Imagine receiving a notification that you are named as a beneficiary in a will or trust from a relative abroad. Initially, it seems like a windfall, but what comes next? The intricacies of managing cross-border trusts can turn an expected gain into a complex financial headache. This issue is especially pronounced for heirs who are dual citizens and live outside of America.
Navigating International Trusts
A trust established in the U.S. for an Israeli beneficiary requires navigating both U.S. estate planning principles and Israeli tax regulations. This dual obligation can create unforeseen complications, as non-Israeli trusts with Israeli beneficiaries can fall under the jurisdiction of the Israeli Tax Authority. In many cases, neither the creator nor beneficiary of such a trust are aware of these implications and complications.
Advance Planning is Key
For cross-border estate planning to work well, it’s important to be flexible. Trusts and wills need to be reviewed and updated regularly to match changing laws and the needs of the beneficiaries. For example, trusts created for young children should be reviewed when they become adults to make sure the money is distributed in a way that fits their current situation and lifestyle.
Practical Steps for Beneficiaries and Trustees
Beneficiaries and trustees should work closely with financial planners and legal experts specializing in cross-border estate management to ensure inherited trusts are managed effectively. Here are three actionable steps to ensure smoother management of international trusts:
- Review and understand: Always understand the full terms of your trust. Ask your lawyer to interpret and explain the details.
- Engage with experts: Work with financial advisors and tax professionals who specialize in international estate planning to navigate the complexities effectively. Experts should be consulted during both the writing and disbursement stages.
- Regular updates: Ensure your trust documents are regularly updated to reflect current laws and personal circumstances.
Handling inherited wealth across borders doesn’t need to be daunting. With informed planning and expert guidance, beneficiaries can manage their trusts effectively, ensuring their financial stability and peace of mind.
Download a free copy of “Essential Questions to Ask Your Cross-Border Professionals” at profile-financial.com/essential.
Douglas Goldstein, CFP® is the director of Profile Investment Services, Ltd. www.Profile-Financial.com. He is a licensed financial professional both in the U.S. and Israel. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.
Published October 14, 2024.