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Spouse is not a citizen
Old 01-27-2012, 11:44 PM   #1
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Spouse is not a citizen

My spouse is not a US citizen nor a resident, and thus not subject to US tax. I am a US citizen. We have always lived in Europe and probably intend to continue to do so. I've been considering ways to maximize any tax benefits given this circumstance, particularly in regards to investment gains on assets going forward and keeping assets out of reach from the litigious US legal system. With the lifetime gift tax exemption raised to US$5 million for 2011 and 2012, several people have suggested I simply gift her up to that amount (let's assume I had exactly that amount). The gift would use up my lifetime exemption for estate and generation-skipping purposes, but the way I see it is is better to have all gains on those assets grow tax-free under her name for the next 20 or 30 years. When she dies, I am told she can pass the money tax-free to our US citizen children or put them in a trust for their benefit.

The only real downside I can come up with is that she would have all our money. Assuming I am fine with that, are there other downsides I am not seeing? Expensive estate attorneys have suggested I take the money and put it in a dynasty trust or something similar under my own name, but that still leaves it in the US tax system and seems a poor second to gifting it to a non-citizen spouse.

Does anyone have any experience ot thoughts with this approach?
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Old 01-28-2012, 05:17 AM   #2
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Hi Robby. This is not a tax forum, and your question needs to be answered by a tax attorney. Suggest you call one. You might try Fairmark web site as well.
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Old 01-28-2012, 08:10 AM   #3
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Another downside if you do that is she dies first, of course.
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Old 01-28-2012, 10:56 AM   #4
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.........and how are you dealing with taxes where you reside? You and your spouse will be subject to local taxes. Where do you live in Europe?
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Old 01-28-2012, 01:42 PM   #5
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I think you can develop a solid plan around that concept. One item that comes to mind, Does the country your wife is a citizen of tax on worldwide income (like the US)? You & your spouse should look into divorce laws as well in your country of residency and also consider banking in a third country. With strategic asset protection plans you want to add additional layers when possible. Good luck!
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Old 01-28-2012, 02:50 PM   #6
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.........and how are you dealing with taxes where you reside? You and your spouse will be subject to local taxes. Where do you live in Europe?
This is critical. Most European countries have some form of capital gains tax, but the way in which they work and the best way to optimise around them are different from one country to the next.
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Old 01-28-2012, 02:55 PM   #7
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Taxes are very complicated. I know a Canadian fellow who works in Italy and is employed by an American company. He has a good accountant.
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Old 01-30-2012, 03:12 PM   #8
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Potential issues with the OP's plan are numerous.

If he gifts the money to his spouse and the money is held in non-US accounts there will be local taxes to deal with.

If the money stays in the US there may well be difficulties in a non-US citizen, non-US resident owning the accounts. Even if that hurdle is overcome the wife would have to file US taxes as a non-resident alien on funds in the US.
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Old 01-30-2012, 03:49 PM   #9
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Potential issues with the OP's plan are numerous.

If he gifts the money to his spouse and the money is held in non-US accounts there will be local taxes to deal with.

If the money stays in the US there may well be difficulties in a non-US citizen, non-US resident owning the accounts. Even if that hurdle is overcome the wife would have to file US taxes as a non-resident alien on funds in the US.

+1 on this post... you might not be saving as much as you think if they are US based investments...

Plus, as mentioned, getting a non-US citizen that is a non-US resident a US based investment account was impossible for all the people that I met overseas...
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Old 01-31-2012, 04:32 PM   #10
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As you are already EU based I would look into residency in Andorra. I was talking to a friend there today and he advises me that the current fee (30,000 Euros) will go up to 400,000 euros in mid March. You will need to buy (ideal if you ski)real estate and the purchase price is offset Euro per Euro against the 400,000 bond requirement. Banks in Andorra are well capitalized, offer investment/brokerage accounts/metals storage and has no income tax.
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