As more individuals live across borders and maintain ties to more than one country, dual citizenship is becoming less of a rare status and more of a common consideration in financial and legal planning. For residents of California, living as a dual citizen brings with it unique planning concerns. Estate planning is deeply influenced by the intersection between California state laws and those of the other countries tied to a person’s citizenship. Understanding how tax obligations, inheritance rules, and cross-border legal issues interact is essential to protect your estate. In this article, we will look at key challenges dual citizens face and how to account for them when setting up an estate plan in California.
Understanding Dual Citizenship in the Estate Context
Dual citizenship gives a person equal legal status in two countries. With that status comes the responsibility to comply with both countries’ laws. For estate planning, this often means that two legal systems may govern asset distribution, tax responsibilities, and inheritance rules. In California, which has its own complex estate laws, those overlapping jurisdictions can present serious complications when not properly addressed.
One area of concern is what happens to assets held in a foreign country. These may be governed by the laws of that country regardless of what a California-based will or trust says. That mismatch can result in unintended consequences for heirs or beneficiaries. Estate planning needs to take into account both sets of laws, particularly around forced heirship rules, spousal rights, and the tax treatment of inherited property.
How California Law Meets Global Obligations
California estate law includes provisions specific to community property, trusts, and probate procedures. Dual citizens may find that these elements function differently under foreign law, especially when community property is not recognized outside of the United States. Differences arise in who has rights to certain property at death, who can serve as an executor, and how taxes are assessed on transfers.
It is not uncommon for California residents with dual citizenship to hold assets in both countries. For individuals who own real estate, business interests, or bank accounts abroad, making those assets part of a unified estate plan can be difficult. California will generally apply its probate rules to property within the state but may defer to international laws for foreign holdings. The inconsistency puts pressure on the structure of any estate plan not carefully tailored to deal with cross-border issues.
Taxation Challenges for Dual Citizens
Taxes represent one of the most concerning areas of dual citizenship estate planning. California does not have its own estate tax, but federal estate tax still applies and can conflict with foreign tax systems. Dual citizens may owe estate taxes in both countries depending on the jurisdiction, type of asset, and existing tax treaties.
For example, the United States taxes its citizens on worldwide income and transfers, regardless of where they live. A dual citizen living in California who passes away might trigger U.S. estate taxes on assets, both domestic and abroad. At the same time, a foreign country could apply its inheritance or estate tax if the assets are located there or the individual is still considered domiciled for legal purposes. Without tax coordination, the estate could end up paying taxes twice.
The United States has estate tax treaties with several countries meant to reduce double taxation, but these treaties vary considerably in their scope and benefit. Some may allow tax credits or exemptions. Others may recognize trusts established under U.S. law. Knowing whether and how those treaties apply is essential before finalizing an estate plan.
Foreign Assets and Probate Problems
Probate is the legal process of distributing a deceased person’s estate. When foreign assets are involved, it can require what is known as ancillary probate, which is a separate, often cumbersome legal proceeding in the country where the assets are located. Ancillary probate adds cost and time and can expose the estate to complicated international regulations.
Trusts can be used in California to bypass probate for state-based assets, but foreign jurisdictions may not recognize those structures. If a trust is not valid under the laws of another country, the assets in that region could still go through that country’s local process. For dual citizens, that discrepancy might leave heirs in uncertain and expensive situations, especially if laws conflict or one jurisdiction refuses to honor determinations made in the other country.
Some civil law countries enforce forced heirship rules, meaning that certain relatives have guaranteed rights to a portion of the estate regardless of what is written in the will. Under California law, a person may generally distribute their estate as they wish. If the two systems conflict, the foreign court may override the personal estate plans made in California. This is particularly common in countries in Western Europe and the Middle East.
Community Property Complications
California is a community property state, meaning that most assets acquired during a marriage by either spouse are considered equally owned by both. This can be very different from how property is treated in the other country of citizenship. For a dual citizen, confusion can arise in how assets held abroad are categorized. They may be considered separate property under foreign law but classified as community property under California law.
In cross-border marriages, this becomes especially complex. If one spouse has dual citizenship and the other does not, or if they were married in another country, the system of marital property rights could greatly differ from the California model. Resolving disputes or distributing property may call on courts or advisors in both jurisdictions. These conflicting norms can trigger legal disputes without proper advanced planning.
