UPDATE Robert Wood has posted this today here. This is an excellent opportunity for us to bring this to public attention. Please go over and comment!
“The Business of Life” http://t.co/Dcl7rlqzyj
— U.S. Expat Canada (@USExpatCanada) September 10, 2014
Some Brockers who have been around a long time have likely seen this before. However, given the recent events such as greater focus on “Accidental Americans” (Ginny & Gwen as plaintiffs on the ADCS-ADSC lawsuit), and the attempt to get the IRS to relax the rules against the same, (ADCS-ADSC retention of Mr. Jim Butera, Partner, Washington D.C office of Jones Walker LLP, to explore legal options) this letter is especially compelling.
This message is written by a Canadian businessman to his son at the time of his high school graduation. It is a perfect example of what all parents with dual US/CDN children should be aware of and discussing with their kids before they begin to acquire money and assets. It was originally posted here and is re-posted with permission.
*****
The Isaac Brock Society recently featured a discussion about how and when to advise young people about the potential problems of U.S. citizenship and whether they should consider renouncing U.S. citizenship. As parents, teachers, mentors and friends we should pass on to our young people the benefits of our (in varying degrees) knowledge, wisdom and experience. We do this because we want to equip them with the skills they need to make the best life decisions that they can.
The books: “Letters of A Businessman to His Son” and “Letters of A Businessman to His Daughter“, by G. Kingsley Ward, are wonderful examples of this principle. They are chock full of practical advice and thoughts on – the only business that really matters – “The Business of Life”.
I have been inspired by Mr. Ward. Here is the letter (with many factual modifications to protect the young person in question) that I wrote on the occasion of that young person’s High School graduation.
“Letter of a Canadian Businessman to his Dual U.S./Canada Citizen son on the Occasion of his High School Graduation”
Dear Dave:
Word cannot express how proud I was as I watched you walk on the stage and receive your graduation diploma. Tears came to my eyes then and tears come to my eyes now as I write you this letter. Seems like just yesterday, that I walked with you to your first day of school. I know you were frightened that day. But, I will now confess you to you, that I was even more frightened. I knew that you were at the beginning of a long journey to prepare yourself for a life. These years have been a great adventure for you and for me. We have had our ups. We have had our downs. But, today, your graduation, commemorates part of your success (your dad wants to think that part of it is “our” success). Today marks the end of one chapter of your life and the beginning of a new chapter.
This new chapter of your life will begin this fall when you start the Commerce program at Queen’s. Congratulations on that 95% average that made you one of the best students in Canada. Queen’s commerce is open to only the best students in Canada. And you have certainly proven yourself to be in that group. A commerce degree from Queen’s will give you:
– excellent mentoring in morality and ethics
– excellent career opportunities
– excellent opportunities for graduate school
– excellent networking opportunities
– excellent opportunities to develop long term personal relationships
So, the world is truly your oyster, or to take a line from an old movie:
“Seize the day!!”
Or as Spock from the Original Star Trek (sorry, but I still think the original is the best) series would say:
“Go forth and prosper”
Last night, was a night of celebration. It was also a night of projecting into the future. I couldn’t help but to notice everybody talking about careers. What would people do? Where would they go? A career will contribute to your life. But, it is not your life. A career does NOT a life make. I can honestly say, particularly at this moment, when I take so much pride in your achievements, and feel so much love for you, and thank you for being a fine son, that:
It will be your family, friends, and other personal relationships that will be most important to you.
And yes, your career will contribute to those things. But, you are more than your career. Never confuse having a career with having a life!
On that note, I would like you to consider two things that could have a profound impact on your future. These are: (1) “good citizenship” and (2) “your citizenship”.
On the question of “good citizenship”, I remind you that:
“To whom much has been given, much is to be expected.”
You have been given much (and earned much). People like you, have the obligation to contribute to the “well being” of our society. This can be done in many ways. But, remember not everybody has had the opportunities that you have had, and will have. There are many who have not had the benefits of your good fortune. Many of those who have had your good fortune, have not taken advantage of that good fortune. Through a combination of “nature” and “nurture” you find yourself in a strong position. That is your reality. Some are in a very weak position.
As a former U.S. president said:
“A country that cannot care for it’s weakest citizens, cannot protect its most powerful citizens”.
