International Tax Planning 101

What’s the difference between residency and domicile for tax purposes?

High profile cases such as Prince Harry’s marriage to Meghan Markle made headlines, however, encountering cross-border planning is no longer a rare event. Many non-royal families commonly face complex international tax issues.

The importance of developing an estate plan that not only fulfills the multi-jurisdictional legal requirements but is also tax efficient is complex. Laws will change, and planning strategies can evolve.

Creating the correct estate plan may be challenging under normal circumstances, but mixed nationality families face added challenges, and opportunities.

Residency vs. Domicile:

U.S. citizens are subject to income, estate and gift taxation by virtue of their U.S. citizenship. For non-U.S. citizens, it’s critical to understand how the concept of residency (income taxation) is different from domicile (estate and gift taxation) to determine taxability.

There are two main ways for a non-U.S. citizen to become a U.S. income tax resident. The first way is by becoming a legal permanent resident by obtaining a Green Card. The second is called the “substantial presence test” (a day count test codified by the IRS) After meeting these requirements, U.S. income taxation applies to worldwide income and assets in the same way as to a U.S. citizen.

In Meghan Markles’ case, regardless of where the family ends up settling, one thing is certain: Meghan is still required to file and pay U.S. taxes as an American citizen .

We work with many foreign nationals who are subject to U.S. estate and gift tax taxation. Our team coordinates your clients’ plan in combination with their CPAs, bankers, and attorney’s to ensure that your clients’ estate plan accomplishes their goals.

We know that no two cases are the same and that the complexity of each situation calls for a unique solution. Let us help guide your client to help protect and build their family’s international wealth for their current and their future generations. We are your client’s advocate and use all of our expertise to create and implement the plan that is best for the client and their family.