As I do a lot of Estate Planning for Muslims in the United States, you would typically expect that many of my clients are immigrants. Part of the immigrant experience for many is that there continue to be connections to your homeland for a generation or two. Ties may include overseas property. As time goes on, connections fade. Foreign assets just make things more complicated.
Many of my clients own property and businesses overseas, like Pakistan, Afghanistan, Palestine, Egypt, Sudan, Syria, India, and virtually everywhere else. When you do your estate planning, it is reasonable to wonder: what happens to this stuff after death? How do you make sure it goes to your family?
As a general rule, the estate planning you do in the United States does not cover assets owned overseas (it could as I will describe), you need a lawyer in the country where you have assets that will give you advice on what to do with that. The counsel I provide about these assets depends on my client’s experience.
What Kind of Foreign Assets are Problematic
When I say owning foreign assets, I don’t mean owning stock in international corporations, or anything easy to track and sell. The examples of assets that have problems associated with them:
- Inherited property, held ambiguously by multiple siblings or other relatives.
- Businesses operated by overseas business partners.
- Rental properties and vacant land.
The main problem with foreign assets in certain countries is that they have a way of being ephemeral; your children are often unlikely to inherit them. Inheritance is the kind of asset often stolen by the unscrupulous. Cheating an heir who lives oceans away with no real ties to the country is usually not hard.
Many Muslims are motivated to do their estate plans as they have been cheated out of an inheritance themselves. I have clients who were victims of inheritance-theft in more than half a dozen Muslim countries and countries with large Muslim populations, like India and Israel (though property theft is part of some country’s brand, I suppose). Pakistan though, if I were to single one country out, is likely the place where you should be most wary of owning anything.
Ties to the Country
If you want your property to be owned by your children after you die, you should ask yourself: will your children want it? Will they be prepared to fight for it? Fighting for it may mean overseas travel, hiring lawyers, and dealing with potential nonsense from a wide range of parties you never really expected. I had one client who had an uncle that forged death certificates for all relatives that moved to the United States.
Fighting for inheritance is draining and often not worth it even if it is in your back yard. It is often viewed as less worth it if the fight is on the other side of the globe. People who want to steal inheritance know this. Unfortunately, Muslim countries are not hurting for people who would deny their family members their rights to Islamic Inheritance.
A brief guide to handling overseas property
At a minimum, if you have property overseas, you can do an estate plan abroad with a lawyer in that country. If this is too much of a bother, don’t own it. Anyone who assumes everything will be ok because the country follows sharia is probably a fool. People steal inheritance in Muslim countries all the time.
Adults who grew up in the United States would be lost trying to navigate the legal system of a foreign country. If the asset is relatively small, say in the hundreds of thousands of dollars, it may not be worth the fight. Especially if other relatives, business partners, random squatters, and others are willing to contest ownership. Those lucky enough to spend many summers in the country when they were younger and speak the language may still have an uphill battle. If your children don’t know the language and only know about your country of origin from eating the food, your property abroad may be about as valuable to them as prime real estate on Neptune.
Another way to handle property overseas is to make overseas property US property. The way you do this is to create a business entity (like a corporation) in the United States and another in the country where you have the asset. It would be a parent-subsidiary relationship similar to an American bank owning a bank in another country. An Islamic Living Trust would typically hold the business entity in the United States. For those who are not international business people, this may be too expensive and not worth it.
If you insist on keeping this asset get a professional property manager who can be in regular contact with you, if this is appropriate (it depends on the asset). There are property managers available in other countries.
US persons need to pay taxes on all worldwide assets. If you collect rent or get business profits from any asset outside the United States, report it to the IRS. This is true even if all the money stays overseas. You can get in trouble if you don’t, and you should never assume the government won’t find out. One common issue with people who own property overseas is that they do not do appropriate accounting and reporting. When they die, the business asset may be even easier to steal.
Ambiguous Inheritance Overseas
Some American Muslims have inherited property held by family overseas. They don’t know what it’s worth or what it is really. Only that it’s “a lot of “lands or that “my uncle is taking care of it.” When you do your estate planning, you need to know if this is a real thing or not. Try to get relatives or business partners to buy you out, even if it is through an installment sale.
The property right then becomes concrete, not just for you (you may not care about you, and you don’t want to have uncomfortable conversations with your siblings or uncles), but for your families. Your children have a right to inheritance from you. Not taking steps to vindicate your children’s inheritance rights would be the same as denying them their rights.
It needs to be worth it
The main goal of estate planning is to organize your affairs to do right by the people that you love. You need to follow the Islamic Rules of Inheritance. If you do everything right in the United States (something we help with) but have set up your estate to fail or made it easy to steal outside the United States, you are meting out half-justice to your family.
If you have international assets, do it right or get out.
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