Considering Expatriation? Read Now!
Story added: 29/05/2008

If you have ever considered giving up your green card or renouncing your US citizenship, please read the following ASAP:

After many years of debating the issues, Congress has passed a law that will tax the assets of those leaving the US for good. This includes US citizens renouncing citizenship as well as long term permanent residents – which is defined as an individual who has held a green card for more than 8 years. Any portion of a year is counted as a full year in applying this test! Some of the highlights include:

• Exit tax on all unrealized gains, at current market rates – including those held in retirement plans
• Tax is triggered only for individuals with net worth of $2 million or more, or who owed $124,000 in income tax on average over the past 5 years (indexed for inflation)
• The first $600,000 in gains are not subject to the tax
• If after expatriation, an ex-US person makes gifts or leaves their estate back to US heirs – the US person receiving the gift will pay tax at the US gift tax rate in effect at the time of gift / inheritance (currently 45%)

The current rules say that such tax exiles must file US tax returns for a 10 year period following their expatriation and pay tax on all actual US source income during that period. However, if one was patient and waited out the 10 years, many assets could then be liquidated without incurring US tax, as well as gift and estate tax savings if US heirs are involved.

Certainly we cannot offer any guarantee that this law will be passed, though it is widely expected to do so. Similarly, the timing for the new law to take effect is unknown, though it is expected to occur sooner rather than later.

If this is something you have considered now or in the past – the time is here to revisit it while you may still have a choice of the rules affecting your situation. If you would like to discuss in more detail, please feel free to contact us.

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