When family members come to the United States or purchase property here from abroad, they may put off or avoid estate planning for their assets. Unfortunately, delays in addressing the tax consequences of gifts and purchases made in America can lead to big problems. The truth is, American tax laws may be very different than in other countries, so international estate planning is a must.
Large Tax Bills Now
Due to specific tax laws for non-residents and non-citizens, your lifetime gifts to relatives could cost you or them large tax bills. Making non-residents and non-citizens the co-owners of property, bank accounts, and stock could have the same effect. Calculation of your gift and estate taxes depends on your “domicile”, unlike income taxes, which depend on your “residency”.
Non-resident aliens receive a much lower gift and estate tax exemption than U.S. citizens, only $60,000. As a result, if non-residents make large lifetime gifts that exceed the exemption and then pass away, their estates could owe hundreds of thousands of dollars in estate taxes. Further, U.S. tax law sets a limit on how much money in gifts one person can give to another in one year. If a non-resident alien make a gift of more than $15,000 (the “annual exclusion amount”), he or she is eating into the $60,000 lifetime exclusion and will have to pay gift taxes on the amount over $15,000 just for that tax year.
Large Tax Bills Later
When the estate of a deceased person pays taxes, relatives sorting out finances may discover that the deceased person made some lifetime gifts. If the total of the lifetime gifts and the value of the estate exceed the exemption amount, the estate may owe taxes that could total thousands of dollars.
Some people do not like to talk about end-of-life estate planning or have superstitions about discussing death. Practically speaking, however, your financial transactions in the United States and the estate planning you do here can have an enormous impact on your family’s resources after you pass away. With careful forethought, you can anticipate the large tax bills mentioned above and develop strategies to address them in your estate plan.
What to Do Next for International Estate Planning
If you or a relative have non-citizen status in the United States, and you plan to make gifts, transfer ownership of property, or own property yourself, you need both a good accountant and a good estate planning lawyer. Your estate planning lawyer will help you with issues beyond paying this year’s tax bill. You can get your questions answered about how your residency status will impact gift and estate taxes in your future.
Many lawyers and accountants are not familiar with the estate planning possibilities for people not domiciled in the United States. Seek out a lawyer who has international estate planning experience.
Do you need help with international estate planning? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience and her certification as a California estate planning and probate specialist by the California State Bar Board of Legal Specialization will give you confidence and peace of mind. To schedule a “Get Acquainted” meeting, visit Janet's website or call her office at (650) 469-8206.