You have a moral obligation to bring your intellect, vision, enthusiasm, effectiveness and generosity to your career, your family (present and future) and your community. You have an obligation to be help our “weakest citizens”. Helping others can be one of the greatest values of your education.
“Good citizenship” includes a consideration of how your behavior impacts your community. “Good citizenship” also includes a consideration of how your behavior impacts on you present and future family.
Now, I would like to reflect with you on “Your Citizenship”.
Yes, you are a Canadian. Yes you have lived almost your whole life in Canada. You can and should take pride in being a citizen in one of the greatest countries in the world. But, you may recall that you were born in the U.S. This great event happened when I was doing my MBA at Stanford. (Actually, you probably don’t recall being born, but it did happen in Palo Alto, California.) What does being born in the U.S. mean? It means that the U.S. considers you to be a U.S. citizen. You lived in the U.S. until you were 4. My career brought our family back to Canada where we have lived ever since. In fact, I suspect that you have no memory of those early years of your life. Therefore, it is possible that you don’t think of yourself as being a U.S. citizen at all. You are legally a “dual citizen” of Canada and the U.S.
Is your dual citizenship a good thing or a bad thing? Given that you have lived your whole life in Canada, is your U.S. citizenship a “benefit” or is it a “burden”?
The time has come to consider whether you want to go forth in life as only a Canadian citizen or as a dual Canada/U.S. citizen. This is a decision that you will want to consider carefully, and when you are ready, you must make that decision. You do NOT need to make this decision today or next week. But, I urge you to make this decision before finishing your degree at Queen’s. I will explain why in this letter.
U.S. citizenship is the source of opportunity, liability and disability.
You are probably wondering what I mean. As the great lawyer, Gerry Spence, once said:
“Let me explain you!”
Opportunity/ Benefits of U.S. citizenship:
You have the right to live in and work in the the U.S. This may be a benefit to you. This is something that most of your classmates at Queen’s will not have. You may want to retain U.S. citizenship, in order to keep that option open. But, as you will learn in your commerce program, options are never free. They come with associated costs. In the case of U.S. citizenship it comes with certain liabilities and certain disabilities. It is important that you understand the liabilities and disabilities of U.S. citizenship. You may or may not, see these “circumstances” as being costs. If you do view them as costs, then you must ask whether the option of retaining U.S. citizenship is worth those costs of the liabilities and disabilities.
Liabilities of U.S. citizenship – Burdens of U.S. citizenship:
You have the obligations to:
– register for the military service (“the draft”);
– pay taxes to the U.S. and pay those taxes under the same rules that apply to U.S. residents;
– file U.S. tax returns every year regardless of where you live;
– file numerous “information returns” which may include the private and financial information of others.
– pay estate and gift taxes
Now, you may ask “so what?” Let me try to explain to you why this might matter in your life. But, once again, these are just some thoughts. I leave it to you to decide whether these are considerations that are significant to you.
Registration for the Draft:
Other than the obligation, this is not likely to mean much. Your chances of being called for military service are slim.
Filing Tax Returns Every Year:
You will have to file U.S. tax returns regardless of where you life in the world. The U.S. is the only country in the world to tax its citizens regardless of where they live. This can be very financially (thousands of dollars every year) and emotionally (lots of worry and time) expensive. Although, you will get some relief from double taxation, the theory is that U.S. citizens are taxed twice – both in their country of residence and in the U.S. Furthermore, it is getting more and more difficult to find professional help that is competent in this area.
Being Taxed According To The Same Rules That U.S. residents are taxed:
It’s one thing to be subject to U.S. tax. But, it’s quite another to be “taxed” in exactly the same way that U.S. residents are taxed. Let me explain. The rules for calculating taxable income are different in the U.S. than they are in Canada. The U.S. taxes different things in different ways. There are numerous instances in which the U.S. taxes income, that has not even been earned or received. Furthermore, a number of ways of saving for retirement, that are sanctioned and encouraged in Canada, are punished under the laws of the United States. This can make normal financial planning very difficult, very expensive and in some ways, almost impossible. In this respect, U.S. citizenship (especially for those who do not live in the U.S.) is a clear disability. But, more on the “disability” issue later.
