Estate Planning

Expatriates Beware - New Taxes Apply

By Gregory Herman-Giddens

Tired of all the taxes here in the good ole USA and thinking of moving to a tropical isle with little or no taxation?  Besides the emotional and security issues, there tax penalties for leaving the U.S. In addition to providing tax relief to military personnel and veterans, the Heroes Earnings Assistance and Relief Act (HEART Act) of 2008 also contains a couple of provisions regarding expatriate taxation.  Those who renounce their U.S. citizens in an attempt to save on taxes face the following:

• A tax on the net unrealized gain of worldwide assets, due at the time the individual leaves the U.S.  The gain is based on the fair market value on the day before the expiration date, and assumes the assets were sold on that date.  The first $600,000 on gain is exempt.  Recognition of the gain can be deferred until actual sale only if proper security is furnished to the IRS.
• There is a 45% gift/estate tax due on transfers made by an expatriate during his or her lifetime or at death to a U.S. beneficiary.  The beneficiary is liable for payment of the tax.

Full post as published by North Carolina Estate Planning Blog on December 31, 2008 (boomark / email).