Dear Harry,
I am an American citizen. I would like to leave my property to my brother. He lives outside the United States and has no status in the United States — nor does he have a Social Security number or green card. My holdings consist of cash, stocks, bonds, a Roth IRA, and a 401(k) plan. What are my options to leave all of this to my brother in a will? trust? another thing? What must my brother do to claim my death since he is not a US citizen?
Dear reader,
In many respects, the answer is no different than it would be if your brother were a US citizen living in the United States. You can leave your assets to him through a will or trust, or by naming him as a beneficiary of Roth IRA and 401(k) plans.
The main difference relates to logistics. If you name your sibling as a beneficiary under your will, your property must be intestate. You can name your brother as personal representative of your estate, but the process may go more smoothly if you appoint someone in the United States for this role. For example, if papers that need to be signed also need to be notarized, this may be difficult for your brother because he is not in the United States. He may have to make an appointment at the US embassy or consulate closest to his place of residence in order to have these documents authenticated. This will be much easier for a US-based personal representative. If you do not have a friend or family member who can serve in this role, you can hire your own estate planning attorney to perform these duties.
Furthermore, it may be better for you and your sibling to use a revocable trust. This can avoid the need for probate and the additional costs and delays that entail. However, you will still want to appoint someone in the United States to be your co-trustee or successor trustee. This has less to do with legal aspects than with the practices of banks and investment companies. Many of them restrict what non-U.S. resident owners or custodians may do with their accounts, even if they are U.S. citizens. This may not be a big problem for your brother if he simply wants to liquidate the accounts, but he may not be able to hold them and manage the investments.
While it is usually easier to name beneficiaries directly in retirement plans, this may be more difficult for your brother because he is overseas. If you name your trust as a beneficiary, your successor trustee can manage these accounts on their behalf. The drawback is that the time period for withdrawing money from your 401(k) will be shortened from 10 years to five years. When the money is withdrawn, your brother will have to pay income taxes on it. Since he is a non-US citizen, the investment company will automatically withhold 30% of the withdrawn funds. Depending on the size of the account, this may have a smaller or larger impact on your brother's inheritance. However, the ease of money management may call for a faster withdrawal schedule under the credit despite accelerated tax payments.