Filing Information Returns:
In addition to the basic tax returns, the U.S. requires that a number of additional information forms must filed. These forms include lots of personal financial information about you and about your future family. Basically, any bank or financial account that you have signing authority over (including joint accounts) are required to be reported to the IRS. This could make a future wife or future business partners (who are not U.S. citizens) very uncomfortable and subject her to great unfairness. To put it another way:
There is NO financial privacy in the United States and U.S. citizens have no financial privacy whatsoever!!
I might say that the U.S. is very serious about receiving all information about your assets. The fines for non-compliance can be life altering. During 2011, many U.S. citizens living outside the United States suffered mightily after learning about these requirements. These information returns (forms) are not a small job. They can take hours and hours to complete at great expense. Furthermore, they cannot be completed with the assistance of a qualified accountant or lawyer.
Disabilities of U.S. citizenship: Let’s consider these from the perspective of career, financial planning, family and community.
Let’s start with family:
Future Wife:
Your mother and you children have been the greatest source of happiness, purpose and security in my life. I am sure that you will want a family of your own. It probably won’t be long before you meet a fine woman, with whom you wish to embark on that great adventure of life. Even by the standards of your generation, you are likely to embark on that adventure in the form of marriage. Since you do not live in the U.S. the chances are high that your future wife will not be a U.S. citizen.
Now, the U.S. requires its citizens to require various information returns with the IRS. If you have a joint bank account with her (which is common) you will be required to report much of her financial information to the IRS. I assure you that she will not be happy about this. Furthermore, should you predecease your wife, she will NOT be able to automatically receive all of the family estate in the same way that she could if she were a U.S. citizen. Is this fair to her?
Future Children:
Now, I am not completely sure of this, but the fact that you were born in the U.S., and are a U.S. citizen, might make your children U.S. citizens. Is this an opportunity for them or is it a problem? Only you can decide. But remember, that unless they were to live in the U.S., (assuming they are U.S. citizens), they will be subject to all the legal opportunities, liabilities and disabilities, that I am describing.
Future Business Relationships:
You are going to make some great connections at Queen’s. Your next four years will set the stage for long term business opportunities. These include partnerships and opportunities to own shares in Canadian companies. As a U.S. citizen you will be required to disclose information about these partnerships and corporations to the IRS. . For this reason, (quite understandably) many non-U.S. citizens are unwilling to enter business relationships with U.S. citizens.
Future Employment Opportunities:
Companies outside the U.S. are becoming increasingly reluctant to employ U.S. citizens. The reasons include the high costs associated with U.S. taxation and the danger that the U.S. employee, will be required by U.S. law to disclose financial data of a non-U.S. company to the IRS. Once again, this will include the obligation to report the private financial information of non-U.S. citizens to the IRS.
Possible inability to access normal financial accounts if you live outside the U.S.:
Yes, this is becoming problem. U.S. laws impose high financial and legal costs on non-U.S. banks who have U.S. citizen customers. For example, there are countries in Europe that will no longer allow U.S. citizens to have bank accounts or receive mortgage financing. It is unclear what the Canadian situation will be.
Enough on the possible problems. I remind you that U.S. citizenship does carry some opportunities. You must consider whether U.S. provides you with opportunities that outweigh those problems.
To Renounce U.S. Citizenship or to Retain U.S. Citizenship – This is the decision that you must make:
Let’s explore what each option means.
Remain A U.S. Citizen – and assume the liabilities and disabilities
Now I hate to repeat myself but:
You are subject to all of the requirements I outlined. You will be disabled from saving and investing for retirement in the same way that other Canadians can.
Examples of some “disabilities” include:
– you will not be able to invest in many non-U.S. investments;
– you will not be able to use a business corporation to hold investments;
– you will not be able to invest in a principal residence tax-free the way that others can
– you will be subject to the U.S. estate and gift taxes (making certain aspects of your life difficult)
– your (I assume) non-U.S. wife will be at a great financial disadvantage should she become a widow (is this fair to her)?
– etc.
Renouncing Your U.S. Citizenship – freeing yourself and future families of the liabilities and disabilities of U.S. citizenship:
Should you decide to renounce your U.S .citizenship, you should realize the following:
U.S. citizens who have a net worth of two million dollars or more must pay the U.S. government an “Exit Tax”, should they renounce. This can be very very expensive. For those subject to the “Exit Tax” the financial penalty can so great that they feel trapped and unhappily remain a U.S citizen. At this stage in your life, you might think that a net worth of two million dollars is a lot of money. The truth is that is is not. Furthermore, (given the realities of inflation), you will are likely to achieve that level of net worth quite quickly. Our Toronto home, where you sleep every night, is probably worth two million dollars.
