Expat weighs spousal estate tax liability in mulling U.S. citizenship

Wade left Sydney, Australia to pursue an American business career 30 years ago. Married to his college sweetheart, Wade arrived for a corporate post in NJ with his family -- wife Barb and their young son, Pax -- a green card and few assets. He had enough saved to buy a modest home.

The years have moved quickly since their 1990 move. Five years later, Pax was joined by a brother Zac, now 27, who grew up as a typical American kid. Zac has visited Australia on family vacations but has no plans to settle there. The older son Pax enjoys running with the kangaroo and hasn’t yet decided where he will end up.

Rising through management roles to company group chairman, Wade has had remarkable success, including serving on the boards of other US-based companies. Having traveled extensively, he sees the value of accessing State and diplomatic resources abroad, something he would be able to access as a U.S. citizen. As his wealth has mounted, largely due to long-term incentives, Wade has a growing question about whether to renew his green card or apply for U.S. citizenship, which will determine where they will retire.

There are many financial, immigration and tax considerations now that their wealth exceeds $10 million in U.S.-based assets, mostly long-term incentives. He and Barbara must consider the family status and sort through a mix of immigration, tax and legal considerations – to decide, “do we stay, or do we go?”

For one thing, the Australians always planned to settle down under. They are less sure now until they know where both sons will land. And, returning to Australia could be expensive. They never gave a thought to exit tax (or U.S. expatriation tax) until recently but, unless they pursue U.S. citizenship, it could seriously erode all they have worked for.

What if something happened to Wade before they decide? They were reminded after the death of a colleague – an Italian citizen working in U.S. under green card – that a non-U.S. citizen spouse does not benefit from the unified credit exclusion under current estate tax. Barb would be subject to estate tax on Wade’s assets if he predeceased her. How the annually indexed unified credit up to $11.4 million for each spouse, the current Federal estate tax law in force through the end of 2025, and its application to their situation is also unclear to them.

As they approach their decision point, Wade tapped SFG Advisors as his lead advisor to coordinate the advisory team of experts. They were able to access a U.S.-based estate tax attorney, an immigration attorney and an international tax attorney to resolve this question. With a full picture of their options, they hope to make an informed decision.

*The name, likeness, and circumstances in this example are a fictional composite of facts from executives similar to actual SFG Clients.

Executive Compensation, Retirement Planning, Expatriate Executive Planning

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