The Cross-Border Family Wealth Guide. Fisher Andrew

to afford to bring together their own high-level advisory team of financial advisors, attorneys, and tax professionals. And even for those folks who can afford to pull together their own professional team, we believe this book will provide a tremendous head start, because it looks at issues comprehensively and systematically. That is, when an expert is consulted with deep knowledge of a single cross-border relevant area like tax, real estate, investing, or immigration, he or she may not have a sufficiently robust understanding of the big picture to be able to offer advice that is digestible, relevant, optimal, and usable. With The Cross-Border Family Wealth Guide at your side, you'll be better informed, better able to work with the professionals you consult, and more able to achieve your goals in the long run.

Who's Who: Who This Book Is Meant to Serve

      This book is intended to serve globally mobile families who have a financial connection to the United States, either by being a citizen or resident of the United States or by simply having assets located here. There is a relatively large community of people throughout the world who have financial affairs in both the United States and at least one other country. International or cross-border knowledge workers and other middle- and senior-management professionals, usually working for large corporations, constitute the majority of this community, but of course there are retirees, students, and children as well.

      Some of these individuals are originally from the United States, and their knowledge and skills have brought them overseas. More often, people born outside the United States with substantial knowledge and skills are brought here and then stay for a while, and some stay permanently.

      Often, top-notch individuals (and their families) move from one country to another, and then to still another, so that before coming to the United States they may have previously lived and worked in one or more other countries. Along the way, these cross-border professionals may accumulate personal relationships as well as financial accounts, real property, and other assets. And then, one day, these individuals may end up inheriting property or money from their parents – or their parents' parents – money and property that is located in a country other than the United States.

       Examples of Who Might Benefit from This Book

      For example, suppose a brilliant young Swiss marketing executive works for a major company in Switzerland. She is then brought over to the Hong Kong office before being further promoted and transferred to U.S. headquarters. Along the way, she leaves certain bank accounts, retirement funds, and other assets in both Switzerland and Hong Kong. Before coming to the United States, though, she falls in love with and marries a Chinese man, with whom she has two children. The whole family then moves to the United States, and while the children will obviously be of Swiss-Chinese descent, they will grow up in the United States.

      Education is often a strong priority for international professionals, given their exposure to language, cultures, history, and travel. It's not surprising that by the time they are done moving through the U.S. school systems, their children will talk like, think like, and act like Americans. But at the same time, these children will also have their national history and background, and in some cases, their citizenry, in more than one country. Whether or not the children grow up in the United States, it is very common for cross-border professionals to want their children to get their college education at U.S. institutions, which are very well-regarded internationally.

      Let's consider another example: a high-level programmer from India who works for a while in London, and then gets transferred to Chicago, New York City, or the Silicon Valley. Regardless of whether he ever moves back to India, he will likely accumulate assets of various types along the way. Bank accounts, retirement accounts, brokerage accounts, real property, and business interests might be part of the equation, not to mention such things as precious metals, collectibles (paintings, antiques, jewelry), and other items of value.

      Something else he is likely to gain along the way is a family – a wife and children. Successful young people with busy lives often do not spend a great deal of time focusing on their assets and planning for the future, but with family and increasing maturity generally comes a heightened sense of awareness and responsibility. As the need to intelligently plan for the short, medium, and long-term economic future becomes clearer, our Indian programmer may find the following:

      • He faces unique financial challenges of which he wasn't previously aware.

      • He is immersed in, and must necessarily deal with, a complex and changing legal, financial, and regulatory landscape.

      • Very few authoritative, reliable, and comprehensive sources of information are available to help guide him.

Diagramming a Cross-Border Person: Residency and U.S. Income Tax Status

      In some cases, the cross-border professionals (along with their families) who come to the United States will get a Green Card, and will then decide to stay here permanently and become dual citizens. In other cases, they will return to their country of origin or to some other third country. Similarly, many U.S. citizens will decide to stay abroad permanently – in some rare cases even renouncing their U.S. citizenship – while others choose to come back to the United States. What's common to all of these scenarios, however, is that there will be assets – financial accounts, real property, and other tangible assets – in more than one country, and thereby subjected to the tax laws and other rules and regulations of more than one tax authority.

      Traditionally, many individuals would hold onto their Green Cards for many years after they had more-or-less permanently exited the United States, since the ability to return to the country at some point is highly valued. Recently, however, the rules and regulations that make it possible to hold onto a Green Card – for example, how regularly the individual must spend time in the United States – have tightened. Additionally, there is greater awareness today about the need to continue to file tax returns in the United States as long as a Green Card is held; previously, this requirement was often not as well known or followed.

To help clarify things, please consider Figure 1.1, which illustrates a kind of “Who's Who” for purposes of this book – that is, it shows the six main categories that people fall into, based on whether they reside in the United States or abroad, and their U.S. tax status (either tax resident or non-resident).

Figure 1.1 Who's who for the purposes of this book

      Moving left to right, the Who's Who chart begins by dividing individuals into those living in the United States and those living outside the United States. Individuals living in the United States are U.S. citizens, permanent resident aliens (with Green Card), or temporary visa holders (either tax residents or nonresidents). We will return to this in detail, but note that a U.S. citizen and a permanent resident alien generally receive identical tax treatment by the IRS, although permanent resident aliens are more likely to have foreign income or assets that are also subject to foreign tax liabilities (like a rental property). Temporary visa holders may or may not be U.S. tax residents, based on whether they have a substantial presence in the United States. Also, temporary visa holders who must pay taxes in the United States may or may not owe taxes on their foreign income, depending on their specific situation. (They may only by subject to U.S. tax on their U.S. – sourced income.)

      For those living outside the United States, there are three main categories. The first is the permanent resident alien, generally someone who lived in the United States but no longer does, and still has permanent residency in the United States (possesses a Green Card). Next is the U.S. citizen living abroad, someone who receives virtually identical tax treatment as the permanent resident alien living abroad. Finally, we have someone who is not living in the United States, and who is not a tax resident of the United States, but who has assets in the United States. The U.S. tax code considers such a foreign citizen to be a nonresident alien (NRA), or more simply a nonresident with assets in the United States.

      Note that while the six main categories of individuals are based on tax status, the book ultimately goes far beyond taxation issues. Still, taxes are inevitable, and in many ways they form a core background against which each and every one of us has to be aware of and navigate.