These regimes are obviously quite different, for the decedent in a civil law country may have little or no say in the distribution of all (or most) of the wealth accumulated (or previously inherited), during her lifetime. Thun Financial Data Privacy Statement • Providing confidential consultations to potential clients or others who are considering doing business with us; From an income tax perspective, it is worth mentioning here that there are no treaties between the United States and any foreign jurisdiction that recognizes the tax-free growth of investments in 529 accounts (or Coverdell ESAs – another type of U.S. savings vehicle for education expenses allowing much smaller annual contributions). By Estates & Trusts Team, at McInnes Cooper. A United States expat family, a U.S. person married to a non-citizen spouse, a non-U.S. person investing in the United States, and other cross-border families will need to have an investment plan that is correctly in sync with a tailored cross-border estate plan. This matter involved giving advice to a non-UK resident and non-UK domiciled individual and his family to ensure a coordinated succession planning strategy across two jurisdictions. Accordingly, the expat should expect the U.S. Treasury to impose estate tax at his or her death upon all worldwide assets, including proceeds of life insurance policies, retirement assets, personal property (including investments), real estate, and other assets. This service is ideal for clients who have cross-border interests that require protection, or estate matters that require administration. While expat Americans do enjoy income tax relief in the form of the foreign earned income exclusion, there is no transfer tax corollary for expats. Except in response to direct instructions from you (e.g., a client asks us to send a brokerage tax record to their accountant), we do not share your personal data with third parties. MCA Cross Border Advisors, Inc. is a registered investment adviser. Non-resident foreign (NRA) investors in U.S. real estate: The United States can provide a very attractive market for investing in securities. If the American taxpayer receives annual aggregate (can be from multiple donors/grantors/testators) gifts above $16,388 (2019) from a foreign corporation or partnership, or aggregate gifts or bequests from a non-resident alien or foreign estate exceeding $100,000, the tax-payer must report the amounts and sources of these foreign gifts and bequests on IRS Form 3520, which must be filed at the time that the income tax is due, including extensions. Therefore, it is quite possible that the expat individual will find that gifting through a 529 plan could create detrimental tax consequences, as the donor may potentially incur tax liability on any investment gains in the portfolio going forward (recognized or unrecognized gains, depending on the local tax rules). Will Todd is an independent lawyer who provides cross-border tax and estate planning advice to individuals and families from his downtown Vancouver office. © 2020 Thun Financial Advisors, a division of Creative Planning  |  All Rights Reserved   |, U.S. Citizen inside the U.S.? Wills are the common method of establishing a blue-print of specific instructions for passing (bequeathing) wealth to others (spouses, descendants, friends, charities, etc.) * Applicable Membership or Subscription discounts will be added in your shopping cart Description: . This article does not constitute legal or tax advice, nor a solicitation to obtain clients to provide legal or tax advice. That the testator be legally competent and not under undue influence; That the will describe the property to be dis-tributed; That the will be witnessed by the requisite number of witnesses. If you own assets in both Canada and the United States, or you or your family members have connections to both countries, either by citizenship, residence or domicile, and you are seeking to create an estate plan that optimizes your situation, please call our Toronto, Ontario law office. In a cross-border context, it is wise to seek legal counsel with a specialized focus on estate planning in the relevant jurisdictions. Succession and forced heirship dominate civil law and other regimes: Civil law countries tend to follow a succession regime, also known as forced (or Napoleonic) heirship. Please send such requests or any queries regarding this policy and data privacy to Thun Financial at [email protected] Only clients and prospective clients that engage in direct, confidential communications with us provide additional information. While U.S. citizens and residents are subject to federal estate tax on worldwide assets, the non-resident alien’s estate is subject to federal estate tax only on U.S. situs assets, consequently “situs” has an important role to play in estate planning for many cross-border families. Our estate planning team possesses a wide range of experience in all aspects of cross border planning for wills, trusts and estates. There have been recent reforms in several civil law jurisdictions designed to better accommodate immigrants’ trusts, but uncertainties and complications remain. Both countries have different, often conflicting, tax rules about trusts and estates and … From a tax perspective, the impact on the 2020 U.S. Presidential election will stretch well beyond U.S. borders. Similar results may occur in France, which has a relatively new tax regime applicable to any trust with French situs assets or a French domiciled settlor or beneficiary. For gifts, the recipient takes the donor’s original cost basis. Please consult a licensed attorney or tax preparer regarding the suitability of any strategy, or the applicability of any rule or law, referenced herein, to your individual legal or financial circumstances. Canadians Living in the U.S. Webinar: Cross-Border