Renunciation and Relinquishment of United States Citizenship: Discussion thread (Ask your questions) Part Two
Ask your questions about Renunciation and Relinquishment of United States Citizenship and Certificates of Loss of Nationality.
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NB: This discussion is a continuation of an older discussion that became too large for our software to handle well. See Renunciation and Relinquishment of United States Citizenship: Discussion thread (Ask your questions) Part One
Sorry if I’ve been slow. I thought it was about a non-US estate.
I believe there is a requirement for any US citizen to file an estate /gift tax form when receiving an inheritance. The new form asks the question something like ” was the inheritance received from a covered expat”. So the onus is on the US person inheritor to declare any estate or gift given to them. There are large penalties if this does not happen. I expect that there would be a real incentive to declare children of covered expats to be non Americans.
I also read somewhere on brock ‘media and blog articles’ that US persons are having problems receiving their inheritances, because ‘foreign’ banks are refusing to open probate accounts for them.
“…the onus is on the US person inheritor to declare any estate or gift given to them.”@heidi – yes, it seems to me that’s the only way it could work. Sort of a voluntary tax, not legally enforceable unless the beneficiary decides to apply for US citizenship.
So to recap, if a former US person dies in, say, the UK, and their estate goes to probate in the UK, the executors don’t have any responsibility to find out whether beneficiaries could be US Persons. That seems to be in line with common sense and, happily, with the information provided on the HMRC website (http://www.hmrc.gov.uk/manuals/ihtmanual/IHTM05000.htm). No affidavits required.
“…the onus is on the US person inheritor to declare any estate or gift given to them.”
@heidi – yes, it seems to me that’s the only way it could work. Sort of a voluntary tax, not legally enforceable unless the beneficiary decides to apply for US citizenship.
So to recap, if a former US person dies in, say, the UK, and their estate goes to probate in the UK, the executors don’t have any responsibility to find out whether beneficiaries could be US Persons. That seems to be in line with common sense and, happily, with the information provided on the HMRC website (http://www.hmrc.gov.uk/manuals/ihtmanual/IHTM05000.htm). No affidavits required.
Jennifer Kohen –
As I like to say, the Broccultist free “advice” so readily and abundantly bestowed on any passing inquirer is worth every cent you do not pay. In other words, you can meet up with lots of anonymous noggins filled with oceans of notions, but you still have to sort out for yourself the matter of what is true / pragmatic / functional / nausea-inducing / possible / sleepworthy / etc.
As I recall from the ever-receding past, you will be required to detail names of children in the paperwork that is part of the renunciation process. If that memory is correct, and that aspect seems INCONVENIENT in your circumstances, likely you can find some Broccultist who will “advise” you to lie and say you have no children, or to list phony names for them, or maybe just to paste a fudge recipe over that blank space.
This cautionary 2¢ also costs you nothing.
Who knows if the ‘foreign lawyers/solicitors will go the way of the banks and ask the question ” is the beneficiary a US citizen”?
Not sure what if any threats could be hoisted on them. I do know that it not wise for any US citizen to be an executor of any foreign will, as the probate account would be a reportable account as the exec would have signature authority over it.
Maybe we should be asking the lawyers who will deal with our estates “are you a US person?” It would be a bit of a bummer if you were a US tainted probate lawyer.
usxcanada said: “As I recall from the ever-receding past, you will be required to detail names of children in the paperwork that is part of the renunciation process. If that memory is correct…”
Fortunately, that memory is not correct, not nowadays ay any rate. Form DS4079 does ask whether the renunciant has ever registered a child as a US citizen born abroad, but doesn’t ask for names. And DS4079 is not a requirement for renunciation, only for relinquishment. (Though many consulates do ask for it, even for renunciation.)
“…you still have to sort out for yourself the matter of what is true …”
Definitely.
“Who knows if the ‘foreign lawyers/solicitors will go the way of the banks and ask the question ” is the beneficiary a US citizen”?”
True. It’s a concern to me that the UK-US Mutual Assistance provisions say nothing about HMRC requiring proof of US citizenship before handing over to the IRS the tax records of UK citizens.
I don’t see why lawyers/solicitors/executors would care whether the beneficiaries are US citizens. They have no responsibility for determining that, and no possible liabilities for the tax consequences of a USC receiving his/her share of an inheritance. It’s not their problem.
@tdott
Agree, but nowdays I am never sure if yet another curve ball will be thrown at usp’s.
[totally different topic]
For another example of tax craziness re PFICs (and renunciation), see this post by Phil Hodgen: http://hodgen.com/noncovered-expatriates-and-superannuations/.
“I don’t see why lawyers/solicitors/executors would care whether the beneficiaries are US citizens. They have no responsibility for determining that, and no possible liabilities for the tax consequences of a USC receiving his/her share of an inheritance. It’s not their problem.”
A US person’s bank account used not to be the banker’s problem. America found a way to change that. So they might find a way to put similar pressure on lawyers, should they find that “covered expatriates” were getting away with leaving their earthly goods to their children without anybody saving a large juicy cut for the US Treasury.
@iota
I just wonder where this witch hunt will end.
It’s a transition, I guess. We’ve all been caught on the hop, it seemed to come out of the blue. Let’s hope that won’t happen to most people in future. Those who don’t want to be American citizens or hold American assets will know to renounce if possible before having children. There’ll be more of a chance to make proper plans, incorporate renunciation costs into the budget, get it done before starting a pension plan, etc.
Worse things happen at sea, as my mother-in-law used to say. 🙂
Tdott. Reading between the lines, it’s clear what Hodgen expects you to do with regard to PFICs held in a pension fund. Nothing.
New questions:
Could there be a potential disadvantage to file the 5 years returns with an ITIN instead of SSN?
Is it allowed to enter an ITIN on returns filed for years when you still were a USC?
@joe
See Medea fleecestealer’s post on Jan 27 on this thread.
If you don’t have an SSN, and do not wish to stay an American, then an ITIN is the way to do it. That is the way others have done it. I believe medea filed 5 yrs this way with no probs. I expect she will answer you.
Twenty days to go for me before my appointment at the embassy. Getting a bit nervous. The five year returns, are the they due this year or can I file them at them next year? I am sure you already answered this before, just double checking.
@Joe, heidi, sorry no I didn’t. I had an SSN so filing was no problem for me.
But the point is if you renounce first then you are no longer a US citizen when you come to wrap up your tax filing obligations. You are no longer eligible for an SSN and would not be able to apply for one.
“How do I know if I need an ITIN?
If you do not have a SSN and are not eligible to obtain a SSN, but you have a requirement to furnish a federal tax identification number or file a federal income tax return, you must apply for an ITIN.”
https://www.irs.gov/Individuals/General-ITIN-Information
@Joe, you should file the backdated years as soon as you can after renouncing. Then you’ll need to file the 2016 return and the 8854 by 15th June 2017 to wrap things up.
Thanks. I’ve started to gather the required forms and information. I intend to fill start filling them out shortly.
@medea
Did they bring they fbar filing forward to April rather than June even for expats?
@joe
It’s a good idea to keep proof of mailing of your final tax returns and 8854.
@heidi, I don’t think so – FBAR filing is stil June as far as I know. And there’s some debate here whether you need to even file them once you’ve renounced.
@joe, yes, definitely send the returns registered post so you can have proof they were delivered. What the IRS does with them after that is their problem.