Financial planning when moving country
This is a continuation of the Pondstraddler monthly series featuring questions from readers. A reader asked the following questions:
I'm a Bermudian with UK citizenship, while my spouse is an American. We retired to France and just love the people, the culture and the climate, not to mention the wine-producing areas. Our French is still pretty rusty though, and we have become concerned about eldercare support as we age. Our children are relatively remote, plus we don't want to burden them with our infirmities.
We are thinking about moving to and living in America. We have several questions to ask so we can go forward.
1. As a UK citizen can I buy a house in America in my name?
2. We realise that my spouse can just up and go, even though she has never lived in the US. How long would be my legal length of stay? Will I need to apply for some type of residency permit?
3. Can we purchase US health insurance?
4. If we buy a US car and drive can we use a French licence, and do we need to take US driving tests?
5. I have never worked in US, so should I have to pay income tax?
The reader then asked how US taxes will affect them, but since no information was provided as to their income, assets or any other income production facilities, this question cannot be answered.
6. How do we apply and get started?
Before answering, please note that this article is not personal financial planning advice. The information is general in nature and reference guidelines only.
It looks like just a few questions, needing a few simple answers and then our readers can start off on their exciting new journey. But not so fast. Act in haste, repent at leisure, isn't that how the old saying goes?
Simple answers, these are not. In fact, our readers are facing significant complications relatively unknown to ordinary folks. Even though they have been living in tranquil retirement with a simple financial profile, their mobility dream will still require detailed planning. Further, complex international financial planning will be required if:
• their assets are substantial;
• their income may be subject to multiple jurisdictional taxation;
• the laws of their backgrounds, domicile, residence, and citizenship differ, e.g. UK regulates under common law, France under civil law;
• they have multiple beneficiaries in different countries;
• they own rights to pensions in various jurisdictions;
• their insurance policies are domestic-focused;
• their investments are multi-jurisdictional, multicurrency denominated;
• they have, or will need, multiple wills;
• their gift wishes are executed for more than one jurisdiction;
• their estate planning is one country-centric.
In general, there are six major, and numerous minor categories that influence pondstraddler planning. The major categories are:
1. Residency. It is defined as a personal presence at some place of abode, generally, delineated as number of days (such as 183 days or longer). A person can have more than one residence, but the primary residence (in most countries) is the determinant of individual/business income taxation.
2. Domicile. This means living in a locale with the intent to make it a fixed and permanent home. An individual can only have one domicile. You cannot be without a domicile. An existing domicile is presumed to continue until it is proved that a new domicile has been acquired. Domicile surprises are problematic for bereaved families since domicile generally determines were the individual's entire estate will be taxed.
3. Citizenship. This is the status of a person recognised under the custom or law as being a legal member of a sovereign state or belonging to a nation. Citizenship is received at birth, after birth, by derivation, and naturalisation.
4. Immigration. This is the legal right to enter and stay in a country for a defined period of time, or permanently.
5. Taxation by a country on its inhabitants is determined in various by regulatory authorities juxtaposed within the three categories above.
6. Family relationships can influence the individual's position on residency, domicile, citizenship and immigration.
Our readers' profiles are one US citizen and one UK/Bermuda dual-citizen, both resident in France.
So, looking at residence as it relates to each of them, we start with the US citizen spouse. She has a unique standing within the first three categories.
She can enter the US and has the right to reside and exit at any time without any visa or term-limit doctrine.
Her domicile, unless she makes a substantial change with an expatriation act, for instance, is also presumed to remain in the US for estate planning purposes, even though her assets may be held globally.
Her US citizenship responsibilities for US tax purposes is not affected by where she resides. She is subject to taxation on her worldwide income no matter where she lives, or from whence the sources of income are derived.
As for her citizenship rights, so willingly granted under the 14th Amendment to the United States Constitution, she has an inherent implied liability to be fully and currently US tax and reporting compliant. Failure to be a responsible US citizen can generate a heavy financial burden, along with forfeiture of her US passport.
Under US immigration law, she can also sponsor her spouse for eventual US citizenship. This process requires careful pre and post-sponsorship planning.
Turning to the residence issue of the UK/Bermudian individual — this is another kettle of fish. He is subject to different and often conflicting rules relative to all of the above five categories. We will review his status, discuss problems and suggest planning resources, next month.
Remember what I stated about these cases being anything but simple. Pondstraddler families are awakening to the fact that being globally mobile can be both a terrific experience and a taxing exercise.
• KPMG Taxation of International Executives. Link at https://tinyurl.com/z892ye7
• PKF International — World Wide and Individual Country Tax Guides 2017-2018. Link at: https://tinyurl.com/y8swvcf5
• 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. Contact: firstname.lastname@example.org