What You Need to Know When You Move Transnationally
By Manya Deva Natan, Esq
Published on February 28, 2014
What You Need to Know When You Move Transnationally You are on a spectacular vacation, basking on the stunning beaches of Thailand. After eating yet another delicious, decadent Thai dish, you and your husband decide to purchase a vacation home so you can come back and enjoy it as often as possible. You open a Thai bank account so that you can promptly wire funds from your U.S. bank account and purchase a house for you and your family. You dream of sipping margaritas while relaxing on the front balcony of your new beach-front home.
Did you remember the IRS?
You were born and raised in the Netherlands. You received an incredible job opportunity to move to the United States and work in an internationally-renowned company using your hard-earned expertise. You and your wife moved to the United States and have been happily living and working in the U.S. for the last twenty years. You purchase a home in California and then later purchase a second home in Colorado as a place to get away from the hustle-and-bustle of the sunshine state. Your adult children remain in the Netherlands where they are both successfully employed and have families of their own. They come to visit you whenever their schedules permit, and you also go to visit them and enjoy your grandchildren whenever you can get away.
As part of your retirement planning, you decide to have a Revocable Trust prepared to ensure that your assets are appropriately distributed after you pass. You are resolute in your desire for your two children to serve as Successor Co-Trustees of your estate.
What have you done to ensure that your Trust is not subject to foreign trust implications?
You were born and raised in Spain. You decided to come to California for college and then remained for business school. After receiving your MBA, you began work at a prestigious tech company. You worked there for a number of years before starting your own company. After many long hours of effort, your company has become a huge success. All of your blood relatives are in Spain. You visit Spain occasionally, but since you have a family of your own in addition to your own business, you are rarely in a position to travel to your home country. Your parents recently passed away, leaving a number of parcels of land to you and your siblings. Your siblings have said that they will take care of the estate administration in Spain. You only need to be available to sign documents as needed. You trust your siblings and are comfortable with them handling the distribution of the estate, ensuring that it is in keeping with Spanish law. With your American citizenship pending, however, you want to make sure that you handle your soon-to-be inheritance in accordance with U.S. law.
Have you consulted with an international estate attorney and/or and international CPA/tax attorney to determine whether you will owe any taxes or filings in the U.S. following the receipt of your Spanish assets?
What you don’t know really can hurt you, and hurt badly. Each of the stories outlined above share one thing in common: International Estate Issues. International estates require an even greater degree of care and due diligence than their domestic counterparts to ensure that all assets are properly handled. Unlike the domestic tax system, the United States government regulation of foreign bank accounts is more closely tied to the criminal division of the IRS.
What this means for you is that the penalties are exponentially higher and more severe than for mistakes made involving domestic assets. The failure to disclose foreign assets translates into harsh financial penalties and even criminal prosecution.
For example, the penalty for failing to file an FBAR for each non-willful violation is $10,000. If willful, the penalty is the greater of $100,000 or fifty (50%) percent of the amount in the account for each violation. Each year you don’t file is a separate violation. (An FBAR is a single piece of paper required for all U.S. persons with foreign bank accounts exceeding $10,000 at any time during the calendar year.)
This can seem rather brutish for forgetting to file a single piece of paper. Nevertheless, the United States government has been resolute in its demand for the full disclosure of any overseas monies held by a U.S. Citizen.
Estates that are in need of International Estate Planning expertise can be as simple as having non-U.S. citizens serve as Successor Trustees to complex multi-million dollar transactions setting up or dissolving offshore trusts for the purposes of income generation and asset protection.
If you are a U.S. Person, do you owe taxes on property you own in a foreign jurisdiction? How did you purchase the property? Did you open a foreign bank account to purchase the property? If you pass on, do your family members have a right to the property? Under what jurisdiction will they have a claim to the property? If you have a U.S.-based trust, can the foreign property be owned by your Revocable Trust? Should it be owned by your Revocable Trust? Should it be owned by an Irrevocable Trust? Is any trust valid under the laws of the country where you own the property?
These are just a handful of the questions that can arise when any U.S. Citizen or Permanent Resident either owns assets or has familial involvements with foreign jurisdictions.
It is always better to be safe than sorry. If you know anyone who may need international estate expertise, advise them to consult with an international estate attorney to make sure that they do not end up losing the assets they and their families have worked a lifetime to build.
Manya Deva Natan, Esq. is an estate planning attorney with sub-specialties in international estates and real estate. She counsels individuals, couples, and families on how to best organize, allocate, and distribute their estates to maximize their benefits while minimizing tax liability.
Ms. Natan creates and implements sophisticated plans for high net-worth individuals, while also offering straightforward probate avoidance work for families in need of a revocable trust and supporting legal documents.
Ms. Natan received her law degree from Stanford University and her Master’s Degree from Columbia University’s School of International and Public Affairs. In between receiving her graduate degrees, she lived and worked in Bolivia assisting with small business development.
She now brings her international background and expertise to her estate planning practice and assists with complex estates whenever money and people move transnationally. To learn more about her practice, please visit www.ssslegalconsultancy.com
Article picture: onderortel via Pixabay