Foreign Citizens Are Looking For Preferable Tax Rates in the U.S.

With the increase in global wealth, foreign taxpayers are looking to find the most preferential tax rates and are examining other methods that could help decrease their overall tax liability. Many of these foreign citizens are looking towards to the United States because of our generous estate tax exemption. These individuals are also taking advantage of our gift tax rules, which allow a foreign national to gift an unlimited amount of property to a U.S. citizen. This rule has only one limitation. A foreign national cannot transfer a piece of property that is within the United States to a citizen of this country.

A foreign citizen might be able to avoid this limitation by placing the property within an off-shore company and gifting the interest he owns in the company to several members of his family. The gifted interest is generally non-taxable. Foreigner taxpayers have also come across several difficulties in attempting to transfer wealth or gift property to U.S. citizens. These problems arise from not having a through understanding of the tax code. For example, the tax code contains an exit tax for individuals who wish to leave the United States, which surprises several citizens who wish to leave the United States. The tax code also contains specific disclosure requirements for these foreign taxpayers. Therefore, it is important for these individuals to plan ahead and ensure that they understand the possible consequences of their financial actions. 

See Elizabeth Ody, Tax Hunt Pushes Global Rich to Offshore Trusts for U.S. Children, Bloomberg.com, Mar. 5, 2012.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.