Therefore, if you decide to renounce your U.S. citizenship, you should do it now rather than later!
This decision does not have to be made today or tomorrow, but should be made by the time you graduate from Queen’s!
I began this letter inviting you to think about “Good citizenship” and “Your citizenship”. “Good citizenship” includes a consideration of how your behavior affects your family, friends and community. Is it possible that “Your citizenship” might affect your obligations of “Good citizenship” (particularly in relation to family)?
You are headed towards a great future with loads of opportunity. Your U.S. citizenship is an “accident of birth”. I encourage you to deal with this issue NO LATER than than the end of your four years at Queen’s.
I am proud of you, love you and wish the best for you!
Seize the day!
Dad
By the time my child is deemed old enough to know her own mind (she knows it pretty well now but it’s her age that the State Department questions), she will renounce. I have no doubt.
How could anyone – anymore – pick the US over where they actually live and have roots?
Tonight, I hear, the US POTUS is going to announce to the American public that he has decided to take them back to the Middle East to engage in another protracted and pointless military adventure … just because.
He’s already told Congress that “no, I don’t need your permission” and thus he will write his own presidency off as a complete failure at the expense of the Americans he promised hope and change to.
Why would my child chose that?
Sure, we have Harper and Trudeau may turn out the same but like me, I am certain she will take her chances here rather than go back a place she can’t remember living to deal with the racism, sexism, religious intolerance, the economic caste system, the increasingly scary police state and the forever war that is bleeding them all dry. Not to mention, but let’s anyway, the rapid rise of poverty driven by unemployment or barely employment that represents the norm for young and old alike.
There are so many reasons not to go back and we will borrow the money if we have to so our kid can buy her freedom – though sadly, that US birthplace is always gone to mark and mar her life even when she is finally free.
Reading this I must say I am thankful that my spouse and I do not have any kids. It is hard enough trying to work through the labyrinth of CBT and FACTA myself; I can’t imagine having a child inherit this mess just because her mother was born in the USA.
The question of whether to keep or get rid of US citizenship — something I never even considered 8 years ago when moving abroad — is becoming more pressing. CBT and FACTA make it impossible to live a “normal” life if your address is outside the USA.
Lol. I was just born in US. But I didn’t live there enough time so my children could get the US passport. I discovered that when my first son was born in 2004 and was frustrated about it. Today I am so relieved
@YogaGirl
“How could anyone – anymore – pick the US over where they actually live and have roots?”
Young adults generally go where they can find work. If they can’t find work, they stay where they live and have roots. Some are fortunate enough to find work where they live and have roots–but many are not so fortunate, especially when they are young and just starting out. I’ve never been fortunate enough to find solid work back in Canada even though the US has been fairly good to me personally (even as I recognize the US is in decline at the national level).
Also, because of the unique geography of the two nations, sometimes a US job will be a lot closer to where you live and have roots than a Canadian job. Seattle is a lot closer to Vancouver than Toronto or Montreal are.
Sometimes–especially in our interconnected world–people find love rather than find work (or love is the higher priorit)–and their partner is in another country. One irony of FATCA is that an American-Canadian couple will be better off in the USA because it is easier for a Canadian expat in the USA than vice versa.
One of the reasons why I donate to ADCS is to help create opportunities for people like your daughter and this dad’s son–so that US and dual citizenship will again be seen the same way it was as recently as the 1990’s–as a valuable opportunity–not necessarily for everyone but definitely an opportunity–and not a curse. I’d probably feel a bit like my efforts were wasted if every young person renounced at 18 rather than giving these fights a chance to succeed and open doors for them–but of course I understand that everyone must make their own decision.
@Dash1729, I wasn’t factoring in employment or higher education even though I am aware that this is precisely why some parents happily register their children’s births with consulates.
I think that the days of dual citizenship as a plus are behind us regardless of what the Charter challenge outcome is because neither the US nor Canada is particularly friendly to the idea and each employ tactics to discourage it.
@YogaGirl
Well employment, higher education, and love–not always in that order–do tend to be very very important factors in decision making for young people. And all three can bring a Canadian to the USA–or to any other country in the world outside Canada for that matter.
