Protecting Your Beneficiaries While Living Abroad

Regardless of one’s location, it is crucial to keep beneficiary information current for investments, insurance policies, and other valuable possessions. This is especially true for American expatriates residing abroad, as the process of transferring assets back to the US may pose additional difficulties for their loved ones.

As an American living overseas, it is crucial to take certain measures to ensure your family is taken care of in case of any unexpected events. Here are six significant steps to consider.

1. Build a net worth statement

A balance sheet, often known as a net worth statement, provides a summary of one’s financial situation. It provides a financial breakdown of both assets and liabilities, ultimately determining a person’s net worth.

Your net worth statement serves as a thorough inventory of your assets and accounts, making it easy to identify your beneficiary designations. The beneficiary designations for each account should be confirmed by regularly examining this list. Any obsolete or unnamed beneficiaries can be updated with the help of your wealth manager.

The types of accounts you should check are depicted in the following examples:

• Retirement accounts – 401(k), solo 401(k), 403(b), 457 and other profit-sharing plans, traditional and Roth IRAs, SEP IRAs and SIMPLE IRAs
• Life insurance policies and annuities – Term life, whole life, universal life, fixed annuities, variable annuities and other insurance products
• Other employer-sponsored plans – such as stock options, restricted stock units, deferred compensation, and defined benefit plans (when applicable).

2. Recognize the effects that international laws have on your estate

Just like many other aspects of financial planning, beneficiary designations have particular implications for American expatriates living abroad. For instance, because U.S. common law differs from foreign legal principles, payment on death (POD) and transfer on death (TOD) arrangements are not recognized globally. This emphasizes how crucial it is to have the right beneficiary designations.

Moreover, trust accounts can be problematic for Americans living abroad. The provisions of a trust may frequently conflict with foreign gift tax and inheritance laws, so it’s advisable to work with your wealth manager to determine the appropriate steps if your estate plan currently includes a trust.

3. Establish an emergency fund for your spouse

Americans living overseas typically receive their retirement account assets promptly, but your spouse may have significant delays in accessing other types of accounts. The issue can be easily resolved by setting up liquid emergency accounts in the names of both spouses. Aim to have enough money on hand to cover six months’ worth of costs to maintain yourself during the interim when your spouse might not have access to all your assets.

4. Clearly identify each beneficiary

It is vital to list the primary and contingent beneficiaries along with any necessary contact information, such as a phone number, email address, mailing address, and Social Security number. Keep in mind that the person who will be looking through your beneficiary designations might not have met your beneficiaries and may not be familiar with their backgrounds or whereabouts. Make it as easy as you can for them to locate your designated heirs.

5. Organize your beneficiary designations

Consider compiling a list of all your accounts together with the beneficiary designations related to them. The procedure of adding beneficiary information to each account should be simple now that you have a net worth statement in place (thanks to Step #1 above). Ensure that your loved ones can access this document after your passing by keeping it in a safe place.

6. Obtain the necessary paperwork

The following legal documents must be in place for you to transfer assets if you are the surviving spouse:

• IRS (Internal Revenue Service) Transfer Certificate – To release the decedent’s property for distribution to the right heirs, this document verifies that a U.S. taxpayer has completed any estate tax requirements.
• Foreign Death Certificate – In the foreign country where the deceased resided, a death certificate will be issued.
• Consular Report of Death – A U.S. citizen’s nearest Bureau of Consular Affairs must be notified when they pass away abroad. The consular will prepare a report of death after receiving a copy of the foreign death certificate. This document serves as an official record outlining crucial information regarding the person’s passing, preparations for the remains, and management of their personal property. It usually takes one to two months to complete this process.