So you think it is only UK Taxation issues that can come back years later like a long lost and totally unloved relative? Trust me, it is not! After preaching to the unconvinced for years here in Bermuda about old or not understood tax issues that might entangle the unknowledgable, my respected columnist friend raised the flag for me. Piggy backing on Roger Crombie's article last week about income and estate taxation in the UK, it is only fair that I take a turn in pointing out those are only some of the tax traps waiting for you on this side of the pond.

The US, Canada, and the UK among others are working together more closely than ever before to collect what they deem to be appropriate taxes from citizens or residents of their respective countries. Just recently, Germany obtained a list of 'hidden' assets of German citizens held in Liechtenstein, for the sole purpose (it appears) of tax evasion. Inadvertently, caught out in that loop, was quite a large number of US citizens. You can bet US Internal Revenue Service is elated because in their collective minds, this is only scratching the surface. While Roger's article focused on the estate tax issues for UK citizens who may be deemed to be domiciles, no matter how many years they have lived outside, there is also UK Inland Revenue's attempts to tax those non-domiciles who have lived, worked, paid, taxes, built businesses, and purchased property in Britain. This latest initiative has generated a storm of concern, and a migration consideration out of the UK. More on this in a later article.

I call it the Star Connection with Bermuda in the middle juxtaposed outward on the star points are the UK, Canada, Europe, and the USA.

Currently, local residents have close connections to the STAR group of countries, as well as others such as Australia and New Zealand. For now, it is just the US group that we shall focus on, with particular emphasis on US connection implications, issues and situations involving Bermuda/US border crossings for Foreign Nationals, Bermudians/dual-citizens and their families. Inadvertent or Unintentional Choices: How could Bermudians and other local residents end up with so many complex financial planning issues in such far-flung jurisdictions? There are many reasons.

1 Asset protection when permanent residency/citizenship has seemed elusive. Property has been purchased in other jurisdictions when it was not available in Bermuda due to inflated cost, ineligibility of local residents whose Bermudian status right to own local property could not be clearly defined; and for contingency planning. Bermuda has had long-standing strict immigration policies regarding guest workers and other non-Bermuda status residents. The right to Bermuda citizenship status is subject to serious application and to a series of complex laws, family related equations, long-term residency definitions and other related issues. Conferred with the privilege of being a Bermudian is the right to purchase a permanent home here on the island without the restrictions placed on interested expatriate purchasers, along with a significant surcharge government tax.

2 Diversification away from a single dimension economy and a soft currency. Bermudians have long practiced instinctual asset diversification. At one time in recent Bermuda history, strict exchange controls restricted the flow of cash for investments across border, but permission was often granted for the purchase of foreign real estate due to reasonable individual applications such as family connections, Bermudian children residing in other jurisdictions, impending immigration and the like. The Bermuda dollar is a valid component of the Bermudian economy; however, it understandably is not recognised or is as desirable in other jurisdictions. As an international finance centre, easy access to strong country currencies is offered by all major local financial institutions. Diversification of currencies is often espoused by financial advisors and has become a routine occurrence for investment holdings.

3 Bermuda Estate stamp tax minimisation. Under current Bermuda trusts and estates law, stamp tax minimisation can be achieved by diversifying away from potential future estate tax liabilities in Bermuda-dollar based assets. A US dollar owned property, investments, or other foreign currency real estate assets are not included in Bermuda estate stamp tax assessment.

4 To enhance estate wishes and make gifts to beneficiaries and legacies.

5 The real estate profit motive. What works for flipping real estate here, may work elsewhere. With the hyper-inflation of real estate in Bermuda, and the propensity for Bermudian residents to travel incessantly, foreign-based real estate prices can be extremely attractive, particularly now with the housing bust in the US. Often, the client will purchase a second home intended to be used for 'just' vacations but this small investment may end up as something significantly more, operating a virtual private real estate equity investment firm. Purchases, rentals, and sales of real estate in the US, as in other tax regime countries can have unintended consequences to the foreign owner.

6 Accidents of birth, employment, marriage, divorce, and death in the wrong place. There are a myriad of scenarios that can happen and have happened to Bermudians, due to the close connections to other countries. "Residents of Bermuda have had children born in the US but have never lived or worked there; "They worked long ago in the US, sometimes briefly, sometimes for extended careers; "They have married, and or divorced US citizens; "They may still be green card holders (from many years ago); "They may have inherited legacies from former Bermudian residents who emigrated to the US; "They have several passports, for instance, Bermuda, US, Australian; "They have a US parent, long-term residents of Bermuda who registered children as US citizens long ago and more or less forgot about it; "They are beneficiaries of a Bermuda trust but now have US children or grandchildren; They have taken an extended stay in the US and have died there; "They own substantial estate taxable assets in the United States

7 Confidentiality, feelings of security and anonymity. At 21 square miles, with most land mass less than one mile across, Bermuda is a densely populated place. The explosion in the growth of condominium complexes, the steady decline in the number of vacant lots and recreational areas available to the general public is negatively tolerated by local residents. Longing for more space, privacy, tranquillity, and sheer anonymity has prompted many local residents to purchase that 'home-away-from-home' in unprecedented numbers. Local financial institutions have aggressively marketed for this trend by offering lending against the equity in Bermuda Property.

8 Fun, shopping, and travel. Lower costs, sheer land mass and the ability to drive almost forever is another popular selling point to induce local residents to move and own assets in another jurisdiction.

9 Retirement to a lower cost jurisdiction. In considering a move to another jurisdiction, appropriate planning necessitates additional travel, possible acquisition of a second home, bank and investment account establishments, and many related items. Since, these may all possibly be done prior to the actual immigration, the family may be temporarily sandwiched between two taxing authorities, each with their own set of tax regimes.

10 Education needs of children and parents seeking post-graduate opportunities overseas; Athletic competition and global career transfers.

A Second Question arises: Regardless of the choices made to locate assets, part-time residency and beneficiaries in other jurisdictions, particularly the US, why is the Bermuda resident forced to acknowledge any of these facts? What relevance does any of these initiatives have (or will have) to that individual and family's lifestyle? When travelling, Bermudian and other local residents consider themselves mere visitors in other countries' landscapes. And until fairly recently, they have not had to focus any significant efforts in clarifying their citizenship or residency while travelling or residing, however temporarily, in another jurisdiction. Differences in Tax Regulations and Structures May Mean Taxation as a US citizen (resident) and as a Bermudian citizen. In a tax-neutral jurisdiction such as Bermuda where citizens and residents have not had to contend with an income and transfer graduated tax regime established for federal, state (and in some cases) local revenue enhancement purposes, the implications of such foreign country regulatory information not only eludes them, but is inherently resisted. When you add the complexity of issues of more than one passport, dual-national individuals, multi-national families and multi-jurisdictional issues, you have a jigsaw puzzle that even Merlin will be challenged to sort out, Today, it is incumbent on you to clarify your financial situation regarding tax issues. What you do not want is someone else to make these decisions for you - that can cost you dearly.

Martha Harris Myron CPA -NH1929, CFP® -67184 (US licenses) is Certified Financial Planner and a TEP (Trust and Estate Practitioner). She is a Senior Wealth Manager at Argus Financial Ltd., specialising in comprehensive financial solutions and investment advisory services for individual private clients and their families, business owners, endowments and trusts. DirectLine: 294 5709. Confidential email can be directed to mmyron@argusfinancial.bm

The article expresses the opinion of the author alone. Under no circumstances is the content of this article to be taken as specific individual investment advice, nor as a recommendation to buy/ sell any investment product. The Editor of the Royal Gazette has final right of approval over headlines, content, and length/brevity of article.