Estate Planning. For example, if you are a Canadian who owns property in the US but are not a US citizen or resident, the US will tax your estate 40% of the fair value of the property. Unfortunately, the tax complications and challenges facing American expats also extend to the circumstance of marrying a foreigner. Given the critical fundamental legal differences in the distribution and taxation regimes around the world, it should come as little surprise that a family’s existing estate plan (designed for one legal system) may quickly become outmoded, ineffective, and even counter-productive once the family relocates overseas (and becomes subject to a completely different legal system). We are also able to provide advice and assistance with respect to multi-jurisdictional estate planning. If you would like to review our data privacy statement, click here. To find out more about cross border estate planning, please contact Michael Kennedy at mk@ingenuitycounsel.com, 519-252-3888 or www.ingenuitycounsel.com. (for more information see Thun Research’s article on PFICs). With a QDOT, only distributions from principal during the surviving spouse’s life and at the surviving spouse’s death are subject to estate tax (insofar as they exceed the original decedent spouse’s exclusion). Moreover, If the trust provides for a successor U.S. trustee, then a settlement (triggering UK capital gains taxes) could also be declared on the death of the UK resident trustee (the grantor). Generally, these older treaties provide for primary and secondary credits to be applied to reduce double taxation: the non-situs country (where the property is not located) will grant a credit against the amount of tax imposed by the country where the property is located. Finally, the concept of a trust is likely to be of little or no legal validity in a succession regime. Connections: Key Cross-Border Estate Planning Strategies. Home | Cross-Border and Multijurisdictional Estate Matters | U.S.-Canada Cross-Border Will and Estate Planning. We provide an array of cross-border estate planning services, including: Our firm is known in the professional community for its ability to create and effectively deliver legal solutions for succession of assets and estate and incapacity planning for clients with connections to both Canada and the U.S. As an internationally-recognized firm that frequently deals with clients with multijurisdictional issues, our legal team can provide you with advice regarding your cross-border estate planning needs. This exposes distributions from the trust to potentially higher German transfer taxes. Thun Financial Advisors is a Creative Planning, LLC company. Whether the property is situated in the foreign country; Whether the property is subjected to transfer/death taxes; Whether the property is properly included in the gross estate. However, in some cases, we may seek and collect data about individuals through publicly available third-party sources, such as social media, news, or company websites. Creative Planning, LLC (“Company”) is an SEC registered investment adviser located in Overland Park, Kansas. As a result, a major part of her practice is related to cross border U.S. – Canada transactions and estate planning, including estate, gift, and generation skipping tax issues. We can help you understand how U.S. estate tax could affect your estate planning and how to minimize taxation in both jurisdictions through careful specialized estate planning. Currently, the vast majority of Americans, at home or abroad, have little concern for U.S. federal estate taxes. The applicability of an estate tax treaty between the U.S. and the country of residence, domicile and/or citizenship; The availability of tax credits in the relevant jurisdictions where overlapping taxes are levied. Michael Cirone is a Canadian and U.S. lawyer with 20 years of experience providing cross-border personal tax and estate planning services. Moreover, civil law succession regimes tend to prefer to impose tax upon inheritance (i.e., upon the heirs) at the time of distribution of the decedent’s estate rather than impose tax upon the estate of the decedent prior to the distribution of the decedent’s estate. Concepts of citizenship, residency and domicile have crucial significance in determining the exposure of a person to the transfer tax regime of any particular country. The availability of a U.S. foreign tax credit will hinge upon: There is also the potential that a foreign transfer tax credit could be unavailable because of a Presidential proclamation based on the foreign country’s failure to provide a reciprocal tax credit to U.S. citizens. This example merely highlights that certain classes of investments may be subject to more draconian reporting and taxation rules than other investments. Correctly tailoring that cross-border estate plan will require legal and tax experts with a deeper understanding of the relevant estate/succession/gift/generation-skipping transfer (collectively referred to herein as “transfer”) tax laws in all of the relevant countries that may factor in the distribution of property prior to and upon death, and the myriad of available techniques that, when correctly identified and utilized, can mitigate the punitive effect of transfer taxes. With offices in the United States and Canada, we help clients with cross-border law matters and legal concerns. Join our mailing list to receive the latest news and updates on cross-border investing issues. Cross-Border Estate Planning April 16th, 2021 Attend via Live Webinar. U.S. expats need to be aware that standard U.S. estate planning techniques will likely fail to protect wealth in cross-border situations and may even produce unintended, counter-productive results. We specialize in U.S. & Canadian immigration financial strategy. Will Todd is an independent lawyer