Non-Citizen Gifting Gotchas – Governmental Gives and Takes

Wealthy non-citizens who live in the U.S., but who are not certain whether they are subject to U.S. gift and estate taxes, can (in some cases) take advantage of the new law to hedge their gifting.

Often, American citizens aren’t the only ones subject to American taxes. So, it isn’t only American citizens who have something to gain from the recent tax law changes. We’ve all been given a generous tax windfall for 2011 and 2012 when it comes to gift and estate taxes, and, according to a recent article in Private Wealth, it may be an especially windfall for wealthy non-citizens.

For a wealthy non-citizen residing in the U.S., the problem is their possible tax liabilities lie within a hazy zone between a “domiciled resident” and a “non-domiciled resident.” The initial guidelines for determining domicile status are (1) they must reside in the U.S. and (2) they intend to reside in the U.S. indefinitely. While the fact of residence is fairly easily ascertained, it is the “intent” issue where a number of factors come into play (like residence size, organizational memberships, and the location of burial plots). Oftentimes, it is difficult to predict what the IRS will conclude. Accordingly, you might never know with certainty whether you are or are not a domiciled resident.

The difference in taxes is vast. A domiciled resident is subject to U.S. gift and estate taxes on all assets, whereas a non-domiciled resident is only subject to taxes on U.S.-based assets (physical ones, usually, such as art). If you know you are a non-domiciled resident, then you can transfer massive amounts of wealth without U.S taxation – and it might be wise to do so. However, if it is later determined that you were, in the opinion of the IRS, domiciled, then you’ll be subject to tax, interest, and possible penalties. That wouldn’t be a pleasant surprise, to say the least.

The idea, then, is to play it safe. Hedge your bets by transferring assets as though you were domiciled. You’ll still be transferring assets, but you’ll be safer doing so. The sooner the better for domiciled, non-domiciled, and citizen alike, however, since we’re only guaranteed the present exemptions until the end of 2012.

The original article goes into far more depth, and certainly more information can be found there. Nevertheless, if this issue may touch or concern you, then you should meet with counsel to assess your potential liability… and the best way to hedge your bets.

Reference: Private Wealth (July 2011) “Foreigners and the Gift Tax

Like this article?

Share on facebook
Share on Facebook
Share on twitter
Share on Twitter
Share on linkedin
Share on Linkdin
Share on pinterest
Share on Pinterest

Leave a comment


We have a LOT more where that came from!

We hate spam too. We will never share or sell your information.

Call Now ButtonCall Us Now https://jsfiddle.net/7h5246b8/

Request a free consultation

We hate spam too. We will never share or sell your information.

We've been putting together as many resources as possible so that we can continue to help:

  • If you’re a current client with a signing appointment or a prospective client with a consultation and would prefer that meeting take place in your own home, we can accomplish that with a little bit of pre-planning on our part and with the addition of a laptop, smartphone, tablet or other computer in your home to facilitate this virtual meeting. For those of you that need to sign legal documents, that too can be accomplished with the use of a webcam (FaceTime etc.), so that we can witness and electronically notarize all of your important legal documents.
  • We launched the rollout of our on-demand webinar early so that new clients and our allied professionals can view the important component parts of ‘an estate plan that works’ at their convenience.  That is available on our website.
  • Live video workshops will be produced as quickly as possible and certainly ahead of our previous schedule; we will keep you posted as these events become available. Given the ‘boutique’ nature of the firm, we rarely have more than ten people in our office including team members at any one time. During this period of ‘social distancing,’ we promise to have no more than 8 people at any time.   This allows us to comply with the Governor’s directive to limit in-person gatherings.
  • The best way to communicate with us is still by phone during regular office hours of 8:30 to 5:00, Monday through Friday, or, you can email any of our team members (that is, their first name followed by @zarembalaw.com).  We will respond to these emails as quickly as possible.
  • Please continue to follow the directives of our local, state, and federal agencies. For your health and in consideration of our team who is assisting you, if you’ve scheduled an office appointment or planned to drop off paperwork and are experiencing a fever, dry cough, or shortness of breath, please contact your primary care doctor for guidance and then our office to reschedule.

Thank you, Walt and the Zaremba Team

Update to our Process

The unprecedented coronavirus pandemic has taken our entire country by surprise. We understand how difficult this time is for America’s businesses and families.  However, we believe it is vitally important that we make every effort possible to continue to offer solutions that avoid disrupting our important partnership with you, your family and friends.  As you know, estate planning is not something that should wait for a more convenient time, therefore the opportunity to address your important goals both during and after this crisis should not wait.  To that end, we have added the option of a ‘virtual consultation’ to our office process.  You will now have a choice of either meeting with us in our office or in the comfort of your own home.