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Giving up your


s an American living in the UK, almost nothing related to your financial affairs is easy. The consequences of seemingly simple decisions – such as how to pay for a new home or purchase a mutual fund may create unnecessary tax charges and complexities. There are a number of key milestones that occur, from the time you arrive in the UK to the time you potentially approach and eventually reach retirement. Many of these changes will impact the appropriate wealth management strategies for American expats. Understanding how rules will change for you over time will allow you to plan ahead and make prudent financial decisions. But, sometimes American expats want to give consideration to giving up their US passport. In this edition we will discuss a few of the many financial considerations associated with expatriation. The process of expatriation can be different for people depending on their individual circumstances and whether or not you are consid-

the Internal Revenue code, your worldwide assets are generally marked-to-market at the time of expatriation. This means that your assets are deemed to be sold and any gain arising from the deemed sale is taken into account for the tax year of the deemed sale. Individuals are allowed an exclusion of $693,000 (2016) whereby gains in excess of this exclusion are taxed at applicable capital gains rates. If a covered expat falls within the exclusion amount or has a net loss, they will generally not be liable for any exit tax. There are some exceptions to covered expatriate status including individuals who are dual nationals from birth who have had limited or no period of US residence and children who expatriate prior to age 18.5. As there are very specific criteria that needs to be met, it is important to seek legal advice about individual circumstances to understand how the rules apply to your situation. When an individual is considered a covered expatriate, the decision to move forward is often a family decision. This is due to the fact that US gift and estate tax implications can

The financial implications explained by Andrea Solana


The American

ered to be what is called a ‘covered expatriate’. If any of the following three scenarios apply to you, and you expatriate post June 2008, then you are considered a ‘covered expatriate’: 1. Your average annual net income tax for the 5 tax years ending before the date of expatriation is more than $161,000 (2016). 2. Your net worth is $2 million or more on the date of expatriation. 3. You fail to certify on Form 8854 that you have complied with all US federal tax obligations for the 5 years preceding the date of your expatriation or termination of residency. Under the expatriation rules of

The American May-June 2016 Issue 751  

The leading cross-media publication for Americans in the UK - and anyone interested in American culture

The American May-June 2016 Issue 751  

The leading cross-media publication for Americans in the UK - and anyone interested in American culture