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Post by chang on Jul 13, 2021 0:32:14 GMT
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Post by jongaltiii on Jul 13, 2021 1:28:54 GMT
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Post by chang on Jul 13, 2021 1:40:12 GMT
That appears to be for the estates of non-citizens/residents. This is the other way around. I am a citizen, wondering about potential tax liability incurred by my non-citizen heirs.
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Post by anitya on Jul 13, 2021 1:56:19 GMT
chang, It would be great if you could please include here the link to the M* thread you might create on the subject. Thanks.
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Post by anitya on Jul 13, 2021 1:58:02 GMT
Estate tax, if any, is always incurred by your estate - so, theoretically it is not incurred by the beneficiaries/ heirs.
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Post by chang on Jul 13, 2021 2:05:06 GMT
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Post by fishingrod on Jul 13, 2021 2:12:45 GMT
Really no info here either. Figured I would paste anyway.
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Post by fishingrod on Jul 13, 2021 2:22:28 GMT
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Post by jongaltiii on Jul 13, 2021 2:23:21 GMT
My understanding is that the estate tax is a tax on the transfer of assets not on the recipient of assets. Everyone (including expatriates) can receive inheritances from US citizens tax free. If a non-citizen inherits assets from a US citizen's estate, they do not pay an estate tax. This is separate from their own "income" tax. However, if there is a mistake made by the executor or a mistake made in the US citizens estate, the non-citizen heirs are subject to or responsible for paying. The 11.58 or 11.7 exclusion applies to non citizens the same as it does to US citizens if being transferred to them by a US citizen. Here you go: probatestars.com/wp-content/uploads/2020/11/2021-NRA-Estate-and-Gift-Tax-Chart.pdf
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Post by chang on Jul 13, 2021 3:53:29 GMT
Really no info here either. Figured I would paste anyway.
Actually that link implies in several places that foreign beneficiaries of a trust could create adverse tax implications. It suggests to me not to set up a trust. However, every point seems to end up with "to be certain you'd better consult one of our lawyers, who can relieve you of your money concerns."
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Post by yogibearbull on Jul 13, 2021 11:46:37 GMT
It is a good idea to consult an estate attorney in the US. Going rate for living trusts is $1,500-2,500 and the required trust here may cost something similar.
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Post by chang on Jul 13, 2021 12:17:39 GMT
Yogi I don't see what a trust offers. My situation is extremely simple: 1 beneficiary (100%) and 1 secondary beneficiary. There is no trustee other than me, nor is any needed.
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Post by liftlock on Jul 13, 2021 14:28:08 GMT
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Post by anitya on Jul 13, 2021 17:42:07 GMT
Thanks. When you read articles, that are not peer reviewed, on a subject in which you are a subject matter specialist, quite often you realize how misleading or misinformed the author is. This applies even more for tax articles. If we are lucky, we get in those articles some citations to tax laws and we can google those laws to see if the author interpreted those laws reasonably. If two articles by two separate authors say the same thing, that give me more comfort, than one article with no citations.
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Post by anitya on Jul 13, 2021 18:36:48 GMT
My understanding is that the estate tax is a tax on the transfer of assets not on the recipient of assets. Everyone (including expatriates) can receive inheritances from US citizens tax free. If a non-citizen inherits assets from a US citizen's estate, they do not pay an estate tax. This is separate from their own "income" tax. However, if there is a mistake made by the executor or a mistake made in the US citizens estate, the non-citizen heirs are subject to or responsible for paying. The 11.58 or 11.7 exclusion applies to non citizens the same as it does to US citizens if being transferred to them by a US citizen. Here you go: probatestars.com/wp-content/uploads/2020/11/2021-NRA-Estate-and-Gift-Tax-Chart.pdfIf the info in the table at the link is accurate, that is good news for Chang. Hopefully, his state law follows. (I find it interesting that a non-citizen spouse is treated different from a citizen spouse but for heirs no impact of citizenship.) The $11+M exclusion sunsets after 2025 and becomes half, unless the law is changed. Asset values keep going up, causing more estates to be potentially subject to tax.
