Inheritance Planning Options for the Expat

Pre-Immigration Planning

If you can, before you move you should consult a specialist cross-border wealth manager about your pre-immigration estate planning options. This may involve making a decision about your future residency status and may also necessitate the sale, moving or retitling of certain assets.

For example, there are certain structures that may not be subject to United States estate or gift tax and others that attract a higher rate of liability.

Green Card Holders

If you are in possession of a Green Card, your estate and inheritance planning options are largely the same as those of United States citizens.

Both citizens and permanent residents must pay tax to the IRS on their worldwide income, as well as estate and gift tax on all of their worldwide assets. However, as a permanent resident, you also have the same estate planning opportunities as a US citizen. Whether you are a Green Card holder or US citizen, estate planning advice is a must if you wish to avoid some of the common pitfalls.

Non-Resident Aliens

As a non-resident alien, unless you own United States real estate or other qualifying assets in the country, you are exempt from estate tax. However, if you do have qualifying assets, the exemption threshold is only $60,000—much less than the $5,490,000 exemption available to citizens and permanent residents.

Couples

Married couples who are both US citizens are free to pass assets between each other without incurring gift tax. Furthermore, they do not have to pay estate tax when the first spouse dies. However, if the spouse who receives the assets is not a US citizen, only the first $149,000 that is gifted or transferred is tax-free, even if they are a permanent resident.

Exit Tax

If you are planning to leave the US at some point in the future there are further considerations to be made. Just as with giving up a US passport, giving up a Green Card when you have been permanently resident for at least eight out of 15 years should only ever be undertaken with a full understanding of the implications—i.e. it may mean that you attract an IRS exit tax. This exit tax is essentially an estate tax on the gain in your assets during your time in the US.

Long-term residents can trigger the exit tax in a number of ways. One route is to make a treaty election to become a non-resident. This is done by filing Form 1040NR for the year in question, with the treaty election on an attached Form 8833.

Applicable Treaty Reliefs

The United States is signatory to gift tax treaties with certain countries. These include Australia, Austria, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Netherlands, Norway, South Africa, Sweden, Switzerland, and the United Kingdom. These treaties should prevent your country of origin and country of residence from taxing the same asset on your death.

Contact Blacktower (US) LLC Today

Estate and inheritance planning is one of the most important yet complex and challenging areas of wealth management for expats in the United States and one of the most important factors is to start planning as soon as possible.

Blacktower (US) LLC can help you understand your responsibilities and options so that you can comply with Internal Revenue Service (IRS) rules while also structuring your assets in the best interests your family. Contact us today for more information.

We are not tax advisers and independent tax advice should be sought in relation to tax obligations.
The information  included here is based on our understanding of the tax benefits at the time of publication.
The above does not constitute advice. You need to seek independent advice to ensure the suitability of these solutions.