The U.S. estate and inheritance taxes are very complex if you own property in other countries. As a result, many U.S. taxpayers who own investments or businesses outside the country own those assets through a corporation. Although the owner of a corporation may die, the corporation does not; thus, there is no imposition of an estate tax in the country where the property is located. For a U.S. taxpayer, the value of the corporation stock would be included in his or her estate. The actual assets owned by the corporation, however, are not included separately by the estate, because those assets are already included within the value of the corporation’s stock. But any assets, including real or personal property, located anywhere in the world, even the United States, owned by the deceased taxpayer will be included in the estate. For 2007 through 2008, there is an exemption of $2 million before the federal estate tax is imposed. For 2009, this amount increases to $3.5 million, and in 2010 the estate tax is repealed.
The countries that you have investments in will also have an impact on the amount of tax payable by your estate upon death. On the positive side, some countries have no inheritance tax. Other countries have complex rules or extremely high estate taxes, which may necessitate that your heirs sell the property to pay the taxes. The important thing is not to be caught off guard. Consult with local professionals and attorneys to understand what your options are before you purchase. There may be considerations regarding how the title is held that affect your estate and your beneficiaries. Unlike the United States, the country may be subject to religious laws and codes that affect inheritance. Or there may be rules that dictate who can inherit and in which order. For instance, in France, if title is held by you and your spouse and if you have children from any relationship, those children have priority over any other beneficiary, including your spouse. If you die in France but are a U.S. resident, the property you own in France is subject to French inheritance tax laws, which means your children have priority over your spouse. However, if you die outside of France, inheritance is based on the laws of the country of death. So as you can see, if you want to know where your estate is going and what taxes it may be subjected to, do your homework and seek legal counsel in the country that you are purchasing in.