U.S. Expatriates and The World of Estate Planning

None of us is immune to the challenge of trying to understand the ever-changing tax picture that confronts U.S. Citizens living, working and investing domestically. The nuances and burdens of Alternative Minimum Tax, evolving State tax laws and the estate tax landscape in flux are all but examples of this phenomenon. U.S. expatriates, however, remain subject to all such basic rules while abroad (based upon the principle of taxability founded on U.S. Citizenship), but are also impacted by rules specific to their status as expatriates, in addition to being subject to foreign tax laws. In this way, an already complex tax profile can become thoroughly confusing! Understanding the interact ion of these various tax rules, however, is critical to managing tax exposure and to avoiding double taxation.

But, let us step back for a moment. Where does (or should) tax planning fit in the overall scheme of concerns for a long-term U.S. expatriate or U.S. investor in foreign markets? In this author’s long-held view, an area that is often overlooked by U.S. expatriates and their advisers – in part due to the ever-pressing needs of dual-country, complex income tax compliance requirements – is the wider, and potentially much more significant issue of estate planning in the cross-border context. In a sense, one can see income and estate tax issues as a sub-set of a far broader spectrum of estate planning concerns. Unfortunately, many find themselves bogged down in the annual (and growing) thicket of income tax compliance, while missing the bigger picture.

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