Yes the USA is definitely effectively strongly discouraging dual citizenship at least for expats–and that is part of what we are working to correct here–along with making it easier to expatriate for those who wish to do so by their own choice.
I don’t know that I’d agree that it is a worldwide trend though. Canada hasn’t tried to discourage my dual citizenship. I’ve felt at times that my Canadian citizenship has been devalued over the years but that’s not the same thing as being asked to give it up. Australia changed its laws to permit dual citizenship in most situations beginning in 2002. India now permits its expats to retain overseas citizenship which allows for the eventual resumption of Indian residency and full citizenship.
We live in a global economy and the general trend is to encourage dual citizenship and it is generally seen as a good thing. The US treatment of expats is, however, badly out of step with that trend and is a big part of what needs to be corrected here.
“I am aware that this is precisely why some parents happily register their children’s births with consulates.”
And this strategy often works well except when the consulate concerned is a US consulate. For example, my cousin, a Canadian, married an Italian and their two Italian-Canadian sons grew up in Italy. Seeing more opportunity in Canada as young adults, though, the two sons exercised their dual citizenship and moved to Canada with the full blessing of their family. Both seem to have promising futures in Canada.
I believe if a virtual “Chinese Democracy Wall” of such letters is created this will help get attention and spread awareness of the onerous US regulations on USP abroad. The Robert Wood letter to the President under the Forbes brand received over 300,000 views, far more than his other articles. A personal story(ies) may gain far greater attention than an article on a topic. Picture a virtual “Chinese Democracy Wall” with letters pined to it describing how the US virtual Berlin Wall of compliance and taxation has impacting normal living for US citizens living abroad.
In terms of the content of the letter. It is fairly restrained in my view. There is no mention that the U.S. would erase the Canadian tax break when selling a business. Or, about working for an employer and having their accounts reported to the U.S. no doubt with major fines if not done right. Also the choice is not that clearly presented and the parent is not laying it out clearly enough and should be along the lines: If you live your life in Canada to live a normal life you must renounce your U.S. citizenship. If you plan to live in the US, develop a career there and never move back to Canada then you should keep your US citizenship. This is quite an ask for someone so young at the start of their career.
@JC
“In terms of the content of the letter. It is fairly restrained in my view. There is no mention that the U.S. would erase the Canadian tax break when selling a business. Or, about working for an employer and having their accounts reported to the U.S. no doubt with major fines if not done right. Also the choice is not that clearly presented and the parent is not laying it out clearly enough and should be along the lines: If you live your life in Canada to live a normal life you must renounce your U.S. citizenship. If you plan to live in the US, develop a career there and never move back to Canada then you should keep your US citizenship. This is quite an ask for someone so young at the start of their career.”
Most of these points he did mention in the letter.
I think the strategy the father clearly implies although doesn’t quite state is the correct one: if the next move after Queen’s is to the USA then keep US citizenship; otherwise renounce. The start of university is too soon to decide.
Yes, but how can a dual afford Queen’s (or any post-secondary) when there are no savings plans available for USPs anymore? Catch-22.
And I don’t agree that Canada doesn’t discourage dualism. Canada has a long history of deference to a dual’s “other” country when they stake a claim. You are Canadian only so long as your second citizenship is dormant and hidden. The new citizenship act even no so subtly is a shove towards mono-citizenship because it allows the Minister of Immigration to strip Canadian citizenship of duals. Granted, the reasons are extreme but all slippery slopes start out being “well, X could never lead to Z here in Canada”.
There is also a rather subtle (sometimes not so) preference among Canadians themselves for Canadian only newbies. Not one person I know has ever thought my relinquishing was a bad idea. I have never been questioned. It’s taken as a given that I would chose Canadian status for my only one because who would want to be American.
In fact, the Canadians I know who live down there and have PR status don’t even feel that USC is worth the bother because they already have a citizenship and why does anyone need to be a dual anyway?
My child never admits to be American. “It’s embarassing.” she says.
She had a classmate last year who’d moved here with his Canadian Dad and American mother and hated it. He is desperate to “go home” and when he discovered my girl was American born, he began reference her. “Us Americans” he would say.
She was appalled. “I am not like them!”
