International Tax Planning Helps Foreign Nationals Buy Peace of Mind

In 2012, foreign nationals conducted about 17 percent of real estate transactions in California. They may have engaged the professional assistance of real estate agents and brokers to streamline the purchase process but without thoughtful attention to legal details around international tax planning strategies, they may be putting their U.S. assets at risk of significant gift and estate tax consequences – often to the tune of 40% of the property value or more.

Before making any real estate investments, foreign nationals and their real estate representatives should seek legal international tax planning guidance from experts like the attorneys at KJM LAW Partners. Well versed in international tax law, they can help foreign nationals legally reduce or even completely avoid gift and estate taxes on their American properties.

Without proper planning, non-resident aliens are allowed a mere $60 thousand estate tax exemption and there is no exemption for gifts taxes. In practice, this means that U.S. property that a foreign national passes on to an heir may be subject to the current tax rate (upwards of 40%) on the value of the property that exceeds $60 thousand. Should the owner want to gift the property while they are still alive, every penny of that property’s value will be taxed to the fullest extent of the tax code.

The attorneys at KJM LAW Partners cultivate a deep knowledge of the ever-shifting international tax laws and counsel foreign national clients to avoid undue tax burdens. Here are three major issues to consider when it comes to this kind of strategic planning:

International Tax Treaties

The United States maintains gift and/or estate tax treaties with upwards of 16 countries around the world. The lawyers at KJM LAW Partners stay informed about current laws in each of these nations and they also know how to navigate the circumstances in which the United States has no existing treaties with a client’s home country. They know which countries allow for which kinds of tax exemptions and how best to leverage them for tax relief when it comes to property purchases.

Ownership Structure

When considering purchasing American property as a foreign national, it makes sense to start by determining whether to purchase a property as an individual or through a pre-existing or newly created business. A good attorney can help non-U.S. citizens decide whether to make a purchase as an individual or through a domestic corporation, foreign corporation, limited partnership, joint venture, real estate investment trust or limited liability company. Each offers a different blend of benefits and protection.

Property Use

International tax planning strategies will also shift depending on whether the property is intended as a primary residence, a vacation home, a domicile for family members, an investment or as the location of a business. Each of these circumstances carries a different set of considerations. Relying on an expert attorney can help sort out the best option for your situation. For example, an investment rental property requires foreign nationals to pay state and federal taxes on net income generated from the rental property.  In addition, an income-generating property may be eligible for income tax treaty exemptions with their country of origin.

Buying beyond the borders of your home country offers a wide range of opportunity. Before you purchase a property, look for international tax planning and transaction experts like those at KJM LAW Partners to protect your assets and ensure your peace of mind. Their team excels at counseling foreign national clients in addressing international tax planning issues as they invest in American property – both at the time of purchase and into the future.

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Kevin Moore, Founder of Kevin J. Moore & Associates, is focused in the areas of estate planning, trusts and probate services with additional expertise in both domestic and international business transactions and tax planning and tax controversy representation for individuals and companies.