The old adage “hope for the best and plan for the worst” has served us very well during and after our move to Portugal. Now that we are residents and own personal property here, we needed to direct how those assets will be handled in the event of our deaths. This post covers that process in Portugal and also includes some information about U.S. Wills for ex-pats.
Since we do have financial accounts in the U.S. (primarily IRAs) cashing them out and moving the monies in bulk to Portugal, rather than slowly transfer the funds monthly like a pension, could cause us to incur Portuguese tax consequences, in addition to U.S. taxes. Since we have limited investment opportunities here (interest rates on savings accounts aren’t great), the majority of our nest egg remains in the States at present. In addition, the Internal Revenue Service likes to keep track of what U.S. citizens do with their cash overseas.( FATCA--the Foreign Account Tax Compliance Act--will be the topic of another blog since it impacts the overseas financial institutions where we bank).
Because America is composed of 50 different states and five territories, that means each of those entities has its own laws regarding estates. What works in Iowa might not be legal in Nevada, and so forth. And in our case, our old Wills stated we are residents of Gwinnett County, Georgia, which is no longer the case. Definitely time to get our legal house in order.
A Will is referred to as a ‘Last Will and Testament” because if you create another Will that is dated after the first one, the first is considered invalid. Our Georgia-based estate lawyer warned us that this could get really sticky trying to carve out exceptions for both U.S. and foreign assets. He recommended a Revocable Trust, which is the way we decided to go. We already have a close friend in Georgia who will manage all the assets there, and we now have simple Wills in Portugal to handle the assets in Porto.
If one is going to pursue a trust, it would be our recommendation to have it in place BEFORE YOU MOVE as it is a bit more hassle to have the documents witnessed and notarized after you’re out of the country. To have our Trust notarized will require an appointment at the U.S. Embassy, two witnesses (the Embassy will not supply them) and a trip to Lisbon (2-1/2 hours by train). There’s a fee involved, currently $50 per notarized document. More about that process in a future blog.
On the Portugal side, it is somewhat easier, but there are some distinct differences the way things are handled. The first difference is that you go to a notary (referred to as a Notário) rather than a lawyer, to draw up your Will. As non-citizens, there is an EU directive that states you have the option to have your Will in Portugal use either Portuguese law OR the law of your country of nationality. Since we had a rather simple estate on this side of the Atlantic, we chose Portuguese law, but everyone’s situation is different and you may need guidance in making this decision.
Portugal also has restrictions about who you can leave your assets to. For example, it is not possible to leave all your money to your favorite pet if you have a spouse or children.
As it was explained to me, since inheritances have to be divided between spouse and children, this is one of the reasons that there are so many vacant properties in Portugal. It is necessary to do a lot of horse-trading for one person to take sole possession of an inheritance property. If there are bad feelings between the heirs, sometimes the properties just sit vacant until there’s only one living heir. If you have a spouse and children you may want to use the law of your home country for your Portuguese Will. You really need legal assistance to assure your last wishes are followed properly.
Another thing we found unusual was that you can’t just assign someone to be an Executor as they don’t use that title here. All named parties in a Portuguese Will are heirs. Since we don’t have children, we asked a friend of ours, an American who lives here, to be our Heir. He immediately agreed, which was awesome.
One thing to consider when asking someone to handle your estate, especially if they don’t live in Portugal, is that the legal steps here are going to take time. Not everyone would be comfortable dealing with legal matters in a foreign country, even with expert guidance. Because we are Americans there must be a U.S. death certificate (issued from the Embassy in Lisbon), plus other documentation on the Portuguese side. If your “Heir” is tied down by his/her job, unable to afford plane fare, in ill health, has small children or other familial obligations, they might not be your best choice to handle your estate.
Your Portuguese Will must be witnessed by two people who are NOT related to you, or to each other. You may also have an official translator, but that individual cannot be related to any of the witnesses. We did not use an official translator however one of our friends, who speaks Portuguese, made sure there were no surprises in the Wills. The notary was very good about explaining all the elements of the documents to us in English, then read it all out in Portuguese as well. We signed two copies and then the notary added her signature and seal.
After our Wills were finalized, we were given an official copy and the notary also kept a copy. On our behalf she contacted the Portuguese Wills Registry (Registos Centrais), to notify them that she holds the official copies of our Wills at her place of business. The Wills Registry doesn't receive a copy, just the notary’s contact information, so the contents remain private. This is a rather clever system. If you change your Will or draft a new one, the Wills Registry always knows where the most recent copy can be located. That way your heirs can always locate your current Will when they finalize the estate.
There were some interesting things that the notary told us not to include in the Will, one of which was funeral arrangements. Since the Will is not usually read until after the funeral, those final wishes are not likely to be known until too late. These are details that should be expressed to a family friend, or put in a document in your personal papers, rather than put in a Will.
The notary always requested we be very specific with our bequests and where they are in our apartment. Our Heir knows where that information is located, and how to access the passwords, etc. for all our various accounts. He has the contact information for our U.S. Trustee so they can work together at finalizing the arrangements on both sides of the Atlantic.
Also, there are some interesting estate tax issues in Portugal, in particular exemptions from tax for close relatives (spouse, children, grandchildren, parents and grandparents), with non-relatives owing a 10% tax on inheritances depending on the type of item inherited.
Costs for a Will vary by complexity, but plan on at least 300-400€ for each party. Beware of those promoting a lower price as you could just leave your heirs with an expensive mess if everything was not done properly. We used Eugénia Bessa, Notário here in Porto.
Once we've finished the Notary appointment at the U.S. Embassy, we'll write a blog post to let you know how that went. Hopefully, it will be seamless.
Harold is a former software engineer. Jana is an author. Together they're exploring their new life in Portugal.