Case Study: American Retiree Estate Plan Across the US and Brazil

Client Profile

Robert, 65, retired American executive who moved to São Paulo in 2019 after 30 years in the pharmaceutical industry. Lives in a two-bedroom apartment in Jardins. Married to Maria, 58, a Brazilian national. Two adult children: James (34), a financial analyst living in New York, and Ana (30), a marketing manager in São Paulo who holds dual Brazilian-American citizenship.

US assets:

• Traditional IRA: $800,000 (Fidelity, primarily index funds)
• Home in Westport, Connecticut: $650,000 (inherited from his mother, currently rented)
• Brokerage account: $650,000 (Schwab, mix of equities and bonds)

Brazilian assets:

• Apartment in Itaim Bibi: R$2.4M (purchased in 2019 for R$1.8M)
• CDB and LCI investments at Itaú: R$800,000

Total estate: approximately $2.7M USD equivalent.

The Challenge

Robert came to us after a colleague’s husband died and his family spent 22 months in judicial inventory with frozen bank accounts. Robert had a US will drafted in Connecticut in 2016 — before his move to Brazil — and nothing else. No Brazilian will. No power of attorney in either country. No coordination between his US and Brazilian assets.

The specific risks we identified:

1. No Brazilian will meant judicial inventory. Without a Brazilian testamentary instrument, Robert’s death would trigger inventário judicial under CPC Art. 610 — a court-supervised process lasting 12-24 months during which all Brazilian assets are frozen. Maria would be unable to access the R$800K in investments or sell the apartment during this period. With a valid testamento público, the family could use inventário extrajudicial under Lei 11.441/2007 (cartório-based, typically 2-4 months), provided all heirs are adults and in agreement.

2. ITCMD exposure at current vs. future rates. The Itaim Bibi apartment, valued at R$2.4M for ITCMD purposes, would generate R$96,000 in São Paulo ITCMD at the current 4% flat rate. Under LC 227/2026 progressive rates starting in 2027, the same apartment — assessed at fair market value (estimated R$3.2M by 2027) — could generate R$192,000-R$256,000 in ITCMD at 6-8% progressive rates.

3. IRA distributions to a Brazilian heir. James, living in New York, would inherit IRA assets under normal US rules (10-year distribution rule for non-spouse beneficiaries under the SECURE Act). But Ana, as a Brazilian tax resident, would face both US withholding (30% default for IRA distributions, reducible to 15% under the Brazil-US treaty) and Brazilian income tax on each distribution at up to 27.5%. Without coordination, she could lose 40%+ of each IRA distribution to combined taxes.

4. Connecticut property complications. The rental property in Westport is US-situs real estate. It must pass through US probate regardless of any Brazilian planning. Robert’s 2016 will left everything to Maria — but as a non-US-citizen spouse, Maria would not qualify for the unlimited marital deduction under IRC §2056(d). Instead, distributions to her would require a Qualified Domestic Trust (QDOT) to defer US estate tax. Since Robert’s total estate is well below the $13.61M exemption (2024), US estate tax itself wasn’t the issue — but the QDOT requirement would add unnecessary complexity and cost if left unaddressed.

Our Approach

Step 1: Brazilian Testamento Público

We drafted and registered a testamento público at a cartório in São Paulo, specifically tailored to coordinate with Robert’s US will. The Brazilian will governs only Brazilian-situs assets (apartment and investments) and expressly states it does not revoke the US will. Under LINDB Art. 10, succession of immovable property in Brazil is governed by Brazilian law — so the Brazilian will ensures compliance with forced heirship rules (CC Art. 1.829) while maximizing the disposable portion (parte disponível) per CC Art. 1.846.

“A US will and a Brazilian will must be drafted in coordination — not independently. When they conflict, the result is a multi-year judicial battle that costs the family far more than the planning ever would.” — Zachariah Zagol, Founding Partner, OAB/SP 351.356

Step 2: Strategic Donation of Apartment

We executed a donation with usufruct reservation (doação com reserva de usufruto vitalício) of the Itaim Bibi apartment to Ana in 2026, while the 4% flat São Paulo ITCMD rate still applied. Robert and Maria retained full right to live in and manage the apartment for their lifetimes.

• ITCMD paid: R$96,000 (4% of R$2.4M declared value)
• Estimated ITCMD had they waited until post-2027: R$192,000-R$256,000 (6-8% of R$3.2M market value)
• Net savings: R$96,000-R$160,000

Step 3: IRA Beneficiary Restructuring

We coordinated with Robert’s US estate attorney to restructure IRA beneficiary designations:

• James (US resident): named primary beneficiary for 60% of IRA — straightforward 10-year distribution with US-only taxation
• Ana (Brazilian resident): named primary beneficiary for 40% of IRA, with instructions to take distributions in years when her Brazilian taxable income is lower, maximizing foreign tax credit utilization under Form 1116
• Maria: named contingent beneficiary (spousal rollover option preserved)

Step 4: US Will Update

Robert’s Connecticut attorney updated the US will to:

• Remove the blanket “everything to Maria” provision
• Specifically devise the Connecticut property to James (avoiding QDOT complications)
• Coordinate with the Brazilian testamento público so neither revokes the other
• Include a specific provision under CC Art. 1.846 acknowledging the forced heirship allocation for Brazilian assets

Step 5: Life Insurance for ITCMD Liquidity

We arranged a life insurance policy on Robert’s life (R$500,000 coverage, premium ~R$18,000/year) payable to Maria. Under CC Art. 794, life insurance proceeds are exempt from ITCMD and are not subject to inventory proceedings. This ensures Maria has immediate liquidity to pay any remaining ITCMD and cover living expenses during the inventory period — however short it may be.

Step 6: Power of Attorney

We prepared a procuração pública granting Maria power to manage all Brazilian assets and a reciprocal power of attorney for Robert to manage on Maria’s behalf. We also prepared an apostilled power of attorney for James to act on Robert’s behalf regarding the Connecticut property.

The Outcome

Timeline: The entire engagement, from initial consultation to final document registration, took 4 months.

“The pre-2027 ITCMD window is not a hypothetical planning opportunity — it is a quantifiable savings event with a fixed deadline. Every month of delay narrows the execution window.” — Zachariah Zagol, Founding Partner, OAB/SP 351.356

Key Takeaway

Robert’s estate was not large by US standards — well under the US estate tax threshold. Many American retirees in similar situations assume they don’t need estate planning in Brazil because they “don’t have that much.” The reality is that Brazilian succession law applies regardless of estate size: forced heirship rules, ITCMD, and the judicial vs. extrajudicial inventory distinction all apply whether your estate is R$500K or R$50M. The cost of doing nothing was not abstract — it was R$230,000+ in unnecessary taxes, legal fees, and frozen assets that Maria and the children would have borne after Robert’s death.

If You’re Facing a Similar Situation

If you are an American retiree living in Brazil — or considering retirement in Brazil — without a coordinated estate plan, the risks Robert faced apply to you. A Brazilian estate planning consultation identifies the specific gaps in your plan and provides a written strategy memo with prioritized recommendations. The 2026 ITCMD window for favorable donation rates is closing. Contact ZS Advogados today to schedule your consultation.