International estate planning is not just about the wealthy shifting assets to tropical locations via offshore trusts (that is a subject for another time). In the global environment we live in today many of us have financial interests outside of the U.S. These interests are subject to the tax laws of other countries and the U.S.
This calls for relatively complex planning to help minimize worldwide taxes imposed at death. First, it is important to determine whether you can be taxed as a resident by more than one country. The estate tax should be calculated for each possible residence and then you can make a more informed decision on establishing permanent residency. Evidence used to determine residency in the U.S. involves many factors such as residence location, whether or not you own a home and its value, ties to the location such as clubs and memberships and possessions that you have accumulated. Part of the estate planning may be to update voter registration records, changing references in legal documents or updating automobile registration.
Then you must consider the taxation issues. The U.S. estate tax can be much more burdensome on the U.S. assets of the non- U.S. citizen than on the estate of a U.S. citizen or resident. The federal tax exemption amount for the estate of a U.S. citizen or U.S. resident in 2011 is $1 million. The unified credit for the estate of a nonresident alien is only $13,000, enabling the protection from U.S. estate tax of only $60,000 in those assets. Additionally, if you are married and a non-U.S. citizen, you do not get the unlimited marital deduction. The rationale for this was that the non-U.S. citizen would be free to leave the United States and take any inherited assets out of the United States and these assets escape taxation forever. To prevent this potential escape the new rules required that if the marital deduction were to be allowed it would be only with respect to assets that were transferred to a new entity, a Qualified Domestic Trust. I draft these types of trusts quite often.
This post has probably brought up more questions than answer due to the complex nature of International Estate Planning. Each case is unique. Feel free to email me at terzianlaw@gmail.com for a free consultation to discuss the particulars of your case
