A primary factor that motivates our clients to work on their estate plan is so that their heirs can avoid probate. We can almost always advise our clients, as well as draft the right documents, so that their assets will transfer free of probate after they pass. However, that careful planning can be disrupted if a client opens a bank account in another country because foreign bank accounts often require the client to probate those foreign assets in the jurisdiction in which the account was opened. (Note there are several other reporting and tax issues that affect foreign accounts; I will discuss these in later blogs.) Thus, not only do the client’s heirs not avoid probate, but also in order to get the assets in the foreign account, the heirs are forced to endure probate in another country, thereby subjected to that country’s laws and legal system. Like all estate planning, such missteps can be avoided by asking the right questions before action is taken.
Of course, there are many reasons to open an account in another country, i.e., saving on fees while traveling, having a place to deposit income earned abroad, or sharing an account with a relative living in another country are a few examples. Thus, one can possibly save some time and money by opening an account outside of the United States. Furthermore, with so many banks having branches all over the world, it is easy to think that there will be no problem with administering a foreign account from the United States.
However, that is not the case; rather, it is too often that someone will open an account, pass away, and their heirs will have to probate the account in the foreign jurisdiction. This result occurs because most banks, even the ones with branches all over the world, will not allow the bank account to be closed from any other country other than the one it in which it was opened. This leaves heirs to travel to the country to probate their relative’s assets in the account, which can require hiring a foreign attorney; all this is a large expenditure of time and money.
Opening foreign bank accounts is just one example of the pitfalls that can lurk with almost every financial action as they relate to your estate. It is not imperative that you to be aware of all those pitfalls; rather, it is important for you to discuss your financial actions, even if they seem benign, with your advisors. Like all estate planning, it is better for you to make the right decisions now, so your heirs aren’t left having to sort out issues later.
– Gary Altman, Esq. and Michael Wolsh, Esq.