How are foreign assets handled through a will

I recently spoke with a client, David, who discovered his father had a substantial property in Tuscany, Italy, but hadn’t updated his estate plan in over 20 years. David’s father’s original will contained no provisions for foreign assets, and the codicil attempting to address it was improperly witnessed – effectively making it invalid. The resulting legal fees and delays to sort out the Italian property exceeded $40,000, and the estate was significantly diminished by the time David received his inheritance.

What Happens to Foreign Property After Death?

Dealing with assets located outside the United States through a will adds layers of complexity. It’s not simply a matter of probating the will domestically. Each country has its own laws governing inheritance, taxation, and asset transfer. A U.S. will directing the distribution of a foreign property may be recognized abroad, but it’s rarely straightforward. Often, a separate ancillary probate proceeding will be required in the country where the asset is located, governed by that country’s laws.

What are Ancillary Probate Proceedings?

An ancillary probate proceeding is essentially a secondary probate case opened in a foreign jurisdiction. This process verifies the validity of the U.S. will under foreign law and authorizes the transfer of the foreign asset according to the will’s instructions. The requirements vary drastically from country to country. Some nations readily accept U.S. will validity, while others may require the will to be re-executed in their local format, or even necessitate a completely new will be drafted to comply with their laws. Translation costs and the requirement for local counsel add significantly to the overall expense.

Tax Implications of Foreign Assets

The U.S. estate tax applies to the worldwide assets of a U.S. citizen or resident. This means assets held abroad are included in the taxable estate. However, the U.S. has estate tax treaties with many countries to prevent double taxation. Determining the applicable tax rate, exemptions, and credit for taxes paid to the foreign country is critical. Furthermore, the foreign country itself may impose inheritance or estate taxes. As a CPA as well as an attorney with over 35 years of experience, I’m uniquely positioned to navigate these dual tax obligations, ensuring my clients minimize their tax liability and maximize the value of their estate. Understanding the step-up in basis for foreign assets is also vital, as is correctly valuing those assets for reporting purposes.

Digital Assets and Foreign Accounts

Beyond real property, consider digital assets – cryptocurrency, online accounts, foreign bank accounts – that may be located outside the U.S. Without specific RUFADAA language (Probate Code § 870) in your Trust or Will, service providers like Coinbase and Google can legally deny your executor access to your digital assets. Accessing foreign bank accounts requires additional documentation and coordination with the foreign financial institution, which can be incredibly time-consuming.

Foreign-Registered Business Entities & BOI Reporting

If the estate includes ownership in a foreign-registered Limited Liability Company (LLC), it’s crucial to address Beneficial Ownership Information (BOI) reporting requirements. While as of March 2025, domestic U.S. LLCs are exempt from mandatory BOI reporting under the Corporate Transparency Act, executors managing foreign-registered entities must still file updates within 30 days to avoid fines of $500/day. Failing to do so can lead to substantial penalties.

Planning for Foreign Assets in Your Estate

Proper estate planning for foreign assets requires proactive steps. A well-drafted trust, in conjunction with a pour-over will, can provide greater control over asset distribution and potentially avoid ancillary probate. It’s essential to work with an attorney experienced in international estate planning and familiar with the laws of the countries where your assets are located. We routinely collaborate with legal professionals overseas to ensure a seamless transfer of assets and minimize complications. Also, understand that if combined ‘probate assets’ (excluding the AB 2016 residence) exceed $208,850 (the threshold effective April 1, 2025), they are subject to formal probate; a Will alone does not allow you to bypass this limit.

What about California Real Estate and AB 2016?

For California residents, remember that for deaths on or after April 1, 2025, a primary residence valued up to $750,000 qualifies for a ‘Petition for Succession’ under AB 2016 (Probate Code § 13151). It’s critical to distinguish this from the Small Estate Affidavit (strictly for real property <$69,625, used for timeshares/vacant land). This Petition requires a Judge’s Order, but can be a significantly faster and less expensive option than full probate, provided the decedent’s other non-real estate assets remain below the separate $208,850 Small Estate limit. Finally, under Prop 19, heirs can only keep a parent's low property tax base if they move into the home as their primary residence within one year and the home's value is within specific limits.

How do California courts decide whether a will reflects true intent or creates ambiguity?

In California, a last will and testament is reviewed under probate standards that focus on intent, capacity, and execution. Clear drafting reduces ambiguity, limits misinterpretation, and helps families avoid unnecessary conflict during estate administration.

For California residents, understanding how intent, authority, and compliance interact is one of the most effective ways to protect family harmony and estate integrity. A will that anticipates probate scrutiny is far more likely to be honored as written and far less likely to become the source of unnecessary conflict.

Resources for Asset Management & Transfer

• Property Tax Reassessment: California State Board of Equalization (Prop 19)
  This page details the "Base Year Value Transfer" rules. It explains that heirs can only avoid a property tax reassessment if the inherited home becomes their primary residence and the Homeowners' Exemption is filed within one year of the date of death.
• Real Estate Probate (AB 2016): California Probate Code § 13151 (Petition for Succession)
  The specific statute for the AB 2016 process. It outlines the requirements for using a court-approved "Petition" (not an affidavit) to transfer a primary residence worth $750,000 or less (gross value) for deaths occurring after April 1, 2025.
• Small Estate Affidavit: California Probate Code § 13100 (Personal Property)
  Access the statutory language for the "Small Estate Affidavit." This procedure is strictly for Personal Property (cash, stocks, vehicles) and is limited to estates with a total value of $208,850 or less (effective April 1, 2025).
• Federal Estate Tax Exemption: IRS Estate Tax Guidelines
  The authoritative federal resource for estate valuation. It reflects the 2026 exemption increase to $15 million per person, which is critical for high-net-worth asset planning and determining if an IRS Form 706 is required.
• Unclaimed Assets: California State Controller - Unclaimed Property
  The primary portal for executors and heirs to search for "lost" assets—such as forgotten bank accounts, uncashed dividends, and insurance benefits—that have been remitted to the State of California for safekeeping.
• Business/LLC Compliance: FinCEN - Beneficial Ownership Information (BOI)
  The official portal for corporate transparency reporting. Most domestic and foreign entities (LLCs, Corps) must file a report. Executors must verify compliance, as failure to update control information within 30 days of death can result in federal civil penalties.