Estate Planning in a Global Economy

Today’s evolving technology and a move toward a more global economy have allowed for investments anywhere in the world. However, that same technology and commerce have done nothing to eliminate the legal borders between nations. Although one can traverse borders with ease, our legal status, our tax obligations and our estates remain firmly planted in the country of origin. As you’ve likely surmised, paying taxes or settling estates has become an expensive, complicated headache for those with a global portfolio.

Last week, SmartBusiness issued a short list of common problems “global citizens” may encounter. For example, it has become increasingly common for a U.S. citizen to own a house in Mexico, but to do so may have involved a “fideicomiso”, which the IRS considers a trust subject to all foreign trust reporting requirements. So, if you purchased a condo in Cancun, you must file both IRS Forms 3520 and 3520-A annually or be subject to significant civil penalties. To make matters worse, after March 18, 2010, if you actually use the condo or let a relative use the condo, the fair rental value for the period of use is subject to U.S. income tax.

What if your spouse is not a U.S. citizen? Spouses are generally able to transfer assets to each other, both during lifetime and at death, without tax consequences. But if our spouse is not a U.S. citizen, things get a little more complicated. You may want to consult a qualified estate planning attorney to avoid unexpected (and unnecessary) gift and estate taxes.

As your global investments increase so too will your need create a sophisticated estate plan that will help to minimize taxes. For more tips about how to stay out of the IRS’s crosshairs, read the entire article on SmartBusiness.

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