International Estate Planning

We advise individuals and families on tax and reporting requirements relevant in the context of cross-border property ownership and transfers.

Property held abroad is often held indirectly through entities such as corporations, partnerships, or trusts. These forms of ownership may trigger reporting and disclosure obligations such as: Foreign Account Tax Compliance Act (FATCA), Report of Foreign Bank and Financial Accounts (FBAR), and Foreign Financial Asset Reporting on Form 8938

 

We advise foreign individuals prior to becoming a resident (for U.S. income tax purposes) or a domiciliary (for U.S. estate, gift, and GST tax purposes).

In today's transnational world, it is not uncommon for a non-U.S. citizen, non-resident individual to live in the United States for a period of time for work or family reasons. Such a move may cause the foreign individual to become a U.S. resident for U.S. income tax purposes and be subject to U.S. income tax on his or her worldwide income. If a foreign individual also becomes domiciled in the United States, which involves different legal tests than residency for income tax purposes, his or her worldwide estate will be subject to U.S. estate tax at death. 

Pre-residency U.S. income tax planning.

 

The residency status of a non-U.S. individual has a big impact on his or her income tax treatment under U.S. law. Resident aliens, like U.S. citizens, are subject to income tax on their worldwide income, regardless of source.

 

In general, the objective of this planning is to limit the investment and business income that would subsequently be subject to the global application of the U.S. income tax (i.e., the income to be directly received by or for the individual after the individual has become a U.S. resident for U.S. income tax purposes).

Pre-residency U.S. gift and estate tax planning.

A nonresident alien individual is subject to U.S. gift and estate tax only on the transfer of U.S. situs property. U. S. situs property is generally limited to U.S. real estate, stock of U.S. corporations (for estate tax purposes only, not U.S. gift tax purposes), mutual funds (including money market funds) organized in corporate form if incorporated in the United States, certain types of debts of U.S. obligors (for estate tax purposes only, not U.S. gift tax purposes), and tangible personal property located in the United States. This leaves broad categories of property that are not subject to U.S. estate and gift tax, such as foreign stocks, foreign bonds, foreign real estate, U.S. bank accounts, and U.S. publicly traded bonds. However, once that individual acquires a U.S. domicile, his or her worldwide transfers become subject to U.S. estate, gift, and GST tax. Planning in advance can mitigate this problem.

 Questions? Call Attorney Robert Adler: 212-843-4059 or 646-946-8327.