Biggest Downside For US Citizens Living Abroad?

By: Pete
Date posted: 01.16.2013 (11:12 am) | Write a Comment  (0 Comments)

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In the past, I’ve discussed many of the consequences of being a US citizen abroad. There are obvious benefits of course (if not, myself and others would simply forfeit our citizenship) but the downsides must be considered.

The More Obvious One

It’s fairly obvious to anyone on this blog that the following are major downsides:

-Being in legal obligation to file taxes every year to the IRS
-Possibility of owing money on those revenues if taxes are lower wherever you are located
-Being in legal obligation to file the FBAR every year

Another One To Consider.. Estate Taxes..

Estate taxes are often called “death taxes”. In most countries around the world, including Canada (since 1972), dying is tragic but there are no fiscal consequences to giving away all of your possessions. That is not the case in the United States though.  To be fair, up until the recent crisis, $5,000,000 could generally be given away without paying taxes. That might be changing though because of the fiscal cliff and taxes rising everywhere.  We all know that taxes are increasing and deductions are slowly being taken away but it’s unclear how much things will change in the next few years/decades as the US government tries to get its budget back in control.

Possible Solutions?

One thing that I’ll be looking into both to protect myself from Canadian and US taxes since they could change significantly between now and my death (which is hopefully several decades away!) is having a trust created where I could hold most of my assets. This would diminish my income taxes, make it easier to postpone such payments but also reduce the impact of estate taxes if some major changes occur (or in the less likely scenario that my net worth is over $5M by then).

Have you spent any time looking over these? 

More info: Estate taxes in the US (Wikipedia)


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