If you're wealthy and planning to apply for resident alien status, some experts would tell you to think twice about the estate and income tax implications of your new domicile. You may discover that your assets are taxed at a higher rate in the United States than in your native country. In fact, the United States imposes federal estate taxes on property that a taxpayer holds anywhere in the world, not just in the United States. The question of estate planning is very complex and even more complicated when you own property in more than one country.
Your Estate Will Be Taxed on All Assets, Even Those in Another Country
Whether you're a U.S. citizen or resident alien, the federal government is going to be basing your taxes on your entire estate, no matter where it is located. In fact, your estate will have to pay the same rate as if you were a U.S. citizen. If your spouse is not a U.S. citizen, your ability to pass property tax free to your spouse will be substantially restricted.
You Won't Escape These Taxes Even if you’re Not a Permanent Resident
If you die and you're not a permanent resident, you'll still have to pay taxes on any assets that you have in the United States at the time of your death. This means that your estate will include that Manhattan condo you only visit during Christmas. For purposes of estate and gift tax laws, a nonresident is a person who is not domiciled in the United States But the question of residence and domicile is very complicated. What counts is that if you are a nonresident alien, only your property within the United States is taxed at your death. But if you are domiciled in the United States, everything you own everywhere will be included in your gross estate for U.S. tax purposes.
Questions to Consider Before Applying for Permanent Residency
Where Do Your Assets "Live," and does it Matter?
If you aren't a resident alien and can avoid becoming a resident for tax purposes, you need to pay attention to where your money "lives." U.S. corporate stock "lives" in the United States, but foreign stock "lives" in the foreign country, even if you keep it in your Wall Street safe. If you keep cash in the same safe, however, the IRS can pursue it upon your death.
Would You Ever Return to Your Native Country to Live?
A federal transfer tax may be imposed on property transfers to U.S. persons from long-term U.S. residents who terminated their U.S. residency, or from their estates.
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