Shape up your estate plan before you ship out.

• Author: Jenkins, Gary E.
• Position: Includes related articles - Personal Financial Planning

When you're negotiating a foreign assignment with your company, your estate plan is probably the last thing on your mind. But it's also something you shoulddiscuss with your employer if you're planning on going overseas, especially on a long-term assignment. Acquiring assets in a foreign country vastly complicates the estate-planning process, and estate-tax laws vary considerably from country to country. That's why you should consider estate planning part of your overall expatriate benefits package. With proper planning on your end, you can protect your family from double taxes on your estate, which could happen if you die while out of the country.

If you work or are planning to work abroad, you face potential estate and inheritance taxes on compensation and benefits. The first thing you need to do is determine what type of tax you're likely to incur. An estate tax is a tax upon the transfer of wealth at death and is paid by the deceased's estate. In most cases, the tax applies to the individual's worldwide assets. An inheritance tax, on the other hand, is paid by an estate beneficiary and may be deducted from the receipt of property inherited.

In the United States, the estate-tax rates range from 18 percent to a maximum of 50 percent on estates in excess of $2.5 million. Many countries impose no death taxes whatsoever. However, in these instances the country often imposes capital gains tax at death on an asset's appreciated value, measured from the purchase date to the date of death.

If you decide to go overseas, you'll probably keep only limited assets in your host country. Very few expatriate financial executives own foreign real estate, although most have bank accounts denominated in the local currency. But even if you're only on a temporary assignment and the majority of your assets is in the United States, you should investigate whether the host country has a treaty with the United States to prevent double taxation.

For instance, some treaties provide for an exemption period for a specified number of years after an executive relocates in another country. During this period, all assets not situated in that country are exempt from death taxes. That includes stock, stock options, securities and other intangibles the executive might have, as well as assets located in the United States or in a third country. Once the exemption period expires, the country may provide further tax relief through offsetting tax credits. Therefore, even if both...