Top 5 Reasons for Expatriates in California to Have an Estate Plan
Moving to California is an exciting adventure for many expatriates. The Golden State boasts stunning landscapes, a vibrant culture, and a thriving economy. However, amid the excitement of a establishing a life in California, expats should not overlook the importance of estate planning. Estate planning is a crucial aspect of financial and personal planning, and understanding the unique considerations that apply to expats is essential. In this article, we will outline the top five reasons why expatriates should prioritize preparing an estate plan in California.
Reason #1: Planning for Incapacity
When people think of an estate plan, they often associate it with preparing for a time of death. While this is an important function of an estate plan, an equally important role is its ability to provide instructions during an individual’s incapacity.
The three most important documents to have during incapacity are a trust, a power of attorney and an advance health care directive:
- A trust enables you to nominate a trusted person to manage your assets during your incapacity, and allows you to spell out how your incapacity can be established.
- A power of attorney enables you to nominate a trusted person to make financial decisions on your behalf, should you be unable to do so. This includes paying credit card bills, filing taxes, paying rent or a mortgage, and paying for medical expenses.
- An advance health care directive enables you to nominate a trusted person to make medical decisions on your behalf, should you be unable to do so.
Planning for incapacity is particularly important for expatriates, because oftentimes family members are overseas and unable to assist in an emergency. Moreso, even if family members were able to assist, they may not have the authority to do so. We can help you identify and nominate trusted individuals to help in the event you become incapacitated.
Reason #2: Protecting Your Children
If you are an expat with children, having an estate plan is particularly important.
Our documents enable parents to nominate guardians to take care of their children, should they be unable to. This includes selecting local temporary guardians, such as a trusted friend or neighbor, to ensure your children are immediately taken care of, and guardians located overseas, should you wish for your children to return to their home country.
Our documents also enable trusted individuals to provide financial support for your children, covering schooling, medical expenses, and everyday living expenses.
Reason #3: Streamlining US Asset Distribution
Without a trust, your estate may have to pass through probate – a lengthy, expensive and public court process. A trust can ensure that your assets pass seamlessly to your loved ones without the hassle of probate.
For expatriates, we can help ensure that your US-based assets are taken care of, and we can connect you with foreign attorneys to ensure your foreign assets are also protected.
Reason #4: Mitigating Estate Taxes
The US imposes a federal estate tax on individuals who are U.S. citizens and primary residents with assets exceeding $12.92 million at the time of their passing. This value is likely to reduce to $7 million in 2026.
To make use of this marital deduction, expatriates must establish a qualified domestic trust (QDOT), allowing for a surviving spouse who is not a US citizen to take advantage of the marital deduction and preserve marital assets.
Reason #5: Minimizing Exit Taxes
Certain expatriates are subject to exit taxes when leaving the US. Covered expatriates must pay a capital gains tax on assets above an inflation-adjusted exclusion limit, as if they sold those assets on the day before expatriation. More sophisticated estate planning tools can help mitigate these taxes.
Don’t wait until it’s too late; safeguard your assets, protect your family, and ensure a smooth transition for your loved ones. Contact us today at (650) 572-7933 or visit our website at www.mcdlawyers.net to schedule a consultation with our experienced estate planning and litigation attorneys in San Mateo. Let us help you navigate the complexities of estate planning, so you can focus on enjoying your adventure in California with peace of mind.
By: Alison Youssef, Esq.