Legal Documentation Challenges Across Borders
Legal documents like wills, trusts, and powers of attorney must often be interpreted across two legal systems for dual citizens. A will written in California that appears sound and valid under U.S. law might be unenforceable abroad without proper notarization or language translation. Similarly, a will written in another country may not be admissible in a California probate court depending on how it was executed.
The precision of estate documents becomes even more critical in dual-citizenship cases. To avoid confusion, some legal experts recommend drafting separate wills for each jurisdiction. Doing so can help maintain compliance with the laws of each country while keeping the language and format tailored to the relevant legal codes. However, if improperly coordinated, these dual wills might unintentionally revoke each other or cause conflicting directives.
Global coordination of estate plans must account for the formal requirements of both legal systems. Powers of attorney may need to be executed differently. Trust documents may require supplemental affidavits or certifications. Planners must remain cautious not only of the legal language but also translation accuracy and cultural interpretations that could affect execution.
Role of Tax Treaties and Foreign Reporting
Tax treaties provide some protection to avoid double taxation, but they typically require additional compliance steps for dual citizens. While beneficial, these treaties do not always completely eliminate overlapping tax obligations, and they often bring new filing requirements with them.
U.S. citizens, including those with dual status, must report foreign accounts and income via the Foreign Bank Account Report (FBAR) and the IRS Form 8938 under the Foreign Account Tax Compliance Act (FATCA). Noncompliance brings significant financial penalties. Californian estate plans must consider the compliance aspects of these international reporting standards, particularly in trusts or estates with offshore components.
If a beneficiary is a foreign citizen, or if foreign trusts or entities are involved, these structures may also trigger reporting or tax issues under both legal systems. Ignoring these complexities could expose an estate or trust to tax audits or penalties long after the person’s death.
Trusts with International Assets
Setting up a trust in California for an individual with property or beneficiaries overseas adds complications not often seen in domestic estate planning. Just because a trust is recognized under U.S. law doesn’t mean it gains equal recognition abroad.
Issues emerge when administering a California trust that involves foreign properties or nonresident beneficiaries. Depending on the foreign country’s legal system, the trust’s expression may be meaningless or might even violate public policy. This is particularly true where countries reject common law approaches or where trusts are perceived as mechanisms to evade taxation.
Nevertheless, California-based trusts remain powerful tools for dual citizens with U.S. property to avoid probate, manage taxes, and maintain control. Success in using trusts across borders relies heavily on legal coordination with counsel in each country involved, which can prove expensive but, in many cases, necessary.
Planning for Cross-Border Family Members
A dual citizen will often have heirs or beneficiaries living in a foreign country. This creates challenges beyond taxes or probate. Each jurisdiction may view family rights differently. A California resident leaving assets to children abroad might run into issues if that country has inheritance tax or restricts how foreign gifts are received.
In such cases, legal barriers could prevent timely or full distribution of estate assets. Certain countries limit the receipt of foreign money, enforce inheritance taxes at high rates, or require local representation to act on behalf of an heir. Understanding these practical barriers holds equal importance to drafting sound legal documents at the planning stage.
Special Considerations for Citizenship by Descent
Some Californians may have acquired dual citizenship through descent rather than naturalization. This often means they may not even reside in their secondary country of citizenship. Yet for tax or legal planning, that country may still impose obligations or benefits under its laws.
Not realizing this fact could trigger foreign compliance failures. In some cases, dual citizens must renounce secondary citizenship to avoid a future burden, particularly where forced heirship laws or tax structures are in conflict with personal estate goals. Consulting with international legal advisors becomes essential before making such a decision, especially when considering how citizenship rules pass to children or grandchildren later on.
Why Coordinated Legal Advice Is Critical
No estate plan should be created in isolation when international issues are at play. Having a lead advisor in California is a strong starting point, but additional counsel from legal professionals licensed in the secondary country is highly recommended. Different jurisdictions may require different definitions of mental capacity, different timeframes for contesting wills, or different assumptions about marital property. Without coordination, a well-meaning plan may unravel quickly.
Beyond just paid advisors, speaking openly with family members and impacted heirs about the plan and its binding elements can clear up many misunderstandings. Even with well-written documents, perception and education play a role in reducing the potential for legal litigation or delay.
Dual citizenship introduces a second layer of legal obligation for estate planning in California. From asset location to tax exposure to document recognition, there can be no “one-size-fits-all” approach. Good preparation, multiple legal perspectives, and open communication with stakeholders offer the strongest chance of success. When planned correctly, a dual-national estate can achieve clarity, minimize risk, and provide confidence for the next generation.
