Estate Planning 101


 

ESTATE PLANNING BASICS

 

Expats are in a unique situation.  Their estates are subject to probate in both the country of residence and the place of domicile (Note: each state has its own rules regarding minimum estates requiring probate, but for expats it has the potential of becoming a major nightmare.)  For expats we recommend a dual set of estate planning documents: one set to cover affairs here in the Philippines; another to cover affairs in your place of domicile.   Even though non-Filipinos are not permitted to own real estate here in the Philippines (except through a corporation or Lnnd Trust), usually there are other assets which would be considered part of the estate, and anything that is either sited here is subject to probate and estate taxes here (vehicles, bank accounts, personal belongings, jewelry, computers, etc.- even your life insurance may be considered as part of your estate).

Wills, Powers of Attorney, Health Care Powers of Attorney, Living Trusts, CRTs, ILITs, and more...  Even attorneys get confused (but don't expect them to admit it!).  Estate planning is something that most people, it seems, would prefer to avoid. Yet the reality is that some estate planning has already been done on our behalf- by the respective governments that claim jurisdiction over our assets (and children, if any).  As someone has said, "If you don't have a will, the government has one for you." In the case of most expats, two (or more) governments (the Philippines and your home state(s)) have one for you!  Like it or not, this is something that, sooner or later, someone is going to have to deal with.  Estate planning is done in advance because you care- about those who may be left behind when your time comes.

Wills- everyone of legal age should have a will.  If you do,  and it meets the legal criteria, then it will be honored, rather than the government's will (laws of intestacy).  For parents with minor children, wills are an absolute must, as it will be up to the courts to name guardians if you fail to do so, and their choice may not be yours.  We like to use "Pour-over" wills when setting up Living Trusts, as any assets not distributed would then go into the trust.  (We do not believe that a separate will for the Philippines is absolutely necessary, but your will should take into account local laws and your Philippines trust, if any.)

Powers of Attorney- We recommend that all expats- especially non-immigrant expats give some level of Power of Attorney to someone they trust in order to handle matters back in the U.S.  Also, we usually recommend that spouses have durable general Powers of Attorney for each other.  This is so that in the event of incapacitation of one the other can handle necessary matters.

Trusts: There are many different types of trusts, and the larger the estate, the more planning that should be done, depending on the desires and goals of those involved.  A Living Trust (also called an "Intervivos Trust") gets its name simply from the fact that it is created while the grantor is alive.  We recommend living trusts for anyone with assets, including life insurance and retirement plans, of more than a few thousand dollars.  Each state has its own criteria for probate, and a living trust can minimize or eliminate the hassle, publicity and expense for your loved ones, and can also save on inheritance or estate taxes (including those of the Philippines!).