who provides cross-border tax and estate planning advice to individuals and families from his downtown Vancouver office. Cross border trust and estate planning . Acquisition of real estate. This is analogous to the intestate succession rules followed in common law when the decedent has otherwise failed to legally direct the distribution of wealth upon death. • Communicating with you with respect to new research, webinars, or other firm activities or events that may be of interest to you; and Accordingly, in addition to the federal estate, gift and generation-skipping transfer (GST) tax regimes, the transfer tax regimes of multiple states may also factor in the distribution of wealth (during lifetime and after death) to the surviving spouse, the children, and future generations. Cheyenne received her J.D. Estate planning for cross-border families can get a bit tricky or complicated when family structure includes one U.S. citizen and one non-U.S. citizen. Now imagine that typical affluent American family in a modern, global setting: A husband that is a United States citizen living in Germany, married to a citizen of France (a “non-U.S. person”), with two children from a prior marriage living in the United States and one from the present marriage living with her parents in Germany. Who Can Benefit Those clients who benefit from our cross-border financial, tax and estate planning and investment management oversight expertise include: It is extremely important to remember that the filer must specify any specific benefit under the treaty that is being claimed in the actual tax filings; otherwise, the presumed benefit is lost. The complexity and sophistication of traditional and living wills varies greatly, and any individuals with estates that may approach the levels that trigger any transfer taxes (which may be substantially lower in many foreign countries), or anyone who wants to make sure that their wishes are given legal effect, would be well advised to seek legal counsel regarding the drafting and execution of their will. • Providing confidential financial advice and other services to our clients; Thun Financial Advisors, Copyright © 2019. Personal data is securely protected on our own internal servers and the technology systems of our trusted technology vendors. By Heela Donsky Walker April 13, 2015. Here are the general situs guidelines for non-resident aliens and their U.S. estate tax exposure: The U.S. situs rules are particularly instructive for expat families that include non-U.S. persons (e.g., an American abroad married to a foreign spouse), or to non-U.S. persons with investments in the United States. There may be extremely negative consequences (e.g., the trust may be separately taxed upon the grantor obtaining residency in the new country), and those consequences will vary depending on where the expat relocates and how long the expat and his or her family remain in their new country of residence. Read Article. While the global income taxation of U.S. citizens gets far greater attention, U.S. transfer taxes apply no matter where a U.S. citizen lives, gifts property, or dies. The solutions or tools of estate planning and wealth management that could be utilized in any given situation may include (but by no means are limited to): Most of these tools are very familiar and frequently utilized by domestic financial planners and estate planning attorneys to assist single and multistate U.S. families. CROSS-BORDER ESTATE PLANNING By: Gideon Rothschild Moses & Singer LLP 405 Lexington Avenue New York, New York 10174 (p ) (212 ) 554-7806 (f ) (212 ) 554-7700 grothschild@mosessinger.com www.mosessinger.com I. • When you engage in email, telephonic, or internet communications with our financial professionals. These treaties are far from uniform, and some treaties eliminate double taxation better than others. The QDOT can be created by the will of the decedent or the QDOT can be elected within 27 months after the decedent’s death by either the surviving spouse or the executor of the decedent’s estate. Determining which country is the decedent/donor’s domicile for transfer tax purposes; Determining in which country the property is deemed to be located. Estate planning cannot be done in a vacuum, and it requires experienced advisors who are knowledgeable about cross-border issues. Info Here > We make it … You may have a serious estate tax issue if you are a US citizen and have used a typical Canadian estate … E state taxes can be a huge liability if you are not properly prepared. 25+ Years of Experience in Wills, Estate Planning, Probate, and Estate Litigation – Top-rated Estate Lawyer Toronto with Cross-border Expertise. Persons Investing in the United States. This is an introductory webinar on the cross border Estate Planning issues facing Australian expatriates living in the United States. If an individual and his or her family have ties across the border, either through residency, citizenship, domicile or the location of an asset, it is important to obtain legal advice from experienced lawyers who can assist in identifying critical issues and preparing a coordinated and effective cross-border estate plan. KeatsConnelly can assist in your cross border tax planning needs. The Tyra Law Firm, LLC Helping our neighbors plan for their family’s future and avoid painful issues. January 20, 2017. When engaging in cross border financial planning, we determine a client’s cross border tax, estate, investment, retirement, and immigration planning needs in light of their particular goals and objectives. The savvy expat or multinational investor also needs Gifting strategies (e.g. These treaties serve several important roles in determining the transfer tax consequences of assets held within the cross-border estate, and may provide a meaningful reduction in the estate taxes by mitigating double