In today's global community, an increasing number of families are finding themselves with assets and family members in more than one country. This is particularly evident in San Antonio, where we've seen a significant growth in the number of Mexican nationals who have relocated or invested in our community.

For many of these families, the laws of both the United States and Mexico may affect transfers of wealth. As such, it is strongly recommended that these families develop a strategy to efficiently transfer their wealth and minimize the application of U.S. transfer taxes.

There are some key considerations that nonresident aliens with U.S. situs property should keep in mind in the arena of U.S. estate planning and taxation.

1. Separate Wills. Consider creating separate wills for property located in different countries. It is not uncommon for a person who owns property located in different countries to use separate wills to dispose of the property in each country.

There are a number of reasons for doing this; one of the more obvious being that a will executed in conformance with the laws of one country may not satisfy the requirements of a valid will in another country.

To address this problem, Texas has a provision that permits a will duly admitted to probate in a foreign jurisdiction to be admitted to probate in Texas. However, even where a foreign will is admitted to probate and is effective to transfer title to property in the United States, it may not create efficient methods to administer the property located here.

For example, Texas has an efficient system of independent administration providing that no action in relation to a decedent's estate shall be had in the probate or county court other than the probating and recording of the decedent's will and the return of an inventory. Independent administrations have proven to be an efficient and economical way to administer most estates.

Most wills prepared in Texas provide for independent administration; however, it is unlikely that a foreign will includes such a provision. Although all distributees of an estate can consent to the advisability of an independent administration (where the will does not expressly provide for it), obtaining the consent of all distributees can be difficult or impossible, particularly when some or all of them are located in a different country or when minor children may receive all or some of the property.

If it is not possible to administer the estate in an independent administration, it will be administered in a dependent administration, which is generally less efficient and can be costly and time consuming.

In addition, a will that is not prepared in Texas may not include provisions providing an executor or trustee with the authority and flexibility he or she needs to efficiently administer the estate or a trust created under the will.

The differences in the laws of different countries may also have a significant impact on a person's estate plan.

2. Gift and Estate Tax. Special rules apply for transfer tax purposes in which one or both of the persons involved in the transfer is a nonresident alien.

Generally speaking, nonresidents are only taxable on lifetime gratuitous transfers of property situated in the United States. Significantly, the applicable credit amount that shelters the first $1 million of taxable gifts from gift tax is only available to an individual who is a U.S. citizen or resident. As a result, proper planning is necessary to take advantage of tax planning vehicles that are available to nonresidents.

The U.S. estate tax applies to the portion of a nonresident decedent's gross estate, which, at the time of his or her death, is situated in the United States, including “ but not limited to “ intangible property.

Although the estate tax rates imposed on nonresidents are the same as those imposed on residents and citizens, a nonresident's estate is only permitted a $13,000 credit against the payment of U.S. estate tax, which will only shelter $60,000 from U.S. estate tax.

Compare this with the rule for United States citizens and residents. Under current law, the federal estate tax has been repealed in its entirety from Jan. 1, 2010, through Dec. 31, 2010, and is scheduled to return on Jan. 1, 2011, with an exemption of $1 million.

While the estate of a nonresident decedent is entitled to deductions under the Internal Revenue Code, most deductions are permitted only in proportion to the value of the U.S. situs assets relative to the decedent's worldwide assets. As a result, many of the deductions will require disclosure of worldwide assets, much to the chagrin of the nonresident taxpayer.

By structuring U.S. investments to maximize U.S. tax advantages, nonresidents can help minimize the application of U.S. transfer taxes to their investments. In addition, with proper planning, nonresident aliens can help ensure that their investments are efficiently transferred to succeeding generations.

This article is not intended as an exhaustive discussion of the points raised herein, nor is it intended as a substitute for legal advice or opinion, which can be rendered only when related to specific fact situations.

Karina C. Cantu is a wealth planning attorney in the San Antonio office of Jackson Walker, L.L.P. For more information please contact her at 210-978-7700, or visit www.jw.com.