unique issues in arranging your estate plan including the need to consider establishing another trust outside the US to hold your non US assets and/or a will in all foreign jurisdictions in which you have assets. A trust can often help you to pass on your assets regardless of forced heirship rules in your home country. Regardless of whether you rely on a will or a trust to carry out your intent, the most important thing is to address your situation and seek competent legal advice from someone who can help you navigate the often turbulent maze of tax, property, and probate laws.

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