Tag Archives: French inheritance tax

U.S. International Inheritance Tax Plan for the British, French, Dutch, Germans and Canadians

International inheritance tax plan for the United Kingdom citizen, the French citizen, Dutch citizen, German citizen and Canadian citizen is unique.   Citizens of these countries have numerous tax treaties allowing for unique tax treaty planning. 

The “trick” is to balance the inheritance tax law in the U.K., France, the Netherlands and Germany with both the U.S. estate tax laws and income tax laws. The U.S. laws are different from the laws in other countries. 

Canada does not have an estate tax or an inheritance tax.  Thus, the “trick” is to balance the U.S. income tax laws with the Canadian income tax laws using the income tax treaty.

While some European countries do not recognize trusts, these countries do either because of their local laws or European treaties.   The United States has many types of trusts.  There is almost always a trust type that will reduce the inheritance tax and or the U.S. estate tax.

One of the special rules that the U.S. has for estate planning, is the use of a “private annuity”.

Here is an example.    Ian owns property in the U.S. and the U.K.  He is a U.K. citizen and resident.   Part of his assets are in the U.S. stock market.     Ian decided to create a trust in the state of Nevada.  Nevada trust law allows Ian to direct the trust investment and direct distributions to any person other than himself.

Ian settles the trust with an initial gift of $2,000,000,  He wants to limit his gifts (for both U.K. and U.S. tax reasons).    He decided to places an additional $2,000,000 into the trust with the agreement that the trust will pay him a lifetime annuity.  

Ian is age 75. Based upon an IRS tax table, the trust will pay him $200.000 a year.  

By using the annuity, Ian avoids having a gift in both the United States and the United Kingdom.  The annuity payment can be deposited in a U.S. bank account or a bank account in another country.

International Inheritance Tax Planning Involves Income Tax Planning

There is more than just avoiding tax upon death.  You want your heirs not to pay income tax because you took a shortcut in your international  inheritance tax planning.

Learn more about UK  tax planning on this link,

Learn more about French tax planning on this link.

The United States has a special tax savings law for heirs.  The property inherited gets a new tax cost for income taxes.  The new tax cost is the value of the asset on the date of death of the decedent.   If you would like to strategies your international inheritance tax plan, then please contact me, Brian Dooley, CPA, MBT at [email protected]

 

 

French U.S. Estate Tax Treaty Gives French Citizens a Preferred Inheritance Tax Strategy

The French U.S. Tax Treaty gives French citizens  preferred inheritance tax strategy. 

France is on the United States’ favorite country list.   Recently, France and the U.S. changed their tax treaty.   Under the new treaty,  the U.S. estate tax does not apply if the spouse inherits the property.   And it gets better with the new $11,000,000 exemption.

French U.S.  Estate Tax Treaty Gives French Citizens part of the $11,000,000 Exemption.

This is how it works.  François owns $14,000,000 in assets.   $5,000,000 is invested in the U.S. stock market.  $9,000,000 is property and other assets in France.   His U.S. estate tax exemption is 5/14th of $11,000,000 (which is $3,928,571). 

If François should die, his U.S. taxable estate is $1,071,428 ($5,000,000 in stocks minus $3,928,571).  The U.S. estate taxes will be approximately $400,000.

The surviving French spouse can sell the property located in the U.S income tax-free.

This is  how it works.   When the spouse inherits the property, she or he has a new cost for tax purposes.   The cost is the market value at the time of the death.  For example, French couple acquired a home in Los Angeles in 2009 for U.S.$500,000.

The husband dies in 2017.   The house is now worth $1,500,000.   The wife inherits the homet.  The U.S. death tax does not apply because of the U.S. – French Tax Treaty.

Next, U.S income tax law increases the tax cost of inherited property to the market value as of the day of death.    When the spouse sells the property for $1,500,000 she will have no gain or loss.

This new tax law is found in a “protocol” to the original French-U.S. income tax treaty and not to the estate tax treaty.  Here is a link to the protocol.

If you need help with your U.S. – French tax planning, then please email me at [email protected]  Also, here is a link in French explaining the U.S. estate tax laws.

By the way, U.S. tax laws allow a unique type of trust that will avoid inheritance tax for the children of French citizens.  The  trust is called a “marital deduction trust”.  This trust created at the time of the death of the first spouse.   For French tax law, this trust is a U.S. person which provides interesting tax savings.  

New French U.S. Tax Treaty Gives French Citizens Preferred Inheritance Tax Strategy with a Nevada Trust

If you find that you owe U.S. estate taxes, consider a Nevada Self-Directing Trust.  The IRS has issued very favorable rulings on these trusts.   Just as the name sounds, you direct the trust investments and also distributions to your family. 

If you would like to discuss  how the new french – U.S. tax treaty  gives french citizens preferred inheritance tax strategy, then contact me at [email protected]  

You can learn more on how the  French U.S. Estate Tax Treaty Gives French Citizens a Preferred Inheritance Tax Strategy  on this link.  This page has the IRS international estate tax treaty explanation.  This IRS page applies to all estate tax treaties.