Owning a home in the United States is exciting.
The United States is a Tax Haven for Citizens of the U.K. Belgium, Sweden, Austria, Luxembourg and Canada.
Your home is a significant investment. California has the lowest property taxes of any state in the U.S. California law prevents increases in property taxes as your home increases in value. For example, if you spend $1,000,000 for a home in Malibu and ten years later, your home is worth $2,000,000, your property taxes will be based on the $1,000,000 value.
However, there is one topic that needs a discussion that is not so pleasant. It is death taxes. (By the way, if you want help, then check out this website)
Both France and the United Kingdom have an inheritance tax. French inheritance tax is known as the droits de succession. In France and the U.K., an estate is exempt from Inheritance Tax if the deceased left everything to their husband, wife or civil partner, who lives permanently in France or the UK.
In France and the U.K., married couples and civil partners can give any value of gifts to each other during their lifetime without inheritance tax being assessed on them. This is known as spouse or civil partner exemption.
The United States has a similar law but only for U.S. citizens. As a French or U.K. citizen, U.S. Inheritance Tax is assessed on the assets that your spouse or civil partner receives.
As we are all mortal, even these relationships come to an end at some point. So inheritance planning to minimise liability to United States inheritance tax for children and other inheritors remains something all owners of U.S. property and U.S. business need to consider.
If you are not a domicile in France or the U.K., death tax is charged on the value of your U.S. property in excess of $60,000. For example, if your U.S. home is worth $1,000,000, the death tax will be based on $940,000. The tax rate is approximately forty percent.
U.S. Inheritance Tax Planning for U.K. and French domiciles. If you are subject to either French or U.K. inheritance tax on your worldwide assets, then the $60,000 exemption is increased to $5,200,000 for your worldwide assets.
For example, your U.S. home is worth $1,000,000. You are a domicile of France. Upon your death, the U.S. home is subject to French inheritance tax. Your U.S. inheritance tax exemption is $5,200,000 for your worldwide assets. If your worldwide assets are worth $10,000,000, then your U.S. exemption is reduced. One million is one tenth of your worldwide assets, therefore your exemption will only be $520,000. You will owe 40% tax on the remaining $480,000.
The Do’s and Don’ts of U.S. Inheritance Tax Planning- The Do. Americans avoid the U.S. death tax by having a trust own the home. The U.S. tax law provides for a special type of trust. This trust is known as a “qualified residential trust”.
The Don’t. You may read on the internet about the use of a foreign corporation (by foreign, I mean non U.S.) to own your U.S. property. The U.S. Tax Court decided that the U.S. property owned by a foreign corporation is considered to be owned by the shareholder of the corporation. Because of this, the U.S. Inheritance Tax applies to the corporation’s property if the shareholder dies.
Who Do You Contact to Learn More. The best firm is International Tax Counselors. Located in California, they specialize in tax planning for French and U.K. citizens. You may contact the owner, Brian Dooley, CPA, MBT at this email address, firstname.lastname@example.org or call 714-710-9199. You may write in French or English.