As more U.S. citizens purchase real estate or establish businesses in Costa Rica, it becomes increasingly important to structure ownership in a way that aligns with U.S. estate planning goals while ensuring compliance with both U.S. and Costa Rica law. One way to accomplish this goal is to use a U.S. trust to own the shares of your Costa Rican company. This article explores how this structure works.
Understanding the Share Ownership Structure
In Costa Rica, non-citizens can own real estate either in their individual names or through a Costa Rican LLC. For liability reasons and ease of transfer some expats prefer to own real estate through an LLC. For U.S. citizens, the next step in optimizing this structure is to place the shares of the Costa Rican company into a U.S. trust. Here’s how this works:
Create a U.S. Trust: A revocable living trust is a common choice for many U.S. citizens. This type of trust allows you to maintain control of the assets during your lifetime, with the flexibility to modify or dissolve the trust as needed.
Transfer Shares to the Trust: The U.S. trust will become the owner of the shares of your Costa Rican company. This transfer of shares is relatively straightforward but should be handled by legal professionals to ensure compliance with Costa Rican corporate law and U.S. tax regulations.
The Company Owns the Property: The Costa Rican LLC retains ownership of the real estate or other assets in Costa Rica. However, the shares of the company are now held by the U.S. trust, streamlining the estate planning process.
Benefits of Using a U.S. Trust for Costa Rican Assets
Avoiding Probate
One of the key advantages of placing the shares of your Costa Rican company in a U.S. trust is the ability to avoid probate, which can be a lengthy and costly process in both the U.S. and Costa Rica. By having the trust own the shares, upon your death, the trust’s assets (including the shares) are transferred to your beneficiaries according to the terms of the trust without the need for court involvement.
Simplifying Estate Administration
If you were to pass away with the shares of your Costa Rican company in your personal name, your heirs will have to open a probate process in Costa Rica to transfer ownership of the shares to the heirs. By holding the shares in a U.S. trust, you simplify the process for your heirs and ensure that the transfer of ownership is smooth and automatic.
Flexibility in Beneficiary Designations
A U.S. trust allows for considerable flexibility in determining how and when beneficiaries will receive the shares or any income generated from the Costa Rican property owned by the Costa Rican LLC.
Maintaining Control During Lifetime
With a revocable living trust, you retain full control over the trust assets during your lifetime. This means you can buy, sell, or manage the Costa Rican property and the shares in the Costa Rican company without restriction. The trust merely serves as a vehicle for the transfer of assets upon your death.
Final Considerations
While using a U.S. trust to own shares in a Costa Rican company has significant benefits, there are some key considerations:
Legal Compliance: It is essential to ensure that the transfer of shares to a U.S. trust complies with both U.S. and Costa Rican law. You still have to comply with all the Costa Rica company laws, disclosures and filings.
Professional Guidance: Due to the complexity of cross-border estate planning, it’s critical to work with legal and tax professionals in both the U.S. and Costa Rica who are experienced in handling international estates.
Conclusion
For U.S. citizens with real estate or assets in Costa Rica, using a U.S. trust to own the shares of a Costa Rican company can be a good estate planning strategy option. This structure allows you to avoid probate, simplify estate administration, provide flexibility in managing your assets, and maintain control during your lifetime
