Tuesday, March 17, 2015

International Estate Plans

Having an office in Naperville, IL, I frequently see clients with global ties.  With our proximity to O'Hare International Airport, our community is home to many multinational technology, finance, consulting, and other companies.  Frequently, skilled employees of these businesses have family ties overseas, or have worked for their companies in other countries.

Below, I will discuss a hypothetical family of four that emigrated from the United Kingdom to work at an engineering firm in Naperville.  Families like this, which are increasingly common in today’s world, require careful estate planning services, often from an international team of experts.

Our Hypothetical Family

Imagine our hypothetical family owns a half-million pound house in London, a half-million pound UK bank account, a half-million dollar house in Naperville, and a half-million dollars worth of stocks in US brokerage accounts.  The family has lived in the US for two years.  All family members are dual UK-US citizens.  Every summer the family goes back to London for a month for the children to visit their grandparents, but spends the rest of the year in Naperville.  The family may one day return to the UK or live in a third country, depending on where the company sends them next.

The Local Component

Because the family is living in Illinois, it is extremely important that the parents work with an estate planning attorney licensed to practice law in Illinois.  If either or both parents became disabled or die, Illinois powers of attorney (in the event of disability) or well-drafted trusts (in the event of disability or death) would help ensure the family is properly cared for.   Many families with this level of assets also plan ahead to avoid the difficulties of probate, typically through the use of a living trust.  Perhaps most importantly, the family should name guardians for their children in the event of their deaths, as an Illinois judge would ultimately decide who should serve as guardians.  Without instructions from parents, a judge may pick someone the parents would not have chosen.

So far, the family’s discussion with an Illinois attorney is similar to the discussion any typical Illinois family might have with their attorney.  However, the family’s ties to the UK add a layer of complexity.

UK Estate Plans

Only a lawyer licensed to practice law in the UK is qualified to give advice about an estate plan in that country.  The ideal time for a family to create an estate plan for its overseas property is at the same time as when dealing with US property.

If the US and UK lawyer are working on their respective pieces of the estate plan at the same time, the family would be wise to ask the two lawyers to coordinate.  Some potential reasons:

-Probate is aggravating, expensive, and time consuming enough in one country.  It would be unfortunate if the family ultimately had to go through the process in two countries, due to a lack of planning.  A conservative estimate would be $6,000 in legal fees per probate estate, per country.  Therefore, dual nation, dual parent probate could result in $24,000 in legal fees.

-Inheritance tax laws vary greatly from country to country.  While the hypothetical family above does not come close to the threshold of having to worry about federal inheritance tax in the US ($5.43 million per individual; $10.86 million per couple),  its UK assets exceed the inheritance tax threshold in the UK (£650K per couple).  This means they could be facing a 40% tax bill on some of their UK property at death.  Depending on the advice of the UK attorney (in coordination with the Illinois attorney), it may be wise to shift some assets to the US to avoid taxation.

-Local counsel in the UK can properly advise on the formalities of UK will execution.  While the US and the UK are both signatories to the Washington Convention, meaning they agree in principal to respect a will that meets the standards of an “international will,” only UK counsel can advise on the practical realities of probating a UK estate.  Note also that due to the federal nature of the United States, it is up to individual states to adopt (or not) the Washington Convention.  In short, it is a complicated area.  Additionally, only UK counsel would be qualified to advise on probate avoidance mechanisms, like UK trusts.

-If the family has overseas relatives, there is a chance it will inherit further overseas property after drafting its estate plan.  This could exacerbate foreign estate tax and probate problems.  Planning ahead with UK counsel would be wise.


The successor trustee of a living trust ensures that its terms are carried out after the death or disability of the settlor (the person who created the trust).  Typically this means distributing funds, maintaining accounts, ensuring children are financially cared for, etc.  Similarly, the executor of a will closes out the estate in probate, if probate is necessary.

In Illinois, an executor may be anyone who  “has attained the age of 18 years, is a resident of the United States, is not of unsound mind, is not an adjudged disabled person as defined in this Act and has not been convicted of a felony, is qualified to act” in this position.  See 755 ILCS 5/9-1.  So for the family in question, it is important the executor appointed in any will be a US resident, not a relative in the UK.

For different reasons, all successor trustees of a living trust should ideally be US residents.  Under IRS regulations, allowing a non-US resident to serve as trustee will cause the trust to be classified as a “foreign trust” and incur much more burdensome tax reporting obligations. 


Ideally, the family would name US resident family or friends to serve as guardians of their children in the event of the parents’ death.   755 ILCS 5/11-3 specifically requires that any court-appointed guardian of a child be a US resident.

For a family with a very close relationship to overseas relatives (like our hypothetical family), this could create issues.  Our hypothetical family may have no blood relatives or even close friends in the US, and the children may even have been raised for some time by their grandparents in Great Britain.  Many reasonable people would believe it to be in the best interests of such children to be raised by their relatives, as opposed to non-relatives in Illinois or even in the foster care system.

The US Supreme Court has even declared that parents have a “constitutional, fundamental right to the care, custody, and control of their child.”  Potentially, a situation like the hypothetical one above could create a conflict between the parents’ constitutional right to select guardians, and the Illinois law which forbids them from selecting the UK grandparents.  There could be much debate about what is in the best interests of the child, which is what courts ultimately strive to achieve.

While there is no easy answer to this situation, a few possibilities exist:  If the parents are adamant about naming UK proposed guardians, they should at least name temporary short-term guardians in the US to watch after the children while the longer-term guardianship question is sorted out.  The parents should also clearly state their intentions about who they want raising their children, and where, in their wills (possibly in both countries).  Maintaining dual citizenship for the children may be wise.

Ultimately, it may require the UK family going to a court in the UK to adopt the children or get some form of guardianship, and then trying to get the children travel clearance to the UK through diplomatic channels.  If this type of international adoption/guardianship process is followed, an Illinois judge might be persuaded to release the child from Illinois and allow the international adoption/guardianship to go through.  However, there is no guarantee this process will work, so it would be wise for the family to name local guardians to serve in the event that their preferred guardians cannot take custody of the children.  If any reader has experience with this situation, feel free to send me a message and I’m happy to share with the community.

Published by Ian Holzhauer, Esq. of Nagle Obarski PC in Naperville, IL.   

Note:  The information above is not legal advice and is not the basis of an attorney-client relationship.  If you need assistance, you can hire an attorney to assist you with your individual legal needs. 


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