Supports Cross Border Professionals and Families
Today, you can work anywhere, and you can retire at any place in the world. Thanks to globalization and the advancement of technology, more and more people cross the boundaries of countries to have new lifestyles. For instance, I noticed recently that many foreigners like to retire in Japan. Factors such as favorable exchange rates, the high health/long-term care level, and the low crime rate contribute to this trend.
Before moving to another country, you must review your existing estate planning documents to ensure they are up to date and aligned with the laws of the country you are relocating to. It would be best to talk to a U.S. professional to review the impact of moving overseas and others. At the same time, you need to find a local country professional to ensure that your documents will function as intended. Finally, having two professionals meet and coordinate to help you modify your estate plans would be best. Finding an excellent Cross-Border professional was a difficult task in the past. However, the situation is improving.
- A Non-citizen spouse may not utilize the US Unified credit.
A US citizen is always US domicile and can use unified credit wherever they live. The 2023 credit amount is $12.92 million. A non-citizen spouse can utilize the same if they live in the U.S., intending to live in the U.S. forever. When a non-citizen spouse permanently leaves the U.S., they should lose the domicile status, becoming ineligible to use the Unified credit. The person’s gift or estate may be taxable in the U.S. Since the original estate planning documents do not consider this possibility in most cases, you must review the records before moving.
- S. trust or the will conflict with the local laws
Each country’s laws are different and do not match the U.S. rules. As a result, there will be confusion in deciding how to dispose of and distribute the assets. Which laws should be applied? A US court will have difficulty following other country’s laws in its probate. The same is true for the local government. A U.S. living trust may be taxable in a foreign country as a stand-alone entity under the local country’s laws.
- Local inheritance tax and gift tax rates may be ominous.
For instance, Japan’s highest inheritance tax rate is 55%, whereas the U.S.’s is 40%. Coupled with the point described below, the drafter of your estate planning documents did not anticipate the magnitude of the rate difference.
- Local inheritance and gift tax exemptions can be significantly lower.
Japan’s base exemption amount of the inheritance is 30 million yen. This amounts to approximately $200,000 in U.S. dollars. The number of legal heirs increases the exemption by 6 million yen ($40,000). Many residents in Japan end up paying the inheritance tax. There is no Unified credit system, and the annual gift tax exclusion amount is 1,100,000 yen ($7,333).
Never assume that your original estate planning documents will work in a local country, and be prepared to adjust the documents.
CDH provides tax return preparation and tax consulting services for Cross-Border individuals living in the United States or foreign countries and strives daily to solve and explain various problems and questions of these people. In addition, the issues these people face are complex and wide-ranging, including the tax laws of your country and the United States, immigration law, life insurance, and retirement rules. This article makes complex tax laws and regulations easy to understand, which is just the point. Therefore, there are many exceptions. There is also a risk that the rules have already changed by reading them. Don’t hesitate to contact us from the following website for the latest practices. Also, consult with tax and legal affairs experts if you take action.
CDH Resources: www.cdhcpa.com. We provide one-hour paid consultation sessions online. https://outlook.office365.com/owa/calendar/[email protected]/bookings/ If you can read Japanese, visit https://www.cdhcpa.com/ja/cross-border-individual-tax/. You can access them all on the page. YouTube, Facebook, free online consultations, estate, permanent resident waiver, exit tax, Form 1040, tax simulation, overseas asset reporting, other sectoral online question forms, and monthly newsletter sign-ups. For more information-packed past articles, check out https://www.cdhcpa.com/ja/news/. Please feel free to use it. You can email me at [email protected]