Estate Planning for FBAR
Estate planning is an integral part of establishing a strategy for what happens to your wealth after you have passed on. With the globalization of the US economy, many US Persons (US Citizens, Lawful Permanent Resident, Foreign National who meet the Substantial Presence Test) have accounts, assets, investments, and income sources from across the globe. One of the most common issues that beneficiaries have to deal with when an international estate is involved, is what happens to the undisclosed offshore money? In other words, let’s say a US person has overseas accounts and income but did not properly disclose this information to the US government on the FBAR or FATCA. Now, when the heirs and beneficiaries inherit the estate there is a concern that they are inheriting an estate that is out of compliance and since the notorious FBAR penalties survive death, some planning is important. Here are three tips involving estate planning for FBAR:
Estate Planning for FBAR Before Death
Estate Planning for FBAR is complicated. When the US Person is preparing their estate plan, it is important that they consult with international tax attorneys along the way to make sure that the state is in order. Oftentimes, estate planning attorneys are wonderful at tax planning, but if they do not handle international overseas-related issues often — they can miss several of the international information reporting requirements. This can make it difficult for the taxpayer — as well as for those that inherit the estate. For taxpayers who are out of compliance, there are various compliance initiatives to safely resolve any issues.
Get Into Compliance while Alive
If a Taxpayer is out of compliance while they are alive, it would benefit everyone involved if they were able to get into offshore tax compliance before passing on. Of course, as people get older and other priorities take shape, oftentimes tax planning and minimization are not essential at the end stage of life. But, if the taxpayer is able to get into compliance with proper estate planning for FBAR — then that will make it easier for those inheriting the estate with the international property involved.
Let Beneficiaries Know if they are on the Account
Here is where conflict often arises on the estate planning front: on the one hand, the person creating the estate may not want to inform certain beneficiaries –– especially their younger beneficiaries –– that they will be the recipient of money in the future, or how much they will receive. But, as people get older (understandably) they get less trusting of third parties, and often times want to include family members on their account — so that someone they know and trust can access the money, especially in an emergency. The problem is when someone is a signatory on a foreign account they may have an annual FBAR and FATCA filing requirement –– along with other reporting requirements depending on whether they are identified as a joint owner as well. Unfortunately, this can make it difficult when the beneficiary inherits the property smoothly receive the inheritance without having to go through several hoops with the IRS.
International Tax Lawyer Specialist Team: Golding & Golding
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