Estate Planning Considerations for Dual Residents

Gain an understanding on the key concepts you should be considering when estate planning for a dual resident client including tax issues and will options.

In an increasingly global society, the world is shrinking and clients are becoming more mobile. Just last year, over one million foreign nationals obtained green cards. U.S. professionals move overseas for better job opportunities, and disgruntled U.S. taxpayers renounce their U.S. citizenship at an unprecedented rate. Currently, there are an estimated nine million U.S. expatriates living abroad. During the first three months of 2020, more U.S. citizens sought to renounce their U.S. citizenship than during the entirety of 2019. Often, these mobile clients are unaware that they have dual status and become or remain subject to certain U.S. tax obligations. Even those clients who are aware of their dual residency frequently fail to comply with their U.S. tax obligations and end up facing substantial costs associated with their noncompliance. Moreover, estate planning for such mobile clients is important, if not essential. The problem, however, is the complexity of the U.S. tax rules involving international clients. These rules frequently change, and the challenge for domestic advisors is exacerbated by a contrasting variety of rules and legal regimes of the countries in which such clients or their assets are located. Thus, there is an increasing demand for domestic advisors who have the ability to identify dual resident clients, to be aware of such clients' U.S. tax obligations, and to design estate plans that factor in all potential issues and that will survive across the border. This topic is intended to serve as guidance for both domestic advisors and dual resident individuals. It will cover the intricacies of the dual residency rules and a number of key non-tax and tax factors that must be considered when advising dual resident clients and when designing tax-efficient and viable estate plans. This information is also intended to help determine whether a dual resident client is in compliance with applicable U.S. tax obligations.