Wealthy Mexican investors are increasingly choosing to invest in U.S. real estate. While creating a foreign trust owned by a Canadian Limited Partnership or a Delaware LLC offers maximum asset protection as well as the ability to reduce estate taxes, these legal structures require a significant up-front fee to create and must be maintained on a yearly basis. In some cases, purchasing a U.S. life insurance policy may be a more suitable plan of action.
Why Life Insurance Is Valuable for Mexican Real Estate Investors
Since the payment of the death benefit of the life insurance policy is triggered by the same event that would lead to the obligation to pay estate taxes, life insurance provides your heirs with a much-needed source of funds without the delays associated with probate. Estate taxes must be paid within nine months of the date of death, so ensuring the necessary liquidity is an essential part of the estate planning process.
If you are concerned that your beneficiaries won't use the policy proceeds to pay the appropriate estate taxes, the insurance policy can be owned by a living trust and earmarked for this specific purpose. The same approach could also be used if there was a mortgage on the property that would need to be paid after your death.
A Word of Caution
While life insurance is a cost-effective way to deal with estate tax planning concerns, it does not offer protection against legal liability. If you are renting your property to a third party, it is recommended that you have it in an LLC regardless of its value. Failing to do so could put your personal assets at risk if someone is injured on the premises. The more layers you have between your assets and a litigious third party, the safer you'll be.
To Plan for the Future, You Need an Attorney Who Speaks Your Culture
There are many variables to consider when using life insurance as part of your estate planning strategy, but MEG International Counsel will create a plan that is personalized to fit your unique needs. Our international estate planning attorneys understand the challenges faced by the Mexican investor and have dedicated their practice to serving trans-national clients from both the U.S. and Mexico.
To help you learn more about the value of life insurance as an estate planning tool, we encourage you to request a copy of our whitepaper, How Should Mexican Residents Hold Life Insurance Policies in the United States? To schedule a consultation to learn more about how we can help you protect your assets and investments in Mexico and abroad, contact us today.