We live in a world where global investments are common. Flights can get us from country to country in a matter of hours. This ability to travel has resulted in the ability to become global citizens — putting large quantities of time and money in different countries.
United States citizens that choose this lifestyle may consider ownership of property and other assets in foreign countries. If done wisely, such ownership can not only lead to personal enjoyment but also diversify one's financial portfolio. If not, those aiming for a global experience could find themselves facing serious penalties in the United States.
How can United States taxpayers wisely own foreign assets? Consider the following before purchasing foreign assets:
- Consider the structure. Looking to start or expand a business into a foreign location? Each structure option has different benefits and risks. Analyze each to find the best fit for your enterprise.
- Do not neglect tax obligations. Taxes may apply at federal and local levels both abroad and in the United States. Contact an expert in this area to get the information to better ensure proper compliance. This generally requires inclusion of the property or asset on one’s tax returns and may require filing specific tax forms, such as a Report of Foreign Bank Accounts (FBAR). A failure to do so can result in steep financial penalties and possible prison time.
- Adjust your estate plan. Make sure your estate plan addresses these assets. In some cases, it is best to have a second will that specifically addresses the foreign asset.