U.S. Estate Taxes For Non Residents - If You Own Assets in the U.S., You May Have To Pay
Written by James Baker on August 21st 2018
It's not always easy to talk about estate tax planning with clients. It is an emotional topic and even more difficult when health is already an issue. But the reality is, if you are a Non Resident of the U.S. and you have assets located in the U.S., you could have a huge estate tax bill to pay.

 
I am working on a non resident estate tax return right now, and realized that there is very little information and advice online about this topic. At the same time, I am realizing that almost all of the clients I work with will be affected by this tax. The one sentence summary of the non resident estate tax is this - if you are a non resident, you get a $60,000 exemption for all of your U.S. assets (including real estate).

The tax rate goes all the way up to 40%. The worst part is the tax isn't calculated on any gains or losses, and is more about cash flow and the estate debts and expenses. It doesn't get much worse then having a new client come to me discuss the passing of the family member, and I have to tell the client they need to take out a mortgage on the property that was paid off, just to pay estate taxes. Ouch.

We work with non resident investors almost exclusively and we always factor estate taxes into our planning, but not everyone does. There are ways to plan so that there is not a huge estate or transfer tax bill when moving assets. I'll list a couple of ideas below

  - Holding assets in a corporation. Right now there is no estate tax on corporate stock. If you own a home that is paid off and want to transfer it to a loved one, consider contributing it to a Corporation, paying tax on the gain and gifting the stock. It's not that straight forward, but that is the basic idea.

  - Leverage your estate tax risk with life insurance. If you own a home and do not plan on gifting it, consider getting a life insurance policy that will pay out enough money to cover the estate taxes. It can be good hedge in certain situations.

  - Sell your U.S. property before you die. Estate taxes don't factor in the cost basis of your property, and for those with significant assets abroad, the expenses to be taken in the U.S. can be severely diluted. This can save money by being able to take more expenses and using better tax rates.

So if you or your clients have assets in the U.S. but are unsure if you have estate tax exposure, I encourage you to set up a strategy session with me BY CLICKING HERE.

James Baker, CPA

Jim Baker helps international investors and businesses lower their US income tax bill with custom tax plans. We help our clients through the whole process and work hard to make things super simple to understand.
If you're interested in lowering your tax bill and ensuring that your assets are safe from the IRS, then definitely reach out and request a free strategy session today - meetme.so/jbaker.
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