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Post by yogibearbull on Jul 13, 2021 19:47:01 GMT
Good point by anitya on consideration of both federal and state estate issues. So, check your state estate exemption levels and rules. Right now the federal estate exemption is very high but that will be halved in 2025, as also noted. Recent portability of unused estate exemption by surviving spouse also simplifies things, but many states don't follow federal portability rule. Joint ownership, POD/TOD, beneficiary designations (primary, contingent/secondary) do simplify estate transfers in a certain way (immediate to primary A, B, C, etc; later, immediate to contingent D, E, F, etc) and their tax implications can be determined. Trust is the only way to modify timing, transfer and taxation of assets. If the estate now, and that of the spouse later, will be well within the federal estate exemption, then no need for trusts, but otherwise, 40% federal estate tax and additional state estate taxes on applicable amount may take huge tax bites. Citizen/residency status of person and beneficiaries further complicate an already complex situation.
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Post by paulr888 on Jul 14, 2021 5:21:57 GMT
Chang ... Here in US, a trust avoids probate court which is expensive, time consuming and emotionally draining during a period of grieving for death of person. I have a trust that is woefully outdated and needs to be re-done. I am Settlor and first Trustee but I need to assign successor Trustees. I also have a Financial POA and a Medical POA with advance health care directives and who will make medical decisions.
How did you come to the conclusion on what documents you need in your situation? Have you confirmed with a local trust attorney?
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Post by chang on Jul 14, 2021 5:51:52 GMT
Chang ... Here in US, a trust avoids probate court which is expensive, time consuming and emotionally draining during a period of grieving for death of person. I have a trust that is woefully outdated and needs to be re-done. I am Settlor and first Trustee but I need to assign successor Trustees. I also have a Financial POA and a Medical POA with advance health care directives and who will make medical decisions. How did you come to the conclusion on what documents you need in your situation? Have you confirmed with a local trust attorney? Paul: No I haven't consulted with an attorney. Next time I'm home in the US I will do so. However, as mentioned, my situation is simple: 100% to my wife, and if we should happen to go together, 100% to my stepson. That's it. And that's how the beneficiaries read on my accounts. So .... what else is needed?
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Post by chang on Jul 14, 2021 5:55:53 GMT
Good point by anitya on consideration of both federal and state estate issues. So, check your state estate exemption levels and rules. Right now the federal estate exemption is very high but that will be halved in 2025, as also noted.I have no state residency (and pay no state income tax) so that shouldn't be an issue. I keep a US address, but I'd be surprised if any state would use that by itself to try and tax my estate. (Then again,.....) Re the 2nd comment: This is news to me. At the risk of stating the obvious, there's a big difference between $12 million and $6 million. A 40% tax is not even remotely up for discussion, so if and when the exemption drops, I will make sure that my accounts do not exceed it.
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Post by paulr888 on Jul 14, 2021 6:18:53 GMT
I don't know what else is needed in your situation. But you definitely want to avoid probate and I don't know whether you are set up to do that. The attorney will fix any deficiencies. Good luck.
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Post by anitya on Jul 14, 2021 8:08:28 GMT
I think at this time Chang owns only financial assets in the form of accounts at financial institutions, which I am told avoid probate if you have beneficiaries listed on them.
I think he plans to keep an eye on the Estate tax exemption amount and the halving in 2025; if not fixed by legislature, he will do something about it when he gets closer to that time.
In the meantime, as suggested by other members, I think he is better off looking into whether a US state is not interested in his estate. Norbert may have an insight on the state tax matter because he also lives outside the US but a US citizen.
I also wonder whether the financial institution does not withhold state income taxes from IRA RMDs based on the address on the IRA account.
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Post by chang on Jul 14, 2021 8:37:15 GMT
Thanks for reminding me that Norbert is also an expat. Norbert have you looked into any potential state liabilities based on keeping a US address (or previous state tax returns filed)?
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Post by yogibearbull on Jul 14, 2021 12:15:03 GMT
chang, I will send you a PM with some numbers to look at.
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Post by Chahta on Jul 20, 2021 23:35:21 GMT
IRAs work with beneficiaries. Your taxable account does not. You will need at least a will or preferably a trust. Pretty sure gifting only works while you are living. Could be a mess with foreign beneficiary and tax implications for IRAs. The state where held and feds will want their cut. Once Vanguard knows you have expired and they will, your accounts will be frozen until proof of death is given and all “Ts” are crossed.
I would definitely talk to Vanguard and stealthily find out how it works with them.
