In this conversational video, Matt and Mark Kohler discuss the complexities of owning real estate outside the United States while using a U.S. living trust. They explain that U.S. trusts and the domestic probate system do not automatically control foreign‑jurisdiction property, so owners must obtain foreign legal counsel and navigate each country’s probate and corporate rules. The hosts outline common structuring approaches: a U.S. trust can own a U.S. LLC, which in turn owns a foreign entity, or the U.S. trust can be the direct beneficiary/owner of a foreign corporation where local law permits. They note that each of the roughly 187 countries has its own ownership requirements (e.g., Mexico requires a local corporation). Operational issues such as appointing local officers, handling succession, and ensuring the structure survives the owner’s death are highlighted. From a tax perspective, they remind U.S. citizens are taxed on worldwide income, must report foreign earnings, and may claim a foreign tax credit, though treaties can add complexity. The discussion includes brief, informal references to Austria (Sound of Music, Schwarzenegger, Eagle’s Nest) as illustrative color but not substantive legal advice.
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All right. Thomas has a question about owning property foreign, not in the US but using a living trust in the US how does that work? How should I title my foreign real estate? Okay. Now in the US we have a set of laws that we have a constitution. The states have to recognize other states laws. So if you have a trust set up under the laws of one state, other states have to recognize it if you have assets in those states. We also have a federal income tax system that all of our state planning and trusts are designed around and are contemplating and they're taking into account. Now it is not taking into account foreign jurisdictions. Once you start owning property in a foreign country, your estate plan is flipped upside down. It's going to work in the U.S. for assets in the U.S. but assets in a foreign country you need to go get foreign council. You're going to have a foreign probate system that you're going to have to deal with and you need to go get foreign legal counsel for that, unfortunately. And Thomas, I know that seems like a simple question, but it's a complicated answer.
Yeah, yeah. And I think the best approach to take in this situation is you've probably got about 100 and what is it, 187 countries that you are going to have different rules for and you're just going to have to look at does that country provide as way of ownership for that asset. And hopefully you can make the owner of that structure or trust in Austria or I think in Mexico that has specific corporate laws that are really specific to Mexico. You can't go down there with a U.S. trust or a U.S. corporation. You've got to set up a corporation in Mexico, but then you make the shareholder of that corporation or the beneficiary of that trust in Austria or whatever the structure might be in Ireland or Australia or wherever it is. Try to get your trust in as the owner of that entity or the beneficiary of that trust in that country. So deal with their structure first. But try to make your US trust the owner beneficiary of that. What do you do? Concur? My co host.
Yes. Sometimes possible, sometimes not. That's why it's like, you know, there's 187 different answers and really you need a lawyer who understands Austria law, you know the law in Austria and has a little bit of understanding of the US and this is why there's international law firms out there that charge an arm and a leg because this is a, this is a tricky area. So. Yeah, but I do like the idea And I've done this with clients. They'll have their trust own a US Based llc. And in a lot of countries, that US based LLC owns a foreign entity. And in that way, they're based, they're protected, they have a company. Companies don't die. But the underlying ownership of that can pass through the trust and that structure can work. Thomas was asking here in terms of a personal asset, not a rental property, but you could still use the LLC structure and entity structure where the underlying ownership is eventually a US LLC and a trust that owns the US llc. That can sometimes be an easy solution, but again, not always certain it's going to work in the foreign country where you're looking at. Plus you have issues of who's the officer in that country, what happens in changing that when you pass away? You got to think of some logistics there too.
Yeah. And for those of you that enjoy my artwork here, I can come play Pictionary on the team at any point and hopefully add to the experience. Right here we have our trifecta, and this is our asset side, and over here is our operations side. And so those again, that are new to this trifecta diagram. This really just kind of puts it in context from a visual standpoint. You might have your little LLC side hustle here. You might have an S corporation, you can even have a little sole proprietorship. And maybe your day job is over here. But this is all flowing down to your US 1040. And I like to show here that you might have an ira, that, that your trust is a beneficiary of your LLC in Arizona, that your trust is the member of or owner. And then here's this LLC in Austria or a trust in Austria, where again, your trust is hopefully the owner. Or as Matt said, maybe a US LLC provides a little buffer as an owner in the in between area here. And this is where it all again flows downhill into your 1040. And from a tax perspective, remember that as a US citizen, you're taxed on your worldwide income. And so whatever you're doing over in Austria or whatever country you're owning that real estate, you're gonna have to report your taxes in that country, whatever their rules are. And if you pay any tax in that country, you're gonna get what's called a foreign tax credit. Foreign tax credit on your 1040 in the United States, typically. Now, again, there's U.S. treaties and a lot of different countries can put a twist on this. Even NAFTA between Mexico and Canada in the US can get tricky. But hopefully you're enjoying your trip to Austria, Thomas. I think this is a lot of fun. So, yeah, get out there, go at it.
So isn't that where. What's the musical in Austria?
Oh, dude. The Sound of Music.
The Sound of Music, yeah. Sound of Music.
Yeah.
That's all I. That's all I think of Austria. And isn't Arnold Schwarzenegger from Austria?
Yes. And Hitler's Eagle's Nest was in Austria.
Okay.
Yeah, yeah.
I'm gonna. I'm gonna reference Sound of Music and.
Fair enough.
And Hitler's Layer.
Yeah, Hitler's layer was over there, but no. Yeah. So fun fact.
Fun fact.
Yeah. So the cool part here, from a tax perspective, too, is that is you're taking trips to Austria to go check on your rental property. You're going to make those tax deductible expenses, hopefully not only under Austrian law, but US Law as well, because that is a business. You have a business in Austria. And so that's going to be a valid write off and really a nice little perk. Well, great question, Thomas.
