Thousands of U.S. citizens die overseas each year. When it happens, the most immediate concern for their families is bringing them home for a funeral. But when the dust settles, these families, like any other, have to turn their attention to probate issues and settling the decedent's estate. The difference is how these matters are handled. This is largely a question of whether the person resided in the new country or was just visiting when they died.
In both cases, the family's work is much easier when the decedent leaves behind an effective estate plan.
Vacationers Who Die Overseas
Travel can be stressful. And accidents happen—especially in unfamiliar lands where all the useful information appears in an unfamiliar language. We probably shouldn't be surprised that approximately 5,000 Americans die abroad each year, many of them on vacation or business travel. When they do, it's a comfort to know there's a time-tested system in place for reporting the death, repatriating the body, and squaring things away with authorities at home and abroad.
The process begins when local authorities are notified that a U.S. citizen has died. They immediately contact the U.S. Embassy in that country to report the death, and the Embassy in turn contacts the United States Bureau of Consular Affairs (USBCA). The USBCA is a federal agency tasked with protecting the lives of U.S. citizens abroad—whether they're on vacation, working, studying, serving in the military, or residing in another country.
When the USBCA learns a U.S. citizen has died, the agency takes the following steps right away:
- Attempt to contact the deceased person's next of kin.
- Coordinate with the deceased person's legal representative for the handling of their physical remains and personal effects.
- Prepare documents to transfer the deceased's remains back to the U.S. if the family wants them repatriated.
- Oversee the burial or cremation of the deceased's remains in the other country and distribute their personal property according to their wishes.
- Prepare copies of the Consular Report of Death of a U.S. Citizen Abroad for the executor of the estate, or probate court, to use in the distribution of the estate.
When an American dies onboard a cruise ship outside of U.S. waters, their remains are held in the onboard morgue until the ship reaches its next port. At that point, local authorities will determine the cause of death, and the USBCA will begin the work of repatriation.
Cruise ship deaths can involve additional steps as well. Around 200 Americans die on cruise ships each year. Usually, they die from natural causes, but sometimes negligence on the ship is at fault. Cruise ships are subject to maritime laws, which state that a shipowner's highest responsibility is to exercise reasonable care to prevent injury, illness, or damage on their vessel. If they failed to provide the people on board their vessel with such care and a death results, the ship operator is liable. As such, the decedent's estate has every right to pursue a wrongful death action against the cruise ship operator.
In Michigan, wrongful death is defined as instances where an individual dies because of someone else's negligence—including individuals, businesses, or other entities. State law allows the decedent's surviving family members, or representatives of their estate, to file a lawsuit against the at-fault parties in pursuit of compensation for both non-economic and economic losses.
In the case of a Michigan resident who dies on a cruise ship, the court will determine whether the cruise ship operator was negligent. If it finds that the operator is liable, the court then determines how much emotional support, comfort, companionship, consortium, and earnings the deceased would have provided if they had not died. Once they have assigned a monetary value for those things, the court will compel the defendant to pay that amount to the decedent's estate.
Whether on land or on a cruise ship, if someone dies while vacationing, the USBCA makes the process of handling their remains and personal effects straightforward. Complications do arise, however, when the decedent's next of kin cannot be reached, or they don't wish to be responsible for the body. Having a competent estate plan in place is especially helpful in these cases.
U.S. Citizens Who Become Residents of Foreign Countries
Things are a little more complicated for U.S. citizens who reside overseas and die abroad. As with the vacationer, the USBCA will attempt to find their next of kin and oversee the process outlined above. The complications set in when the person dies either without a will, or without a trust and a will that is inadequate for their assets.
What Makes a Will Valid in Michigan?
A will must be valid in order for it to be executed properly. Generally, the testator (the person making the will) must be at least 18 years old and of sound mind (known as testamentary capacity). Testamentary intent is also required i.e. notes about how assets should be distributed may or may not be considered a will if the writing was intended to be a will.
Basically, a decedent must:
- Know that they are making a will.
- Know who their heirs are.
- Know the nature and extent of their property.
- Understand how the will is “disposing of the assets.”
A holographic will is a handwritten document in the handwriting of the decedent. The will must be signed and dated. A typed will must be signed, dated, and witnessed by two people.
The Hague Convention
The Hague Convention compels many foreign countries to abide by a decedent's will, even when the will was executed abroad. The Hague Convention also allows people to specify which country's law should govern the succession of their estate. If they do not specify, the succession of the estate is governed by the law of the country where the deceased resided at the time of their death if two criteria are met: They have to have lived there for at least the preceding five years, or they were more closely connected to that country than to their native one at that period.
Thus, if a Michigan resident dies in a foreign country that has signed onto the Hague Convention, their estate plan will be executed according to one of the following:
- The laws of the country the decedent identified in their estate plan, if they were at that time a resident of that country.
- The laws of the country where the decedent lived as a resident or national, if they lived there for at least five years prior to their death.
- The laws of the country they lived in as a resident or national at the time of their death, unless they were more closely connected to another country. In that case, the laws of the other country would apply.
Why Are Trusts Important?
Trusts are an integral part of an effective estate plan. As with a will, they allow you to specify how your assets are to be distributed after your death. Unlike a will, however, if the assets are held in a trust, then your estate doesn't have to go through probate—a public and often lengthy process. When you create a trust, you transfer ownership of your assets from yourself to your trust.
With a revocable trust, the creator of the trust is usually also its beneficiary and executor, called a trustee. This means you continue to have full control over the assets to use, sell, and transfer just as you would if you didn't have a trust. When you die or become incapacitated, the person you named in the trust to succeed you as trustee steps into the role. The successor trustee then is able to administer the trust and distribute the assets to the beneficiaries as described in the trust.
For people living abroad, having a trust means that one thing their beneficiaries won't have to worry about is figuring out how to settle their estate. A trust makes the process seamless—and, since there's no probate, faster. When the beneficiaries are underage or have special needs, getting everyone taken care of as soon as possible matters.
Death and Taxes for U.S. Citizens Living Abroad
When a U.S. citizen inherits an estate or receives a gift from an overseas estate, the assets located in that country may be subject to taxes there. This is in addition to any U.S. taxes for which the beneficiaries might be liable. There are instances where a U.S. citizen beneficiary could be entitled to a foreign death tax credit for their U.S. gift or estate tax obligation, but this is more likely when the country the assets are in has a tax treaty with the U.S.
Other estate planning complications arise when a foreign citizen resides in the U.S. and passes away. When this happens, their estate tax requirements will be largely dependent on whether they were a U.S. resident, or if they claimed the U.S. as their domicile, when they died. Resident aliens are not subject to U.S. gift and estate taxes, unless those assets are located within the U.S. Foreign citizens who were domiciled in the U.S. at the time of their death will be subject to the gift and estate taxes—even if they leave the country and pass away in another country.
As the taxation requirements vary from country to country, having the advice of an experienced estate attorney is invaluable.
How Great Lakes Family Probate & Estates Can Help
Great Lakes Family Probate & Estates PLLC is a boutique estate planning and probate law firm. The GLFPE team understands the importance of effective estate plans—and how cutting corners in the establishment can be very costly when execution occurs. The most important thing is to rely on an expert to draft an estate plan that captures your wishes and lays out a clear path forward for your beneficiaries after you've passed. Should something happen to you while you're overseas, your estate plan will guide your loved ones during a sad and often confusing time.
Make sure your estate plan is systematically reviewed and updated so that your current thoughts and feelings are correctly reflected if something should happen to you. Call 888-554-5373 today or schedule a consultation online.