Many of our clients, whom we advise on the acquisition, holding, or sale of real estate and investments in the USA, also turn to us with questions about international estate planning sooner or later. This is not surprising: Those who hold assets in multiple countries will sooner or later face the question of how these assets can be transferred to the next generation in a legally secure, tax-efficient, and practically manageable way in the event of inheritance.

The topic of estate planning is often postponed for a long time. Admittedly, coming to terms with one's own mortality is difficult. However, early planning is particularly important, especially with international assets. Without a clear structure, considerable legal, tax, and practical problems regularly arise in the event of inheritance. Often precisely at a time that is already very stressful for the relatives.

Many German owners initially assume that a German will also fully govern their estate in the USA. However, this assumption often leads to difficulties in practice.

Assets in the United States are not exclusively subject to German law or German procedural practice. Rather, a complex interplay between German inheritance law, US inheritance law, and international conflict of laws regulations is relevant.

Action is particularly necessary when there is significant wealth in the USA, such as:

• Real estate or land
• Vacation homes or condominiums
• Bank accounts or securities accounts
• Investments in US Companies
• Real estate investments through REITs, funds, or private placements

It's precisely with real estate investments in the U.S. that we often find that while the acquisition was professionally structured, the subsequent succession planning has been left entirely open.

A central problem in cross-border estates is so-called estate splitting. In practice, this means that the estate is not settled uniformly, but rather different assets fall under different legal systems.

This often leads to probate proceedings being conducted in Germany, with a separate procedure simultaneously required in the USA. Different regulations can apply, both with regard to procedural steps and tax treatment.

The tax situation is further complicated by the fact that both Germany and the USA can levy inheritance or estate taxes under certain conditions. While conflicts between the two systems are generally mitigated by the German-American double taxation agreement, its practical application is complex and requires careful planning.

Through early structuring, tax burdens can often be reduced or at least better managed.

Particularly relevant in practice is the so-called U.S. „Probate“ procedure. This refers to the judicial probate process, which is regularly required when assets are located in the U.S.

Many German heirs are surprised at how complex and time-consuming this process can be. Even with a clearly formulated and undisputed will, a probate process in many states typically takes between twelve and eighteen months. If disputes arise between heirs or there are ambiguities regarding the validity of a will, the process can be significantly extended.

Additional costs include court fees, legal fees, executor fees, and expenses for appraisers and tax advisors. In complex cases, the resulting financial burden can be considerable.

A common misconception is that a German will can be automatically executed in the US without further ado.

Actually depends on the respective federal state and the specific wording of the will. The formal requirements differ significantly in some aspects. If a German will is not recognized in the US or if there are doubts about its validity, this can lead to the estate being settled in whole or in part according to the statutory inheritance regulations of the respective US state.

This regularly leads to results that contradict the testator's actual will. Additional complexity arises from the fact that Claims for compulsory portions under German law can be asserted while a US probate proceeding is ongoing in parallel.

Estate cases with US real estate can be particularly problematic. During the ongoing probate proceedings, real estate often cannot be readily sold, encumbered, or optimally managed.

Heirs often initially lack immediate power of disposition. This can lead to properties standing empty, rental agreements not being managed efficiently, necessary maintenance being delayed, or even sales opportunities not being seized.

This can cause economic disadvantages, especially with valuable or return-oriented real estate portfolios.

In many cases, therefore, it is advisable to establish a separate US will that exclusively governs assets located in the USA. Such a will can facilitate recognition in the US, expedite procedures, and last but not least, avoid conflicts between legal systems.

It is important to carefully coordinate with an existing German will to avoid contradictions or unintentional revocation.

In addition, the use of a so-called trust may be advisable in individual cases. A Revocable Living Trust, in particular, is frequently used in the USA to largely avoid the probate process. The advantage is that the testator generally retains control over their assets during their lifetime, while at the same time enabling a structured and faster transfer to the beneficiaries.

However, whether such a structure is sensible always depends on the specific assets, tax aspects, and the legal systems involved.

From our experience, we've found that errors or oversights in international estate planning for assets in the U.S. can often only be corrected later with significant time and cost. Sometimes, they cannot even be fully corrected.

In contrast, early and professional planning allows for clear responsibilities, tax optimization, accelerated procedures, protection of heirs from unnecessary conflicts, and, perhaps most importantly, the actual implementation of the last will.

International estate planning should therefore not only begin at an advanced age, but should already be taken into account when acquiring or building up foreign assets.

We provide comprehensive advice to clients on Structuring international estates with a US connection. This includes in particular:

• Vote German and American wills
• Structuring of real estate and investment assets
• Planning to avoid unnecessary probate proceedings
• Accompaniment of heirs and estate administrators in case of inheritance.

In suitable cases, we also coordinate or assist with cross-border inheritance proceedings together with our US colleagues on-site.