¶ 5001
Overview
Scope of the chapter. This chapter addresses families whose members, assets and legal relationships cross national borders: non-United States families with assets or beneficiaries in the United States, United States trusts established by non-United States persons, families subject to forced heirship and civil-law marital property regimes, and United States citizens living abroad. It covers the United States estate and gift tax on nonresident aliens, the income tax rules for United States beneficiaries of foreign trusts and for immigrants, forced heirship and the statutes that protect trusts against it, marital property regimes, the obligations of United States persons abroad, the recognition of trusts in civil-law courts, and the enforcement of claims across borders. It closes with planning steps and an assessment of cross-border families in the Threat Matrix.
The cross-border problem. A family whose members and assets are in several countries is subject to the laws of each. The United States taxes its citizens wherever they live, its residents on their worldwide income, and nonresident aliens on their United States situs assets at death. The family's country of residence or nationality may impose forced heirship, a community property regime or its own taxes on trusts. Courts in each country may assert jurisdiction over the family's members and assets. A structure that works under the law of one country may be ignored, recharacterized or taxed punitively in another. Protective planning for such a family must therefore be tested under the law of every country the family touches, and the claims most likely to arise, such as a forced heir's claim to a share of the estate or a spouse's claim under a matrimonial regime, are often claims that offshore protective statutes were specifically designed to defeat.
Relation to other chapters. The tax treatment of foreign trusts is addressed in chapter 42 (see supra ch. 42), and the reporting obligations of United States persons in chapter 43 (see supra ch. 43). The transparency regimes that apply to cross-border structures are addressed in chapter 44 (see supra ch. 44), and expatriation in chapter 46 (see supra ch. 46). Conflict of laws, including the Hague Trusts Convention, is addressed in chapter 35 (see supra ch. 35), and the recognition of judgments abroad in chapter 41 (see supra ch. 41).