taxation and discriminatory tax treatment while allowing for reciprocal administration. This article, then, is an introduction to the international estate planning and investment techniques that sophisticated international and cross-border families utilize. Estate and Tax Planning for Cross-Border Families. Additionally, the countries may provide secondary credits where both countries impose tax because their individual situs laws determine that the (FATCA) create income tax problems that vastly outweigh any estate planning benefits. from the University of Victoria in 2005 and her Masters of Law Degree in International Taxation from New York University in 2006. to understand that the standard U.S. estate plan may no longer protects wealth as intended. Canadian parents are no strangers to losing their kids to the US – some may leave Canada to study in the US never to return, while others are recruited by US companies and sponsored by them for immigration purposes. If you travel back and forth between Canada and the United States, or have any cross-border property, you should ensure that your estate planning and other documents will be valid in both countries to any extent necessary. of the global family change, so will the tax implications and the available solutions. Accordingly, the QDOT can be a critical wealth planning tool for deferring the estate tax until distribution to eventual U.S. citizen heirs when the surviving spouse is a non-U.S. citizen. 529s) to reduce your tax-able estate: Lifetime gifting strategies are a common method for reducing a taxable estate in the United States. The crossborder family may have alternative solutions for providing for the heirs and for the maintenance of the noncitizen spouse that are more practical or even more tax efficient (such as a lifetime gifting strategy, discussed above). Recent estate tax law changes have significantly increased the federal estate and gift tax lifetime exclusion amount to very high thresholds: Accordingly, with a $22.4 million-per-couple exemption, most Americans feel that the estate tax is something that can be ignored. There may be real property in various jurisdictions, separately or jointly titled, personal property also spanning the globe, limited partnership interests (e.g., hedge fund, private equity, or structured products), joint brokerage accounts, individual brokerage accounts, pension funds, defined contribution plans, IRAs, Roth IRAs, and college savings or UTMA/UGMA accounts for the children. INTRODUCTION A. Non-resident alien taxation 1. The treaty will control which treaty country can assess transfer taxes by either: Certain estate tax treaties relieve some of the burden that occurs when a surviving spouse is a non-resident upon the death of the U.S. spouse by increasing the marital deduction for non-resident spouses. cROSS BORDER TRUSTS. Michael Kennedy provides representation and counseling related to all facets of estate planning and business enterprise throughout the United States. Since a non-resident alien is generally not subject to taxation by the United Ultimately, competent financial planning and investment management must recognize and design an investment plan that takes full consideration of the cross-border tax issues. On the other hand, the $11.4 million (2019) lifetime exclusion applies to bequests left to anyone, including a non-citizen spouse. Cheyenne assists clients with tax, estate and trust planning. Info Here > We make it our business to ensure the success of yours. The older treaties (including Australia, Finland, Greece, Ireland, Italy, Japan, Norway, South Africa and Switzerland) follow the more elaborate nature/character situs rules described above for non-resident alien property in the United States. More concerning, it will also subject the foreign, non-resident to a more complicated tax regime – the Foreign Investment in Real Property Tax Act (FIRPTA) – which creates a myriad of tax headaches that are well beyond the scope of this article. The nature, timing, and documentation of the gifts should be done with the assistance of a knowledgeable tax and/or legal professional. These include the treaties between the United States and Austria, Denmark, France, Germany, the Netherlands, and the United Kingdom. INTERNATIONAL ESTATE PLANNING: PLANNING FOR THE CROSS-BORDER FAMILY I. Correctly tailoring that cross-border estate plan will require legal and tax experts with a deeper understanding of the relevant estate/succession/gift/generation-skipping transfer (collectively referred to herein as “transfer”) tax laws in each of the relevant countries that may factor in the distribution of property prior to and upon death. from the University of Victoria in 2005 and her Masters of Law Degree in International Taxation from New York University in 2006. What do … There seems to be some risk in a strategy of multiple wills, as the traditional rule holds that the legal execution of a will extinguishes the validity of any property has situs in both (or even in neither) country. • During the client onboarding and account opening process; Please fill your name, email, check the consent box, and click subscribe. These “permitted” uses may include: Box 68 Toronto, ON M5K 1E7, Toll Free: 888-365-6235Phone: 416-363-3336Fax: 416-363-9570, U.S.