fbpx

Educational Materials

for U.S. Expats

Gifting and Cross-Border Estate Planning

Oct 16, 2019 | Investment Concepts

One of the more complicated aspects of financial planning and wealth management for Americans outside of the United States is managing the distribution of their estates so as to minimize estate and inheritance taxes. While the United States currently has a relatively large Estate Tax exemption, many foreign countries have much smaller exemptions or apply the tax on the inheritor rather than the estate of the person who died (decedent).  

Consequently, one key strategy for management of the Estate is to gift assets to heirs. The United States Estate and Gift Tax places certain restrictions on these gifts. First, one citizen spouse may give to another citizen spouse an unlimited amount; however, if a gift is made to a non-citizen spouse in a country where the United States doesn’t have an estate tax treaty (click here for the list of countries), if such a gift exceeds $150,000 it must be reported. Likewise, gifts to non-spouses must be reported if they exceed $15,000.

These gift amounts are frequently misunderstood: these “limits” aren’t really limits. For instance, one can give more than $15,000 per year, but should they give more than $15,000, you will need to file a federal gift tax return form (Form 709). This amount would then be deducted from your total estate tax exemption. This exemption is currently quite significant: approximately $11.2 million for an individual; moreover, gifts given under current US estate tax exemptions would likely be grandfathered in should the current levels not be renewed when they are due to expire in 2025.  

Consequently, whenever possible gifting should be used to move assets out of an estate in those countries where inheritance or estate tax thresholds are much lower. This is frequently a popular technique in many countries. For instance, gifts in usufruct are often popular in Western Europe. “A Gift in Usufruct” generally involves giving heirs the ownership of a property while the original owners continue to own it. Such gifts are generally not considered “completed” gifts in the U.S. context, but for families with estates below the $11.2 million dollar exemption amount, the local considerations may take precedence over the U.S. ones. 

In all cases, however, before considering these sorts of estate management strategies, local tax and legal counsel should be consulted and such gifts should also be part of a larger estate planning strategy both to maximize their effectiveness and ensure compliance.

The preceding article is for informational purposes only and does not constitute legal or tax advice.  Estate tax rules and regulations are frequently subject to change and individuals should consult legal and tax advisors before implementing any of these strategies.

Walkner Condon Financial Advisors is a registered investment advisor with the SEC and the opinions expressed by Walkner Condon Financial Advisors and its advisors in this piece are their own. Registration with the SEC does not imply a certain level of skill or training. All statements and opinions expressed are based upon information considered reliable although it should not be relied upon as such. Any statements or opinions are subject to change without notice.

Information presented in this piece is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed.

Information in this piece does not take into account your specific situation or objectives and is not intended as recommendations appropriate for any individual. Readers are encouraged to seek advice from a qualified tax, legal, or investment adviser to determine whether any information presented may be suitable for their specific situation. Past performance is not indicative of future performance.