Non U.S. citizen Owned Property in California at the Time of Death

William Sweeney

This article does not cover the distribution of real property held in a trust or in joint tenancy. Nor does if cover the taxation of estate distributions. In general, nonresident alien decedents are subject to U.S. estate tax for assets situated in the U.S. IRC §§2101(a), 2106(a). For estate tax purposes, the situs of assets within the U.S. is determined either at the time of death or at the time of transfer of assets (IRC §2104(b)). In the case of estates of nonresidents who are not citizens of the U.S., a federal estate tax return must be filed if the gross estate situated in the U.S., valued as of the date of death, plus prior lifetime gifts (subject to the gift tax rules of the Internal Revenue Code) exceeds $60,000 (IRC §6018(a)(2)-(3)).

California probate courts apply the California Probate Code to matters subject to their jurisdiction. Accordingly, a foreign citizen who dies without a will owning assets subject to California jurisdiction could face the application of California's intestate succession laws to their estate. Assets such as real property and bank accounts could be characterized as having a California situs. Heirs may find that the Estate is subject to laws that may differ substantively from the laws of their home country.

At the outset, it is important to know that foreign citizens may own property in California. California Civil Code §671 provides:

"Any person, whether citizen or alien, may take, hold, and dispose of property, real or personal, within this State."

However, when a non U.S. citizen decedent is not domiciled in California, a California court has no jurisdiction to appoint a representative, unless the decedent held property in California (California Probate Code §8005(b)(1)(B)). In other words, if property is located in California, California courts have exclusive jurisdiction over that property.

There may be thousands of American expatriates who have taken the drastic and irrevocable step of giving up their citizenship because of what they consider to be the unjust and discriminatory taxation practices of their government. Whether one is an expatriate or not, ownership of California property by non U.S. citizens is common.

Typically, a person's domicile is a threshold issue in determining jurisdiction for purposes of probate administration. If a deceased non U.S. citizen was permanently residing in California on the date of death and owned real property in California, California has jurisdiction to decide testate (with a Will) and intestate (without a Will) distribution of decedent's property, including real property. Every State possesses exclusive jurisdiction and sovereignty over persons and property within its territory.

Jurisdiction is the power of a State to determine title to property, whether tangible or intangible, located within its borders. If a decedent is a non U.S. citizen and a non California domiciliary, California still has jurisdiction over property within its borders. However, if the decedent owned property, real or personal, in his country of domicile a primary proceeding may be necessary to distribute that property to the proper heirs, usually pursuant to the laws of the deceased's domicile. However, a state within whose borders assets are physically located retains the power to subject them to probate to assure proper passage of title and to protect local creditors. Therefore, "ancillary administration," which is a secondary probate, may be required if the decedent also left property in a state or country other than his or her domicile.

In California, ancillary administration is defined as "proceedings in this state for administration of the estate of a nondomiciliary decedent." (California Probate Code §12501). A "nondomiciliary decedent" is defined rather unhelpfully as a person who dies "domiciled in a sister state or foreign nation." (California Probate Code §§12500-12591; 12505). In general, the procedures for administering an ancillary estate in California are the same as those for administering a primary estate in California.

In California, a Will of a nondomiciliary decedent admitted to probate in accordance with the laws of a foreign nation will be given the same force and effect as the Will of a person who dies while domiciled in California, if admission of the Will in the foreign nation is based on a finding that the decedent was domiciled in that jurisdiction at the time of death and if all interested parties were given notice and an opportunity to contest the proceedings. (California Probate Code §§12522-12524).

If a non domiciliary decedent's Will has not yet been admitted or proved in a foreign jurisdiction, it may be admitted in California as an original Will (California Probate Code §12510). The procedure is the same as for an original petition to probate a California Will, but the petition would be titled "ancillary administration."

A California court may determine whether it will apply the law of its own jurisdiction or the law of another country to govern the distribution and administration of real property in California. This may occur if the Will specifies a foreign country's law to govern. A question therefore arises whether the reference to another country's law is a reference to the internal law of that country or whether its conflict of law rules are included. If both, this may result in a reference back to California or, indeed, a reference to a third country. The whole area of conflict of laws is immensely complicated and each case must be considered on its own facts and merits.

  1. Non U.S. citizen with a Will.

    Pursuant to California Probate Code §6113, a Will is valid in California if any of the following three conditions are met:

    1. The Will was executed in compliance with California law;
    2. The Will was executed in compliance with the law prevailing at the time of execution at the place where it was executed; or,
    3. The Will was executed in compliance with the law of the place where, at the time of execution or at the time of death, decedent was domiciled, had a place of abode, or was a national.

