The International Assignment Taboo: Expatriate Death
by Andrew Preston, KPMG LLP, New York
(KPMG LLP in the United States is a KPMG International member firm)

Nobody could have anticipated or have been fully prepared for the tragic events of September 11, 2001, and the repercussions that have spread far beyond New York City and Washington, D.C., and, indeed, the United States. The people who died as a result of the attacks in the U.S. were not just Americans. They came from all over the world—many of them were expatriates on international assignment, especially those who worked at the World Trade Center in New York City.

Terrorism, however, is not the only threat to the lives of expatriates. Those working and living in unfamiliar environments are at an increased risk of illness and injury, and possibly death due to disease, natural disasters, faulty infrastructure, civil unrest, and even kidnapping. Also, while on assignment, employees may die from undetected medical problems or natural causes. Risk of death may be increased due to a particular job requirement or specific conditions at the host location. For example, workers on oil rigs, or toxic chemical or construction sites may be more prone to physical injury. White-collar executive expatriates working in lesser-developed countries may be potential victims of robbery or kidnapping.

The subject of an expatriate's death has generally been a taboo subject. Instances of expatriate death are often dealt with on a case-by-case basis. This may be due to a "bury-the-head-in-the-sand" approach or the belief that "it will never happen to us." This is counter-productive and less than helpful in the face of our new reality, however morbid it may seem. The tragic events of last September brought the issue of life-threatening experiences and death to the forefront of many people's minds. Terrorism and unrest in Venezuela, Colombia, Israel, and Pakistan, among other countries, and frequent warnings from governments and security authorities of potential threats to life make this issue a constantly live one. It is important for companies to review policies and practices and consider how they could be improved in light of the new reality.

There are a multitude of issues that organizations face when confronted with an expatriate's death, including policies and practices to reduce the likelihood of such an occurrence in the first place (such as health and safety, housing, security, transportation, etc.). (For related coverage, see T. Dwyer, "Take a Proactive, Rather than Reactive, Approach to Emergency Planning for Expatriates in Crisis Locations," The Expatriate Administrator, Winter 2001, issue 2001-04.) However, this article will focus on international assignment (expatriate) policies.

Problems and Responses

When an expatriate dies while on international assignment (aside from the significant impact on family and friends), there are grave implications for the employer, including the international assignment program administrators and the company's finances. To best respond to and mitigate the impact of such an event, a company should assiduously plan in advance for it—be proactive rather than reactive—and update its international assignment policy. But before we look at the specific ways to handle the problems, let's examine the issues that can arise with the death of an expatriate.

There are two main problems that can arise: the treatment of the expatriate's estate by the host country jurisdiction, and what compensation and benefits should be rendered to the deceased expatriate's family.

Wills
While it is not the responsibility of the expatriate's employer to ensure that he or she has a written will, the employer should raise the issue in a pre-departure meeting and inform the expatriate that different laws may apply in the host country as compared with the home country. A will prepared under the laws of the expatriate's home country, at worst, may be completely void under the laws in the host location. Even if the host country recognizes the will, certain aspects of the will may be unenforceable. This could cause tremendous difficulties—financial and other—for the surviving family members, and could lead to the family incurring substantial legal costs while trying to sort out the situation. This has also been known to result in problems related to the custody of orphaned children of expatriates; there have been several cases in the U.S. of such children being held in state custody for extended periods while distant relatives from foreign countries attempted to assert parental rights.

Tax
Closely tied to the issue of wills and estate planning is the possibility of unanticipated additional taxes. Many countries, especially in the developed world, impose "death taxes" in a variety of forms (some on the estate of the deceased, and others on the beneficiaries of the estate of the deceased). Careful planning can often vastly reduce these taxes, but this will usually require a prepared will to detail the distribution of assets upon death. Such tax laws differ dramatically from country to country, and if the planning that has taken place concerns just a home country death possibility, the tax bill may be quite unexpected. Also, the rates of such taxes are significantly different around the world and the total cost, even if the same assets are taxed, can be vastly inflated.

While many countries have tax treaties to avoid double taxation, an existing treaty does not necessarily mean that it will be easy to determine which of the two jurisdictions (or more, depending on asset location) has primary taxing rights. The situation is often complicated by the location of assets, the citizenship of the deceased, and where the employee was actually resident or domiciled at the time of death.

Compensation and Benefits
What benefits from the expatriate's assignment package are to be continued and in what amount disbursed to the accompanying family? Should an employer continue to pay the expatriate's salary to the deceased family in the assignment location? When and how are they to be repatriated? If the family decides to return to the home location immediately, how long will they receive temporary living allowances? This may be longer than the usual repatriation-related temporary living allowances because the family's home may be rented for the duration of the originally anticipated assignment. What if the deceased expatriate's spouse wishes to stay in the host location because, for example, he or she does not want to take the children out of the school mid-year? If the family stays in the host country, what benefits should the employer provide? Housing? Salary? Cost-of-living allowances? If benefits are provided, for what period of time should they continue and in what amount?

