Expats from the United States face a complicated tax situation, both for annual income tax filings and for estate taxes. If you have expatriated or plan to expatriate, you should be aware of the tax-related consequences.
What Is an Expat?
The term “expat” means different things to different people. It may refer to someone who has left the United States for good to live in a foreign country. It may refer to someone living abroad who plans to return to the U.S. at some point. Or it may refer to someone who has renounced his or her American citizenship.
Many expats retain citizenship or own United States assets, and this can result in significant tax bills later on. Expats who renounce citizenship but still own U.S. assets face similar issues.
Estate Taxes for Expats
The estates of people with United States citizenship must pay U.S. estate taxes if the estate values exceed $11.18 million. In practice, this means that someone who has not lived in the U.S. for years – and who owns little or no property here – may lose a chunk of their estate bequests to the government.
Along the same lines, the estate of an expat who has renounced citizenship but still owns property in the U.S. may owe U.S. estate taxes too. Estate taxes are due for U.S. estates exceeding $60,000. For people who still own real estate or stocks here on their deaths, the dollars can add up quickly.
The IRS has been increasingly strict in recent years when enforcing taxes against expats. In addition to estate tax requirements, there are challenging and potentially very expensive income tax requirements for expats. The IRS imposes fines when specific forms are not filed every year.
In short, if you are planning to expatriate or have expatriated from the United States, you need to talk to a U.S. estate planning lawyer about your tax liability. More and more people are choosing to renounce their U.S. citizenships to avoid tax troubles, but for estate tax purposes it could make your estate’s bills very high. Speak to a lawyer for more assistance on this issue.
Planning your estate? Look to Janet Brewer, Esq. for thorough and thoughtful estate planning advice. Janet’s more than 20 years of legal experience 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.