If you have ever sat down with your attorney or CPA to discuss estate issues, you know that estate planning involves a lot of decision making on your part. Estate planning professionals seem to have a never-ending list of options to choose from: revocable trusts, irrevocable trusts, credit shelter trusts, disclaimer trusts, life insurance trusts, TOD designations—the list goes on. In many cases there are no right answers and, as we often tell our clients, the correct path may only be evident when you are no longer around to see the results of your planning.

Having international issues adds another layer of complexity. But there are steps you can take now to minimize future complications. Over the next few blog posts we will discuss some of the unique issues facing resident individuals with foreign assets or non-citizen heirs as well as issues facing nonresident aliens owning U.S. property.

Here is a glimpse of the issues we will be discussing.

  • Are you and your spouse U.S. citizens? Even if you are U.S. permanent residents (i.e., green card holders), if you are not U.S. citizens, you should be aware of a few key differences in the inheritance and gift tax laws.
  • Will you have foreign heirs or beneficiaries? This may not change the amount of estate tax you pay, but it can have implications in other ways. If a nonresident alien inherits a retirement account, he or she will have to overcome some administrative hurdles as well as U.S. tax implications. During the period the estate is being administered, there could be withholding tax requirements imposed on the estate.
  • Do you have foreign investments or foreign retirement accounts? Your executor may need to probate your estate in the foreign country in order to access those accounts. More importantly, does your family or executor know of the existence of these assets?
  • Do you own real estate in a foreign country? Your estate or heirs might be subject to foreign estate or foreign income taxes on the transfer of property.
  • Are you a nonresident alien with U.S. property such as U.S. real estate or stock of a domestic corporation? A U.S. nonresident estate tax return is required for the property to be transferred to the beneficiaries of the estate, regardless of the size of the estate.
  • Will you be inheriting cash or property from foreign relatives or friends? You may have informational reporting requirements regarding that inheritance.

Stay tuned for further discussion of these issues.

By Linda Bruckner, CPA