    California requires that the testator be at least 18 years of age, of sound mind, and that the Will be made in writing. A typed Will must be signed by the testator and witnessed by two adults who understand that the instrument they are signing is the testator's Will. A California holographic will doesn't require witnesses and can either be entirely in your own handwriting or blanks filled in on a preprinted form. California has adopted the Uniform International Wills Act (California Probate Code §§ 6380-6390) as well as provisions relating to the probate of non domiciliary decedent's Wills upon petition. (California Probate Code 12520-12524). However, the requirements for recognition as an "international will" are more onerous than the general requirements for a valid California Will.

    Any legal person may fill the position of executor, so a California bank or trust company as well as any friend or group of people-such as qualifying children serving jointly-may act as executor. This executor can serve even if a non resident of the United States. (California Probate Code§ 8402(b).)

    Although named as executor, no one is forced to serve, and the person may decline the job. A California probate court can reject a potential executor if it finds that any of several "grounds for removal" exist. For example, the court may find that the person named as executor is incapable of carrying out the necessary duties, or that he or she is likely to mismanage or neglect the estate. A judge has to power determine who is best suited to serve as executor and may terminate any appointment found to be improper.

    The decedent's Will may fail to name an executor, or that person may be deceased or refuse to serve. It is also possible that a bank was named, but the bank declines because the estate is too small. In any of these cases, the court will appoint a person or entity to represent the estate.

    The petition for probate of a nondomiciliary decedent's Will must include the Will or an authenticated copy of the Will and an authenticated copy of the order admitting the Will to probate in the foreign country, or other evidence of the establishment or proof of the Will under the law of the foreign country. A California court must admit a foreign Will to probate if it was duly admitted to probate, or established or proved, in accordance with the laws of the foreign nation. (California Probate Code §15523), unless an exception applies.

    If the primary administration is in the U.S., the Panama Canal Zone, the Commonwealth of Puerto Rico, the Trust Territory of the Pacific Islands, or the Ryukyu Islands, the procedure is simple-a copy of the Will and a copy of the order admitting the Will to probate (with another copy of the Will attached) must be certified as true and correct copies by the public employee (or deputy) who has the Will or order in his or her legal custody. This person is usually the court clerk or a local equivalent. The attorney probating the primary estate should be asked to obtain these certified copies. If there is no such attorney, one may write to the court clerk to obtain those documents.

  2. Non U.S. citizen When There Is No Will.

    Although a California court will have jurisdiction to determine heirship rights when a non U.S. citizen dies intestate owning property in California, questions still arise. Does California law apply, does the country of domicile apply its distribution rules or does the country of citizenship apply its distribution rules? Navigating one's way through choice of law provisions is not an exercise for the faint-hearted. It can be a complex matter depending upon the approaches taken by the respective jurisdictions.

    For example, under U.S. law, whether one dies with a valid Will in place or not, in general, regarding real estate matters, the law of the jurisdiction in which the land is located will determine how the entitlement to the land is passed. However, many civil law countries, base their choice of law rules in succession law matters on the decedent's citizenship.

  3. When There Is No Will Who Can Be Appointed As Administrator in California.

    The competency requirements and the priority of persons entitled to serve as administrator are set forth in Probate Code §§ 8502, 8460-8469. The administrator does not have to be a California resident, but he or she must be a resident of the United States and meet the qualifications required of an executor. Probate Code §8402. Some California jurisdictions require a surety if the administrator is not a California resident.

    The order of priority of persons entitled to letters of administration is set forth in Probate Code §8461. Nominations also may be made by anyone qualified to serve as administrator or by a nonresident who is otherwise entitled to appointment but is ineligible because he or she is not a resident of the United States. Probate Code §8465 (a)(2). The court may only appoint a nominee of a nonresident who is a California resident (Probate Code §8465 (d)).

    NOTE: Although a nonresident of the United States may not act as a representative unless he or she is named as the executor or successor executor in a will, he or she can nominate a U.S. resident to be appointed as administrator when there is an intestate estate ( Probate Code §8465(a)(2)). Under Probate Code §83 a trust company may be appointed as a personal representative in the same manner as an individual is appointed (Probate Code §300), but foreign corporations, except national banking associations with a main or branch office in California or a foreign (other state) state bank that is authorized to conduct a trust business in California, may not (Finance Code §§1554-1555).

    This article is not a substitute for experienced legal counsel. Family or friends should seek legal and tax advice both in the country of residence and in the U.S. regarding matters covered by this article.

CONCLUSION

Laws governing administration of California property owned by a deceased non U.S. citizen living abroad are varied and complicated and many times may depend upon the laws of the country of decedent's domicile. If you are an executor, friend or family member and need legal assistance regarding the post death administration of California property owned by a deceased non U.S. citizen please contact me. I assist clients in all California counties, including Imperial County, Los Angeles County, Orange County, Riverside County, San Bernardino County and San Diego County. You can reach me by phone at 760-989-4820, by email at wksweeney@gmail.com or through my online contact form.