Legal Translation for International Estate Planning

Legal Translation Services for Estate and Trust Attorneys

We’ve blogged about the need for legal translation services in the context of real estate ownership in a foreign country. International estate planning for international clients residing in the US also generates a need for certified translation of public documents and contracts. How does planning an estate for an expat living in the US differ from any other estate planning issue? Let’s look at legal translation services for expatriates.

For starters, there is the issue of double (or even triple!) taxation. Many non-US citizens are uncertain as to what kind of taxes they could face. As a general rule, the answer is simple: an individual residing in the US has to pay income tax on their worldwide earnings. In addition, they could also be required to pay taxes on the worldwide earnings to their home country, their spouse’s home country – or both.

If the individual meets any of the following criteria, they will be required to pay US income taxes on their worldwide income:

  • The individual has a green card
  • They have a “substantial presence” in the US (determined by the number of days one is present in the country)
  • They make a special election to be treated as a permanent resident for income tax purposes.

If any one of these criteria are met, the individual estate will be taxed at a flat rate of 30% – on top of any other international taxes due. That being said, however, it is important to note that in many cases estate tax treaties with the country of individual’s citizenship can prevent any double taxation.

Then there is the issue of transfer tax, which utilizes a different test to determine whether or not one qualifies. Transfer tax includes such taxes as gift tax, estate tax, generation skipping transfer tax and, in some cases, even capital gains taxes.

According to IRS code 2001(a): “a tax is hereby imposed on the transfer of the taxable estate of every decedent who is a citizen or resident of the United States”. But what does ‘residence’ mean? The definition as it applies to transfer tax is different from the one that applies to immigration status. Thus, according to the law, one will be considered a resident of the United States and thus liable for transfer tax if:

  • The person intends to live in the US permanently,
  • At the time of intent, the individual is physically present in the US, and
  • The person is capable of making an informed, intelligent decision about permanently living in one place or another.

Thus, if a person living in the US intends to someday move back home – and can back this intent with evidence – then they may not be considered a resident according to the IRS code. Thus, no transfer tax will be owed on the estate.

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