Probate and Taxes in Several Foreign Jurisdictions--Once Complicated, Now Easy

Saturday, Oct. 20, 2007

Shopping for, buying, owning, using, and visiting your real estate overseas…that’s all great fun. Administering each piece of property, both its purchase and its hold, isn’t. Invest in real estate in two or three countries…and suddenly, things get complicated.

For example, what are the estate implications in each jurisdiction where you own? You sure don’t want your children to have to mess with multiple probates.

That’s the very long-term concern. There are other, more immediate issues, as well…including, especially, taxes. Transfer taxes, income taxes, capital gains taxes, wealth taxes, property taxes... Not every country imposes them all, but you want to know which ones will apply to you and what you might reasonably expect the respective burdens to be before you buy.

Then there’s property management…and rental management if you’re intending to rent out your house or apartment in paradise when you’re not using it. I’ve learned the hard way that the choice of manager is often the difference between your rental being profitable and a big pain in the neck.

You’ll have other issues to address, too, depending on the type of investment and the market. Homeowner’s association dues or mandatory maintenance fees…caretaker costs…paying the local monthly bills for electricity, cable, internet…

Administering one or two places abroad can be a challenge…managing a dozen investments in a half-dozen countries can become a real burden.

How do you keep the administration from taking all the fun (and maybe some of the profits) out of the equation? The key is doing your homework. Invest the time to do the research to understand all the issues and all the potential liabilities and consequences of a purchase before you make it. This should save you from finding yourself in the worst possible situation: Having to backtrack.

I’m in this situation right now with a couple of investments, where, I admit it, I didn’t think things through completely up front. Who should buy (that is, whose name should go on the deed)…and how to hold? These are critical questions, your answers for which must be considered within the context of your overall investment portfolio and all other assets you hold.

Again, probate is a big issue. My goal is to structure things so my kids don’t have to go through the process anywhere. That means different holding structures for different jurisdictions, because, unfortunately, one holding structure does not fit all.

For example, you can release yourself from all capital gains tax liability in Croatia by holding any property you buy in that country for at least three years. However, that rule applies only if you hold the property in your individual name. Deed it to a Croatia corporation, and you’ll pay capital gains taxes no matter when you sell.

Argentina has a similar rule. In this country, too, you pay no capital gains taxes on real estate titled in an individual name.

However, there are downsides to holding foreign property in your individual name…and great upsides to holding it in a corporation. What is a property buyer to do? In Argentina, you have a legal option that gets you around the problem, but it’s not simple and no one’s going to tell you about it unless you ask. Furthermore, you should realize, here (as anywhere), the rules can change at any time.

In Croatia, you have no legal option. You have to decide which is more important to you--no probate or no capital gains taxes.

And, of course, all of these kinds of questions have to be considered within the context of tax obligations and liabilities in your home country.

Complicated? No question. And the greater and more diverse your holdings become…the more complicated it gets.

I’ve learned that you need help. You aren’t going to figure out the best strategies and structures on your own, no matter how much research you’re willing to do.

Over the past 10 years of focusing my attention on international real estate investment opportunities, I’ve been fortunate to meet and develop friendships with people who know a lot more than I do about these things. They know both the restrictions and the loopholes. They know what’s legal…and they also know what’s possible. They know how to minimize taxes and how to organize holdings with an eye to holding onto your net worth into the next generation and beyond. They know how to maximize both the fun and the profit of an international lifestyle and a global investment portfolio.

And they’re going to join me and Kathleen Peddicord for a weekend at Waterford Castle in Ireland early December. You couldn’t arrange individual meetings with all these folks…even if cost were no object. Residency, domicile, earned income exclusions, double-taxation agreements, passive income versus earned, offshore corporations, overseas trusts…I know enough about these things to be dangerous. The folks convening in Waterford in December are the experts. Kathie and I are making our list of issues and questions to discuss with them while we’re together.

However, the meetings are being planned not for our benefit…but yours. These friends and colleagues have agreed to spend three days not only with Kathie and me but with a small group of International Living readers, as well. The private retreat is not intended as our, but, to the point, your opportunity to get a handle on your life.

If you, like me, hold assets in more than one foreign jurisdiction (or intend to)…then you’ve realized already, I’m sure, that you need counsel you can trust. The answer to every question you try to address leads to more questions, and every decision can have far-reaching and unimagined consequences. You can spend years and tens of thousands of dollars on your own trying to get a handle on your administrative existence offshore.

If you’ve ever wished someone would come along and present a plan for your international life and your offshore holdings in a little box tied with a pretty bow…well, this is almost it.

In truth, no one can tell you how to structure your global activities, but the people joining Kathie and me in Waterford, Dec. 1-5 can answer your questions, comment on your decisions, and advise on the advantages and disadvantages of available strategies. All legal, all on the up and up, and all intended to help you minimize taxes, paperwork, ongoing fees, and any liabilities for your heirs.

You know if you’re in a position to take advantage of this kind of special meeting. If you’re ready to consider the options for structures and strategies for organizing your international holdings, Kathie and I and seven of the most expert friends we’ve been fortunate enough to meet over the past decade look forward to adjourning with you for four days in the privacy and the comfort of Waterford Castle.

You can read more about this first-ever Global Wealth and Wisdom Summit here.

Lief Simon

For International Living

Related articles:

- The Theory of Relativity

- It’s Not Too Late to Diversify Your Property Portfolio

- High Prices, Bad Neighborhoods, and Good Investing

Lief Simon will speak at:

- The Ultimate Event, Oct. 24, Panama

- Global Wealth and Wisdom Summit, Dec. 1, Ireland