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Estate planners can help noncitizens minimize estate, gift tax

Minimizing estate and gifts taxes is an issue which is on the minds of a lot of those with estate plans. And minimizing estate and gift taxes is a central goal of estate planning attorneys, who employ a number of tools and approaches to get the job done.

For those who are not American citizens, minimizing estate and gift taxes can be a challenge since the tax benefits are not as great as they are for citizens. Where non-citizens generally enjoy an estate tax exemption of $60,000, American citizens currently have a $5 million exemption through the end of 2012.

And even though non-citizens may leave an unlimited amount of money to U.S. taxpayers without gift tax liability as long as they do not give physical property located in the United States, there is not lifetime gift-tax exclusion for noncitizens making gifts of U.S.-based property. Further, even gifts of intangible overseas property may still end up causing recipients to owe estate tax.

One common pitfall for these families takes place when foreign parents visit their American citizen children and give them expensive gifts. Because of the tax rules, any gift of U.S.-based property over $13,000 will trigger gift tax. There are other pitfalls for uninformed noncitizens as well.

The difficulties faced by noncitizens wishing to leave assets to their citizen children have led some to hide such assets in offshore accounts in order to avoid tax consequences. But as countries are increasingly cooperating through information sharing in order to decrease tax evasion, the practice is decreasing. And, in general, multinational families are increasingly turning to estate and tax planners to help them reduce estate and gift taxes. Planners are able to help these families find legal ways to reduce their tax liability.

Source: Bloomberg, "Tax Hunt Pushes Global Rich to Offshore Trusts," Elizabeth Ody, March 5, 2012.

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