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Cross-border estates

U.S. Assets, Non-U.S. Families: Begin With Status and Ownership

Income-tax residency and estate-tax domicile are different questions, and cross-border planning has to answer both.

Is citizenship the whole answer?

No. U.S. federal estate-tax residency turns on domicile. The IRS explains that a person can be a U.S. resident for income-tax purposes and still be a nonresident for estate-tax purposes. A visa category, a filing position or a day count does not answer every estate-planning question.

How are the assets classified?

U.S. real estate, shares of U.S. companies, bank deposits and other property may be treated differently. Before evaluating estate-tax consequences, prepare an asset list, identify the legal owner of each asset, and map any companies or trusts involved.

When does Form 706-NA come into play?

Under IRS guidance, the executor of a nonresident non-citizen’s estate generally needs to consider Form 706-NA when the date-of-death value of U.S.-situated assets exceeds US$60,000. Applicable rules, adjustments and treaties can change the result. The US$60,000 figure is a filing threshold, not a calculation of tax owed.

Does a lifetime transfer solve the problem?

A gift, sale, transfer to a trust or contribution to a company can affect income tax, gift tax, estate tax, basis and information reporting at the same time. One potential benefit does not show that a structure fits the family’s wider plan.

What should be coordinated?

Wills, trusts, title documents, beneficiary designations and succession rules in other countries. Cross-border matters often require coordination among U.S. and foreign counsel and tax advisers.

Official resources

General educational information only; an individual plan requires legal and tax analysis.

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