How may I provide for my family when I am gone?

This is my last in a 3 part series for Jewish Times Asia published in their May issue.

Kingdoms have risen and fallen based on the answer to the above question, which demonstrates why the laws of most countries have come up with unique, and bewilderingly distinct, methods for administering the transfer of property and assets smoothly to future generations. What happens when an estate crosses international borders, what means are used to resolve very real differences in rules governing the handing of the torch to a new generation?

Where an individual has accumulated an estate over the course of long and successful career there is usually a surplus of assets to pass on for future generations. All countries have laws providing for the administration of this surplus, and most offer the ability for an individual to instruct how a surplus is handled per their own wishes. These instructions are known as a will, and typically will have specific legal formalities and requirements which must be met in order to be effective under law. If a will is not effective under the laws of a particular jurisdiction, the laws of the relevant state take over and will distribute the assets of the estate according to local custom and legal guideline.

These differences between every country offer particular nuances of difficulty where an estate has been built across national borders. The laws of some countries are relatively flexible in allowing for individuals to craft their own testamentary preparations, while others are notoriously strict in legal form and taxation requirements.

If there is a will, the documentation must be drafted with the particular legal requirements of each jurisdiction where estate assets are located in mind. If a North American entrepreneur invested in property in Japan, does a Japanese court recognize his will under New York law granting a transfer of the property to his son?

The 1973 Convention on Providing the Uniform Law on the Form of an International Will provides one means of assurance that your documentation will be accepted, but with a very limited number of Asian states actually signatory to the convention, its effectiveness in the region may be severely limited. The only other alternative from the perspective of a will is to ensure that each country where assets are located has a unique document drafted under similar terms but completely in compliance with local law. While legally this solution may prove effective for the estate, woe be unto the unfortunate heir who must travel the road actually enforcing this bundle of documentation, a surely unpalatable platter of conflicting languages and administrative procedures.

Trusts are an excellent alternative to wills because they avoid many of these complicated questions entirely. Where a will designates an administrator who will legally transfer certain assets to designated persons or entities on death, a trust transfers legal ownership of those assets at during the life of the settlor. The trustee owns the assets outright, while ensuring that the ongoing enjoyment of the benefits of those assets is provided to beneficiaries in accordance with the terms of the trust deed. Questions of probate do not materialize because assets continue to be owned legally by the trust long after the passing of the settlor.

While issues may arise in some jurisdictions where trust is a foreign concept, for example countries based on Napoleonic legal codes, methods do exist to mitigate the risk of an international trust being disregarded outright by a local court of law. Wills can be useful tools for confronting those unexpected, usually uncontrollable, situations affecting our families and property which arise in life. That does not mean they should be used as a replacement for a long term strategy to protect your wealth. Carefully planning the overall structure of an international estate held ultimately by a trust is the most established means to ensure your property and your family stay together from generation to generation!