Buying Real Estate Abroad: Legal, Tax, and Estate Planning Tips for Americans
More Americans than ever are dreaming of a life abroad—whether it's retiring on the beaches of Portugal, working remotely in Costa Rica, or investing in property in Panama. For many, purchasing real estate in a foreign country offers not only an escape from the rising cost of living in the U.S., but also a chance to invest in a lifestyle that feels more balanced, affordable, and fulfilling.
But buying property overseas is not just a lifestyle choice—it’s a complex legal and financial decision. U.S. citizens considering real estate abroad must navigate local property laws, foreign tax systems, and cross-border estate planning issues to ensure their dream home doesn’t become a legal nightmare.
Why More Americans Are Buying Homes Overseas
According to a 2024 Coldwell Banker report, 40% of Americans with household incomes over $1 million plan to purchase a home outside the U.S. within the next year. Even middle-income Americans, especially retirees and remote workers, are increasingly investing in international real estate to take advantage of lower housing costs, cheaper healthcare, and a more relaxed pace of life.
The average U.S. household now spends nearly $6,500 per month on living expenses. In contrast, you could live comfortably in Belize or Costa Rica on as little as $2,000 per month. And in places like Costa Rica, quality healthcare is available at a fraction of the U.S. cost.
With over 5.5 million Americans already living abroad, it’s clear that international relocation is no longer just a luxury—it’s becoming a mainstream strategy for achieving the American Dream outside of America.
Key Considerations When Buying Foreign Property
While buying international real estate can be rewarding, it comes with legal, financial, and estate planning implications. Here are the most important issues to address before you buy a home overseas.
1. Understand Tax Implications—at Home and Abroad
Owning real estate in a foreign country usually comes with dual tax obligations. As a U.S. citizen, you're required to report your worldwide income and assets—including foreign property—on your U.S. tax return.
You may also face:
U.S. capital gains tax when selling a foreign property.
Local property taxes in the foreign country.
Foreign income taxes if the property is rented out.
Specialty taxes, such as:
Portugal’s AIMI (wealth tax on high-value properties),
Spain’s deemed rental income tax (even on vacant homes),
Thailand’s Specific Business Tax for early sales.
You might also need to file U.S. tax forms like the FBAR (FinCEN Form 114) or IRS Forms 5471 or 8858 if your foreign property is held in a corporation or generates income through a foreign financial account. However, owning the property in your name with no foreign accounts usually exempts you from these filings.
To avoid double taxation, you may qualify for a foreign tax credit for taxes paid abroad, helping offset your U.S. tax liability.
2. Align Your Estate Plan with International Property Laws
Your U.S. will or trust may not be valid—or effective—in a foreign jurisdiction. Many countries:
Reject U.S. wills unless they follow local legal formalities.
Ignore U.S. trusts, especially in civil law countries like Portugal, Italy, or Chile, where the legal concept of a trust is not recognized.
If your estate plan is not properly coordinated, your foreign real estate could pass under the host country’s intestacy laws, not your intended wishes.
Solutions:
International wills under the 1973 Washington Convention are recognized in many countries (including by California, New York, and Illinois). These wills require specific formalities to be considered valid.
Work with an estate planning attorney familiar with both U.S. and foreign law to ensure your documents are recognized where your property is located.
3. Forced Heirship Rules Could Override Your Wishes
In some countries, your heirs may be legally entitled to inherit part of your property—regardless of what your will or trust says.
Known as forced heirship, these laws exist in:
Germany (Pflichtteil: 50% of intestate share goes to heirs),
Portugal, Brazil, Italy, Mexico, and others.
To avoid forced heirship limitations, consider buying in countries that allow testamentary freedom, such as the UK, Ireland, or many Caribbean nations, where you retain greater control over who inherits your foreign assets.
4. Work with Legal Professionals in Both Countries
Purchasing property abroad without legal guidance is risky. Foreign buyers need to understand local ownership laws, tax reporting, and estate planning rules—all of which vary by country.
Hire both:
A U.S. estate planning attorney to align your trust, will, and tax strategy;
A local real estate or legal professional in the country where the property is located to help with title, ownership structure, registration, and compliance.
This dual-counsel approach protects your investment and ensures your estate plan is enforceable across borders.
Final Thoughts: Plan Ahead Before You Buy Abroad
Real estate in a foreign country can be a dream come true—but only if you take the time to understand the legal and financial implications. From taxes to wills, from inheritance rules to ownership restrictions, cross-border planning is key to protecting your property and your legacy.
If you’re considering purchasing property overseas, contact our office. We help U.S. citizens navigate the estate and tax planning complexities of owning foreign real estate—so you can focus on enjoying your new home abroad.