She’s 12. And though she does hear her dad and I discuss US politics, her general disdain for Americans was something she learned in school, which I have come to learn over the years is pretty typical of Social classes and teachers.
A little off topic and I’ve raised this issue in the past – with the increase of the renunciation fee to $2350 it will put people with access to the black market of passports in a dilemma putting aside the legalities.
Do I give $2350 to uncle Sam or do I spend (albeit more) to procure a duplicate of my current passport, but only changing my place of birth?
Yes renunciation is the sure fire way to get out of the US tax system (mostly), however, people have other reasons for hassle free entry into the US (relatives etc.)
Yup..I know this is illegal. Wrong I’m not sure given the BS imposed on US expats.
However I know one thing if the US continues to increase the renunciation fees people will way up the options including resorting to illicit means to sort out their bank identity problems (which is not their name but their place of birth problem).
Yes the US can change the rules including real time reporting for opening, operation, and closing of accounts, but one has to ask if the US is on a diminishing rates of return with FATCA already with people taking countermeasures (such as renunciations, accounts in other names, changed documents, etc).
@YogaGirl
“Yes, but how can a dual afford Queen’s (or any post-secondary) when there are no savings plans available for USPs anymore? Catch-22.”
I don’t know but I’m not clear how renouncing at age 18 would solve this problem. I’d much rather eliminate the negative consequences of dual citizenship (US and other) than force people to choose at an age when they and, in many cases, even their parents aren’t ready to make that choice.
“Canada has a long history of deference to a dual’s “other” country when they stake a claim.”
Can you give an example of when this has happened on Canadian soil? If there is a “long history” it must have happened frequently, but quite honestly this is the first I’ve heard of this happened prior to FATCA. Of course on the “other” country’s soil that country’s laws take precedence.
“In fact, the Canadians I know who live down there and have PR status don’t even feel that USC is worth the bother because they already have a citizenship and why does anyone need to be a dual anyway?”
I respectfully disagree with this perspective–though of course it is their decision. I consider voting to be important and until recently such people could not vote in EITHER country–although a lawsuit working its way through the Canadian courts right now is working to change that. We’ve voted to legalize both LGBT marriage and marijuana in my home state since I became a US citizen and I’m proud of that.
“There is also a rather subtle (sometimes not so) preference among Canadians themselves for Canadian only newbies.”
Being born in a third country (outside North America) I did encounter this growing up but it seemed to be something related to birthplace (which I can never change) as opposed to citizenship.
“She’s 12.”
I thought like her when I was 12 (although I wasn’t born in the US). As an adult the responsibilities of adult life have drawn me to the US. In my opinion adults should vote–and I needed to become an American to do that.
@Don
“it will put people with access to the black market of passports in a dilemma putting aside the legalities.”
Do you live in Canada?
This is something I’ve always been confused about because I’m not aware of any situation where a passport (which would show birthplace) being required as ID domestically within Canada. A driver’s license is generally OK–in fact it is usually preferred. Has this changed? Are banks requiring people to show a passport to open an account?
So wouldn’t it be easier to simply show a driver’s license and lie about birthplace? Yes that may be illegal but it is at most one criminal act (lying about the birthplace).
If you show a fake passport then there are two potentially criminal acts: you’re STILL lying about the birthplace but you’ve now also falsified a passport–a second crime.
Note that I’m NOT advocating violating the law but I would think from the perspective of the criminal mind it would be smarter to show a perfectly valid driver’s license and lie about the birthplace.
@Dash1729 – No I don’t live in Canada (although been there many times), in the UK. UK photo driver’s license show place of birth (there are still a substantial amount of people here with only paper licenses). However banks here prefer passports for opening a bank account plus utility bills to prove your address.
It’s a bit murky but each country is going to be different.
@Dash1729, Canada’s official stance is that they will not interfere with a dual’s other country asserting itself to impose obligations. That is the stance they have always maintained in terms of everything. They warn that they will not step in should issues arise while a dual is outside of Canada (regardless of how long one has or hasn’t had residence established in Canada) and they are quite indifferent to whether a person identifies as Canadian first or not.
I went to check CIC for the link but was met with a “sorry this page is being revised” notice.
Fight all you like for change. Good on ya, if it happens but I don’t think it will happen fast enough for my family to benefit. Life is best lived in the present, imo.