International assignment policies typically detail what provisions expatriates receive before, during, and at the end of the assignment. Generally, the "end of assignment" section of the policy describes the provisions for repatriation (for a completed assignment), and sometimes the procedure for repatriating an expatriate who has resigned or been terminated. For the most part, repatriation and termination are planned events and, therefore, even if the policies are not prescriptive regarding a particular scenario, the administrator will have enough time to plan for the outcome.

This is rarely the case with an expatriate's death, and the emotional issues surrounding the family exacerbate the lack of planning time. If the international assignment program administrator is unprepared, the ramifications can be damaging to both the administrator (emotionally and professionally) and the employer (financially and workplace/marketplace perception). With no clear policies in place, the administrator will likely be confused and stressed trying to accommodate the grieving family overseas. Not wishing to expose the employer to bad publicity, and in the absence of guidelines, the administrator may request that the employer pay the unexpected "death tax" bill (which may be payable in both the home and host countries). It is not simply a case of bringing home a grieving family.

Other Practical Steps

So what can be done about these issues? To some degree, anticipatory planning ideas and responses have been mentioned in the preceding discussion. In addition, broadly, there are two major areas that need to be addressed:

• Policy Provisions: what benefits will be made available to the deceased expatriate's family?
• Procedural Matters: what are the steps that need to be taken when an expatriate dies?

Policy
The company's international assignment policy should address the issues related to the estate of the expatriate, as well as what specific provisions relating to the expatriate's compensation (including repatriation) will be applied for the benefit of the expatriate's family.

The policy must at least raise the point that a suitable will be in place before the international assignment begins. Knowledge of this point and, preferably, action based on knowledge, can save the expatriate and his or her family much distress and difficulty in the event of the expatriate's untimely death. With the assignment location known, an existing will should be reviewed (and possibly updated) or a new will prepared if none exists. This should help ensure that the expatriate's wishes are carried out in the event of his or her death, and that the common law in force in the assignment location is not automatically carried out. The employer may wish to go even further and provide funds specifically for will preparation. Failing that, the policy should note this as one area where the expatriate should consider funding out of any "miscellaneous expense" or "relocation" allowances.

Tax: What's Covered

An international assignment policy should specify which taxes are covered by the policy. Clearly stating that death taxes are not covered in the policy removes the financial burden from the employer and emphasizes to the expatriate that he or she must be responsible for making sure that his or her family and beneficiaries are protected from punitive taxation. Death taxes can be assessed in both the home and host locations and can be very expensive. If an employer does not limit the scope of the international assignment tax policy (for example to income taxes and social security), the expatriate's family may consider that all taxes incurred in the assignment location are payable by the employer.

Procedures
It is unfair for an employer to expect an unprepared international assignment program administrator to have to deal with the grieving family and also have to determine policy on the spot without any guidelines. Without any help, the administrator might not only create additional problems for the family and employer, but may also set a bad precedent.

Potentially more disturbing for the family and administrators than the tax and compensation issues are the problems that may be encountered when trying to get the deceased expatriate's body across national boundaries. Even if a program has a policy that plans for the death of an expatriate, and has every detail of a grieving family's repatriation planned, the return may still face delays. How and when the remains of a deceased expatriate can be brought back to the home country varies from location to location. Strict laws likely apply in both the host location (such as the issuing of death certificates) and the home country (such as regulations regarding the shipment of bodies). Specific responsibilities need to be assigned for all of the research, administration, and payment of associated fees. This can be a substantial burden. One U.S. multinational, confronted with extraordinarily complex regulations and an unyielding local bureaucracy, ultimately resorted to "smuggling" an expatriate's body out of the host location on a corporate jet rather than have the employee's family face seemingly unending delays and costs.

Conclusion

Death is never an easy subject to face, but the problems of such a tragic event are multiplied when the deceased is an expatriate. The unexpected events of September 11 and the threats to foreigners—often individuals working in a host country on international assignment—make planning and written policy essential to mitigate stress, confusion, hardship, and obviate on-the-spot policy-making and bad precedents. Difficulties may be reduced or avoided, however, if a company takes the time to review and write clear policy—or where policy exists, update it—with appropriate provisions and program procedures. This will help ensure that the international assignment program administrators are well-prepared and are able to give guidance and reassurance to all the parties involved during very difficult times. As with many elements of policy, exceptions may need to be made given facts and circumstances. Also, unexpected challenges may arise, but ultimately, preparing for the worst is always better should the "unthinkable" ever happen.

Special thanks to: Alison Shipitofsky, International Human Resources Consulting, KPMG LLP, New York, for her research and contributions.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation.