Napoleon vs. Feudal Lords

A couple weeks ago I went to a conference in Mexico hosted by Ronan McMahon and our friends at Real Estate Trend Alert.

I gave a talk on the second day of the meeting—and was immediately swamped by people wanting my advice.

Here’s what sparked the interest…

Americans and Canadians live in “common law” countries. Their estate systems descend from English common law, developed over thousands of years. Hereditary feudalism had a big influence on common law.

For example, common law allows individuals to determine how their estates are divided. If you have a legitimate will, neither the government nor the courts can interfere. Want to leave everything to your eldest son? No problem. Common law also recognises trusts, which English aristocrats used to protect and extend their wealth over generations.

The rest of the western world, especially Europe and Latin America, follows “civil law.” This has several roots but the most important is the Napoleonic Code. This was a brand-new legal system developed by French revolutionaries at the end of the 19th century. As Napoleon conquered country after country in Europe, he imposed this system on them.

Like the French revolutionaries themselves, the Civil Code was determined to abolish hereditary aristocracy and the accumulation of power across generations. Thus, in civil law countries, individuals must divide their estates according to a set formula. They have limited discretion in determining who gets what. Trusts are not recognised and cannot own property.

Naturally, things have developed a lot since Napoleon’s day. Civil law countries practice a variety of estate systems, some quite strict, others seeking only to provide for destitute relatives. A few countries, like Portugal and Italy, have signed an international convention that recognises common law wills if they are drafted in a particular way.

But the fact remains that if you don’t take steps to avoid “forced heirship,” your overseas property may be subject to a long and expensive probate process. For example, probate in Panama can take two to three years and cost tens of thousands of dollars…  and it requires a lot of work from the deceased’s family.

Fortunately, there are easy ways to avoid this. And as an added bonus, these methods can also dramatically improve your tax situation and even allow you to accumulate wealth more rapidly than you would otherwise.

But these methods work best when you plan on them from the start. It’s possible to implement them after you’ve bought property, but it’s more complicated and means additional expenses.

So if investing in foreign real estate—and in fact, in any foreign assets of any kind—is in your future, meet with me (online) and we can come up with a plan together.

I can walk you through what you need to do to avoid civil law probate, and put you in touch with people who can make it happen.