And at 18 it is a tad late but 16 is when they are first allowed to make their case (as remember, our kids generally are in grade 11 while Americans typically are in grade 10 – apparently that makes a difference).
People form their identities young. And there is a big wide world out there full of jobs and educational experiences. If someone had offered me the chance to come to Canada and settle when I was a teen, I would have been all over it. Not because I knew who I was as much as I had already decided who I wasn’t.
@Oliver Twist
Good point about future children. His son’s having been in the U.S. between the ages of zero and four would not be enough to make his son’s children Americans under current citizenship law (although things can change). It seems a bit odd that he doesn’t know that tidbit when the rest of the letter is spot on.
@Yogagirl
The vast majority of people want to stay where they have roots rather than moving to the United States or anywhere else. This is true even of people in most poor countries, but sometimes life isn’t that simple. Isn’t one of the big mistakes the U.S. government makes its assuming that Americans abroad are automatically suspect because they aren’t living in the U.S. where they have roots?
My father was a holocaust ‘evader’: Jewish and in Warsaw when Hitler invaded, he fled across the border before it was too late. He passed away in 1985 while I was still a teenager. He died intestate, but my parents had only recently divorced, so I decided to give part of the inheritance to my mother. I set up a trust for her, at which point I was introduced to CBT, PFICs, FBAR and the rest. We were an English/South African family with one Accidental Citizen (me), so the trust had to be set up to with zero possibility that I’d ever benefit from it, in order that my mum’s income wouldn’t be subject to US tax (in addition to UK or SA tax). My children were named as secondary beneficiaries, ten years before the first was even born.
My daughter was born out of wedlock, and her mum (with whom I wasn’t in a strong relationship) decided, against my better judgement, that California was a good place to give birth. This ‘US Place of Birth Indicium’ was duly carried into the trust and soon after FATCA appeared in 2010, the trust was rejected by the asset management industry, and now sits as cash in a bank account earning 0%. My mum is old and unwell, and has significant medical expenses. She has received no trust income in over three years.
The letter here talks generally about making a decision regarding renunciation during one’s college years. I would take that a step further and point out that the US government has defined the renunciation window for young foreign Americans already. The State Department will not approve the renunciation of a child under sixteen, while the tax code stands ready to penalise those who do so after eighteen and a half. A two and a half year window which suggests that this decision should be made by school age children, not university students. My daughter turned sixteen this year, so I have started discussing this issue with her, having already made her mother broadly aware of the problems. I have also read that a child renunciant can apply for restoration of her US citizenship before eighteen and a half. So a child who renounces at 16 can have up to two and a half years to experience life as a non American, and reverse that decision if she has regrets. Having the choice to go back if one discovers that the grass isn’t greener on the other side is a wonderful option; but it requires her to act now, and can she really assess ‘the colour of the grass’ while she is enrolled at school?
My daughter has been to the US a number of times over the years, and absolutely loves it there. She’s aware of her US citizenship, and of the fact that it affords her the opportunity to study, work and live there at any point in the future; an idea that appeals to her. Her mum, it seems, has similar ideas. She has mentioned to mutual friends that my daughter can sponsor her for US immigration once she’s an adult. In short, US tax policy is forcing my daughter, at the age of sixteen, to choose between her grandmother’s welfare and her (and her mother’s) future opportunities.
I have explained to her that if she chooses to keep her US citizenship, I would most likely have to amend the trust to exclude her as a beneficiary. The question is: do I wait the 2.5 years to allow my daughter to make a more mature and informed decision, or do I act sooner in the interests of my mum? It gets worse. I have another daughter; they’re half-sisters. My older daughter wasn’t born with the ‘Mark of Cain’, so her rights under the trust are uncompromised. It gets even worse, if I choose to relinquish my US citizenship, I would then have to erect a financial firewall between the family’s finances, and those of my US born daughter. If I qualify as a ‘covered expatriate’, and my estate was shared equally between my daughters, my US born daughter would have to pay 40% of such inheritance to the IRS.
I must say that I do agree with the tone and restraint in the letter. It’s easy to zealously denounce the injustices of CBT/FBAR/FATCA/PFIC when I post here. However, when talking to my own daughter, prompting her to make a decision that has significant and lasting impact, I need to be the prosecution and the defense. I need to remind her too of the benefits of US citizenship, and what she might stand to lose if it is forfeited. I need to revisit the pride and enthusiasm that I held for my US passport when I was a child in Africa during the cold war. I do believe that America is losing its way, but it’s still a great country, with considerable opportunity for those who are fortunate to have the option to live and work there.
