Estate and Gift Planning Strategies

Estate Planning for U.S. citizens with International Interests

The U.S. estate tax exemption of $5.49 million ($10.98 million for married U.S. citizens with proper planning) provides a great deal of cushion for most American taxpayers planning their estate. However, if you are living overseas or have assets abroad, a different set of rules applies, and many countries will charge estate and inheritance taxes against much smaller estates. Understanding the landscape and planning against any avoidable estate and transfer taxes will go a long way to preserving your wealth. Our estate planning attorneys can help.

Estate Planning for Non-U.S. persons with U.S. Interests

For nonresidents with assets in the United States, managing U.S. estate tax exposure is crucial. The generous estate tax exemption applicable to U.S. citizens and green card holders is not available for foreign nationals with assets located in the United States. A reduced exemption of $60,000 applies and any U.S. assets valued in excess of this amount could be subject to U.S. estate tax.

If you maintain assets in the United States and are not a citizen or resident, protecting your estate against tax should be an important component of any financial planning strategy. While the United States has established estate and gift tax treaties with 18 countries that may help to minimize such exposure, the only way to ensure you are protected is to plan ahead. Our attorneys will work with you to understand potential U.S. estate tax exposure you could face and determine if there are options for transferring U.S. assets to your heirs without exposure to avoidable taxes and transfer fees.

Gifting Strategies for International Families

For Americans abroad, the same annual exclusion afforded to U.S.-based Americans of $14,000 applies to gifts made to any single individual. And the unlimited exemption for gifts made to your spouse is also available, but only if your spouse is a U.S. citizen. Americans married to non-citizens, including lawful permanent residents are limited to $149,000 for annual transfers. After these thresholds are passed, the lifetime exemption becomes applicable and such gifts reduce the total estate tax exemption of $5.49 million. Nonresident individuals with U.S. assets will pay gift tax on any transfers made in excess of $14,000 to any individual. No lifetime exemption applies.

For many international families, transferring assets between family members can be complicated and will require careful planning. Charitable gifting strategies can even be challenging with tax deductions available only for gifts to U.S. and a handful of other countries charities. Accounting for any gift or transfer taxes that could be due overseas only complicates matters. Our attorneys can help.

Advising on U.S. Tax and Estate Planning Issues for Foreign Trusts

Organizing a trust outside of the United States may make sense for certain individuals as a component of a complex global estate planning strategy. However, anti-deferral mechanisms typically prevent Americans from using foreign trusts to escape tax on income produced by transferred assets. Complicated information reporting obligations could also apply.

Beneficiaries of foreign estates and individuals who have established trusts outside of the United States before becoming U.S. residents may also need to address U.S. tax and information reporting responsibilities. If you are an owner or beneficiary of a foreign trust or considering establishing such an arrangement as part of your estate plan, our attorneys can assist with all planning and U.S. compliance matters.

Planning with Non-U.S. Pensions and Life Insurance Policies

When living and working overseas you may have the opportunity to participate in pension and other savings arrangements that will reduce tax exposure in the country where you are working while allowing you to save for retirement. Retirement plans in many countries, Australia, for example, may mandate participation. While Americans will need to consider how U.S. tax and information reporting obligations will apply to their foreign pension and tax preferred savings arrangements, these options can still produce tax savings.

Any individual raising a family will want to consider life insurance options to safeguard their family’s well-being. For American expats, the life insurance options overseas can be a minefield with many variations creating avoidable income tax exposure and complicated annual reporting on the U.S. side.

Our attorneys will help you understand the options that will be available to save for the future while you are living overseas and work with you to effectively navigate the potential tax and information obligations that will arise in the United States.

For American expats and foreign nationals with U.S. interests, planning for your financial future must account for the income and inheritance tax nuances that will arise as you build wealth. Our team of international estate planning attorneys can assist you in making sense of it all and developing an effective strategy to safeguard your assets.