Making a cross-border financial decision
This week we return to the Pondstraddler monthly series to review a reader’s questions. The following case is a combination of real life situations and hypothetical facts in order to protect the reader’s identity.
A reader writes:
Hi, Moneywise, can you help me figure out these issues. Here is my story.
I’m a US citizen born in the United States. My father was American; my mother is a Bermudian who had (still has?) a US green card.
My parents both lived in the US for the 18 years of their marriage. Following a bitter divorce, I opted to stay with my dad for my remaining teenage years while my mother returned to her Bermuda family. I saw my mother infrequently when she visited the US. We reconciled a few years ago after my dad passed.
Now, my mom is an unhealthy 70-year old. I am her only child. She needs (and wants) my help managing her finances, as well as physical assistance with her chronic illness.
I am the sole heir to her Bermuda estate. She has already done some planning, local bank accounts and property in joint ownership with me. Thanks, Stephen.
Our reader’s questions are these:
1. Should he consider retiring to Bermuda?
2. Or, should he move his mother to the US where he thinks he can obtain more cost-effective medical insurance and home care?
3. Will there a US tax consequence to him or his mom if she sells the property?
4. Can he keep their Bermuda bank accounts (tax free) to hold the Bermuda property proceeds if they do decide to sell out?
5. If his mother passes prematurely, can he keep the property and stay in Bermuda?
6. If he sells the property, what are the tax consequences for both Bermuda and the US?
7. Now, my questions. Our reader mentions that he files his own US paper tax returns. Is he aware of the Fatca/FBAR foreign assets for US tax compliance?
8. Does his mother still hold that US Green Card? If so, has she been filing her US tax returns, if required?
Taking these items in turn- there are many overlapping considerations.
1. Retiring to Bermuda. Can he plan to stay indefinitely? Does he have or can he obtain Bermuda status?
The Bermuda Immigration and Protection Act 1956 states that under 18(2) Acquisition of Bermudian status by birth, where a person is, after 30 June 1956 and before 23 July 1993, born outside Bermuda, he shall possess Bermudian status if —
a) he is a Commonwealth citizen; and
b) one of his parents was domiciled in Bermuda at the time of his birth and that parent possessed Bermudian status at that time.
Where used in this section “domiciled” has the meaning ordinarily applied to that word at common law; and “domicile” shall be construed accordingly.
18(8) Where — a person relies upon his mother’s domicile at a particular time for the purpose of deducing any rights of his under this section; and she was married at that time and the domicile of her spouse was other than Bermudian at that time, her domicile at that time, instead of being the same as that of her spouse by virtue only of the marriage, shall be ascertained by reference to the same factors as in the case of any other individual capable of having an independent domicile.
So, is he considered a Commonwealth citizen?
Does he have a right to Bermuda status?
Why do we need to clarify this fact? Because the status question may decide a number of things, such as Bermuda right of residence and ability to keep the inherited property. Of course, if mum and he decide to return to the US, the question is moot.
2. Moving mum to the United States. Two questions arise. Does she have that US Green Card? Is her right to reside in the US under that Green Card status still valid?
Validity of her status must be determined given US tax filing issue still in the foreground.
What if mum relinquished her Green Card years ago?
Can Stephen sponsor her again for US lawful permanent residency, a process called Family Preference Immigrants, also referred to as “chain migration?” The current US president wants to eliminate this category of entry into the United States, even though his spouse sponsored her relatives for US Green Card status and recent US citizenship.
You can begin to realise the complicated decisions this reader faces.
Life can be unfair when children become pawns in the game. They are far too often designated (or forced) to provide solutions for adult problems that were never of their making.
Readers, these are ongoing issues for multinationals as well as for single nationality Bermuda residents every single time one crosses a border, physically or electronically (eg, business, relationships, investing, etc). Every country today is in border protection mode to assess what, when, where, why and how the ebb and flow of individuals and businesses will impact their economic interests and national security. This is the way it is — plan for it.
In the next edition of the Pondstraddler Series, on September 22, we will answer more questions on this case after consulting Bermudian legal, finance and immigration experts.
Also, watch out for the revised and updated www.pondstraddler.com and blog, which will launch soon.
• US Fincen. https://tinyurl.com/y7xo5wf4
Who must file the FBAR? A US person that has a financial interest in or signature authority over foreign financial accounts must file an FBAR if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year. The full line item instructions are located at FBAR Line Item Instructions.
• Bermuda Immigration and Protection Act 1956. https://tinyurl.com/y9jwnbve
• Martha Harris Myron CPA CFP JSM: Masters of Law — international tax and financial services. Dual citizen: Bermudian/US. Pondstraddler Life, financial perspectives for Bermuda islanders and their globally mobile connections on the Great Atlantic Pond. Finance columnist to The Royal Gazette, Bermuda. All proceeds earned from this column go to The Reading Clinic. Contact: firstname.lastname@example.org