Domino,
Thanks for sharing your family’s story here. It emphasizes the complexity and the level of maturity (and dreams) of a young person and their realization of the absolute consequences. What a position this puts you in. I, of course, have no advice for you but just wanted to say I appreciate your words here that show the further travesties of all we discuss here.
Excellent self-observation, YogaGirl. I think that applied to my younger self. Your daughter sounds like her mom — mature enough to make her decision. Many young people get their information from the advertisements and the entertainment industry — a form of ‘the white picket fence, happily-ever-after’ fantasy of some young people instead of the reality of possible consequences along with their view of ‘the grass is greener’. Education and awareness so young people have all the facts will be their friend.
@YogaGirl
Got it! And that makes sense.
I guess I was hoping that in 4-6 years–ie when your daughter will be 16-18–the fight against FATCA, etc, will have gained significant traction and that the atmosphere will have changed significantly. I’m not in this fight to make some vague philosophical stand on principle. I’m in this fight to win!
That said–whether the win is significant enough to change the mind of your daughter, the family in the original post, or others in a similar situation–is not up to me.
Yes, I previously made mention on here somewhere of the disappearance of that link regarding dual citizenship. I found that to be a somewhat ominous development.
@Domino
I cannot give you full advice for your entire situation, as it depends partly on the laws in the country where you live (I’m not clear if that is UK or SA), exactly how the trust is set up, and the exact family dynamics–none of which I know.
But may I suggest a possible first step: I’m wondering if you should consider renouncing US citizenship yourself BEFORE asking your daughter to consider such a step.
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@Domino
That is a complicated one without knowing the family dynamics. That 0% return is obviously eroding the value of the trust, which isn’t benefiting anyone. Would the non-U.S. citizen mother spend the money on her daughter? Could the trust be amended so that the mother is the beneficiary instead, at least until the daughter is old enough to make up her own mind, since university is expensive? CBT is going to take a while to sort out.
@publius &Dash1729
Thanks for your concern and suggestions. My mum and step-dad do have other income, but they’re certainly feeling the pinch as the medical bills increase and income drops. This matter was only brought to my attention recently, as I’m not involved with the trust at all (otherwise it might get taxed by the US … seriously). I’m fairly familiar with these matters, and my view is that the trustees faced a conflict between their compliance obligations (FATCA) and their fiduciary duties to the beneficiaries, and erred in favour of the obligation enforcer carrying the bigger stick. This is similar to situations where banks have kicked out US clients, except that the trustees can continue to levy fees on the trust while it sits dormant, so they didn’t resign. My opinion is that they acted in an overabundance of caution; my daughter is only a contingent beneficiary (upon my parents’ death), so the trust lacks the US taint they deemed it to have. Of course convincing an investment firm of this legal nuance is another matter in a world where Aberdeen Asset Management have declared their refusal to accept former US persons even with a CLN.
Ultimately, the purpose of my comment was to highlight the horrendous scenario facing my 16 year old daughter, and my moral dilemmas as a father in attempting to advise her.
Let me remind people that times change. Long ago nobody would have seen these things coming. Heads up. You were born in Canada but one or both of your parents was from USA. Depending on when you were born, the USA citizen parent would have had to spend X number of years in USA in order to infect you with USA citizenship. If you never set foot in USA then you do not infect your children with USA citizenship. (A)They could change that law retroactively. (B) Your passport does not say where your parents were born, so you just always use your Canadian passport to show you were born in Canada, right? Right now, right. However, just as Hitler assigned to the clergy the burdensome task of poring over old records to learn which Protestants and Catholics were of Jewish descent, there will be investigations on these things. Birth notices in the local newspaper are public even if provincial birth records are not. USA goons can learn who your parents were and, perhaps with the help of data on ancestry.com and ancestry.ca and elsewhere, they will be able to gain far more information at the touch of a button. The school yearbooks showing your parents at Peoria High School contradict your story that they left USA as babies. This is not NOW happening, but that is where this is leading.
Full Spectrum Dominance – Chris Hedges
http://youtu.be/k36_kV-Ur8g