Foreign affairs: A primer on international tax and estate planning (Part 1)

Originally published by Bloomberg BNA/Tax Management Estates, Gifts, and Trusts Journal.

It should come as no surprise to tax practitioners that the world is becoming increasingly global. It has become commonplace for advisors to inquire, even in domestic practice, whether and to what extent a client may have foreign connections. Perhaps counter-intuitively, many non-U.S. persons now view the United States as a friendly tax jurisdiction, which has resulted in a boom in foreign investment. Indeed, the European Parliament recently identified the United States as one of the primary emerging 'tax havens'. Global families now look to the United States as a safe place to invest capital, viewing the United States as having well-regulated, secure, and predictable investment markets backed by a modern and stable political system. Moreover, decades of global mobility have resulted in more and more international relationships, and many younger family members have traveled abroad to pursue educational or business opportunities, and have developed ties and broadened family footprints in the process.

As a result, there is an increasing need for domestic estate planning practitioners to have the ability to identify international planning opportunities and to cultivate an awareness of the various pitfalls that exist in the cross-border context. Many of the transfer tax and income tax rules that apply to global families can be thorny, unintuitive, and present traps for the unwary. Indeed, it is quite possible for unexpected tax consequences to occur in a situation in which one would think that a client representation involves purely domestic issues. Moreover, the push towards international financial transparency, with the introduction of the Foreign Account Tax Compliance Act (FATCA) by the United States, and the Common Reporting Standard (CRS) abroad, now requires practitioners to have a working knowledge of the information-exchange consequences and other compliance aspects of estate planning transactions.

This is the first in a series of articles providing a primer on international planning for domestic estate planners and tax practitioners. Click here for the full article.

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