-Canada Cross-Border Will and Estate Planning, Cross-Border and Multijurisdictional Estate Matters, Contact Us – Estate and Trust Administration, Multijurisdictional Estate Administration, Multijurisdictional and Cross-Border Will and Estate Planning, Cross-border incapacity planning including use of a power of attorney in U.S. jurisdictions, Cross-border will planning and separate situs wills, Cross-border trust planning including Canadian trusts to hold U.S. situs asset. Even if an expat’s spouse obtains U.S. permanent resident (“green card”) status, gifts and bequests to the non-citizen spouse are not eligible for the unlimited marital deduction. Not unlike the FBAR, this disclosure requirement is designed to help the IRS flag substantial income that may have been mischaracterized by the taxpayer so that the IRS may further investigate and verify the nature and character of the transactions. KeatsConnelly can assist in your cross border tax planning needs. Some experts on the subject of international estate planning suggest multiple “situs” wills, with each will governing the distribution of property in the country for which the will is executed. These topics also include cross-border issues that complicate estate planning: transfer tax rules, treaties, and credits. They also provide the donor with control over the use of the gifted proceeds and flexibility regarding the designation of account beneficiaries. cROSS BORDER TRUSTS. In contrast, common law systems tend to have more concise constitutions and statutes and afford more discretion and interpretive power to the courts when applying the laws to the particular facts and circumstances of particular cases. Naturally, the likelihood that the effectiveness of an American’s existing estate plan will deteriorate will depend not only on where the family relocates, but also on how much the family integrates its wealth/assets/investments into the new country of residence, and for how long the expat family remains (or plans to remain) in the new country of residency. Read Article. Avoid Serious Cross-Border Tax Issues with Effective Estate Planning. Cross-Border Estate Planning. The dangers are not limited to the expat who relocates to a civil law jurisdiction. All references to “personal data” in this policy mean information that could be used to identify an individual, including, but not limited to, name, address, email address, or phone number. In contrast with many succession/heirship-based transfer tax systems abroad, gifts and inheritances in the United States are not taxed to the beneficiary of the gift or bequest, because we have a transfer tax system that taxes these transfers at the source of transfer (i.e., the donor, grantor, or the estate). The utilization of offshore PICs is generally no longer utilized for U.S. clients, because Passive Foreign Investment Company (PFIC) rules and the Foreign Account Tax Compliance Act prior will. Important Disclosure Information • Privacy Policy • California Privacy Notice • Cookie Policy • Business Continuity Statement • GDPR Privacy Policy Notice • Form ADV Part 2A • CRS – Customer Relationship Summary, Thun Financial Advisors, a division of Creative Planning • +1.608.237.1318• Skype: thunfinancial. Upon your request, we will refrain from sending you future communications or information that we provide in the course of our business, and, to the extent permitted by our regulatory obligations to the SEC and/or any other governmental regulatory authority, we will honor your request to remove your personal data from our records. The estate planning team must evaluate the interplay of the relevant transfer tax regimes and the pertinent treaty to determine the transfer tax outcome in consideration of not only the nature of the property and its location, but also the impact of citizenship and domicile on net tax outcomes. The world is shrinking, but your practice can expand and your risk of malpractice decreases if you understand the fundamental principles of cross-border estate planning. Cross-Border Estate Planning Articles. The U.S. husband’s portfolios might be over-weighted in certain asset classes including U.S. stocks or ETFs, while his wife’s portfolio might be overweight bonds, international equities, or non-U.S. ETFs). Ask us a question now! Utilizing wills in international estate planning: Naturally, the will is one of the more common and widely utilized estate planning tools in the United States. Currently, the United States has estate and/or gift tax treaties with sixteen sovereign nations (see Appendix A). For instance, an asset can be non-U.S. situs for gift tax purposes but U.S. situs for estate tax purposes. Qualified domestic trust (QDOT) – an important tool for marriages between a U.S. citizen and a non-citizen spouse: A QDOT is a type of trust designed to afford the surviving spouse the ability to claim use of and income from the decedent spouse’s estate during the lifetime of the surviving spouse, but then the QDOT assets will pass to the original decedent’s heirs upon the death of the surviving spouse. Lifetime gifting to the non-citizen spouse: First, although a citizen can give unlimited assets to a fellow citizen spouse during her lifetime, there is a special limit allowed for tax-free gifts to non-citizen spouses of $155,000 annually (2019). Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. In the United States, there is an objective test for determining whether a person is a U.S. resident for income tax purposes (the “substantial presence” test) that measures the days of the tax year that the taxpayer was physically within the United States. Cross-Border Estate Planning March 23, 2017. Cross-border estate and succession planning. Estate planning can become complicated by the different tax, estate planning and estate administration laws and rules between Canada and the U.S. At present, the recently doubled exemp-tions are slated to sunset in five years (2023), returning to pre-2017 tax reform levels. We specialize in U.S. & Canadian immigration financial strategy. UK levies ‘inheritance tax’ and France ‘succession tax’, but luckily a specific double tax treaty means only succession tax will apply to your estate if you are resident and so deemed domiciled in France. By O ’ Sullivan estate Lawyers LLP risk management needs are other key cross financial! 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