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Post by chang on Jul 21, 2021 0:56:42 GMT
IRAs work with beneficiaries. Your taxable account does not. You will need at least a will or preferably a trust. Pretty sure gifting only works while you are living. Could be a mess with foreign beneficiary and tax implications for IRAs. The state where held and feds will want their cut. Once Vanguard knows you have expired and they will, your accounts will be frozen until proof of death is given and all “Ts” are crossed. I would definitely talk to Vanguard and stealthily find out how it works with them. I don't think so. My taxable accounts (Fido amd VG) do have beneficiary assignments, which I have completed. I don't think I need a trust. As long as I am within the estate exemption, I don't think any taxes will be due. My beneficiaries will probably liquidate everything and transfer the funds abroad.
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bf22
Commander
Posts: 135
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Post by bf22 on Jul 21, 2021 4:14:16 GMT
IRAs work with beneficiaries. Your taxable account does not. You will need at least a will or preferably a trust. Pretty sure gifting only works while you are living. Could be a mess with foreign beneficiary and tax implications for IRAs. The state where held and feds will want their cut. Once Vanguard knows you have expired and they will, your accounts will be frozen until proof of death is given and all “Ts” are crossed. I would definitely talk to Vanguard and stealthily find out how it works with them. I don't think so. My taxable accounts (Fido amd VG) do have beneficiary assignments, which I have completed. I don't think I need a trust. As long as I am within the estate exemption, I don't think any taxes will be due. My beneficiaries will probably liquidate everything and transfer the funds abroad. Not sure whether this applies to you. The marital exemptions are different or may not even apply if the surviving spouse is a non citizen (e.g., a resident alien).
A trust can fix that.
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Post by Norbert on Jul 21, 2021 4:40:28 GMT
Thanks for reminding me that Norbert is also an expat. Norbert have you looked into any potential state liabilities based on keeping a US address (or previous state tax returns filed)? Yes. I keep a US address in Washington state. There is no income tax or inheritance tax there, but there is an estate tax. Anitya is right that you should look at this for your state of residence. The estate tax threshold is fairly low in Washington, around $2M, 10%+ tax on property and financial holdings above that level. N.
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Post by chang on Jul 21, 2021 7:30:47 GMT
Thanks for reminding me that Norbert is also an expat. Norbert have you looked into any potential state liabilities based on keeping a US address (or previous state tax returns filed)? Yes. I keep a US address in Washington state. There is no income tax or inheritance tax there, but there is an estate tax. Anitya is right that you should look at this for your state of residence. The estate tax threshold is fairly low in Washington, around $2M, 10%+ tax on property and financial holdings above that level. N. Thanks, next time I am home in the US I plan to schedule time with my family's attorney (experienced in trusts and stuff) to go over all these issues. And make out a will, too ... yeah, I know, dumb not to have one, even though I think my après-vie situation should be very straightforward.
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Post by yogibearbull on Jul 21, 2021 11:41:24 GMT
A special QTIP trust (it is different from a living trust but it can be incorporated within a living trust) allows unlimited marital deduction and also buys time for non-citizen wife to become US citizen/resident.
Under QTIP, wife can only draw income, and limited principal if needed. Whether the wife becomes US citizen/resident by the time of her passing will determine her estate tax situation.
Estate planning and trusts don't affect your estate tax situation but affect wife's estate tax situation if her assets remain in the US.
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Post by retiredat48 on Jul 21, 2021 20:32:30 GMT
IRAs work with beneficiaries. Your taxable account does not. You will need at least a will or preferably a trust. Pretty sure gifting only works while you are living. Could be a mess with foreign beneficiary and tax implications for IRAs. The state where held and feds will want their cut. Once Vanguard knows you have expired and they will, your accounts will be frozen until proof of death is given and all “Ts” are crossed. I would definitely talk to Vanguard and stealthily find out how it works with them. I don't think so. My taxable accounts (Fido amd VG) do have beneficiary assignments, which I have completed. I don't think I need a trust. As long as I am within the estate exemption, I don't think any taxes will be due. My beneficiaries will probably liquidate everything and transfer the funds abroad. I consider this is correct...stocks and stock funds now have "transfer on death", TOD designations now permitted, which act like wills. I used these. Real Estate also has what are called "Lady Bird Trusts" (1-2 pages long) that permit designating a beneficiary. I used one. The goal is to have zero assets pass under your will. The will should be a catch-all backup. If something passes by my will, I will have made an error...unless my estate received legal claim money after my death. R48
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