As World Shrinks, Financial Planning Gets More Complex

Global interaction has spawned an increasing need for international financial planning. As U.S. companies hire foreigners to work here, U.S. citizens accept jobs overseas and multinational marriages occur, the complexity of filing one’s taxes, preparing for retirement and drafting a simple will increases exponentially.

A foreigner who becomes a U.S. resident must pay U.S. income taxes on all of his or her worldwide income. A foreigner who is domiciled in the United States, that is, living here with no intention of leaving, would have all of his or her worldwide assets subjected to U.S. estate and inheritance taxes in the event of death.

In many cases, treaties between the United States and other countries eliminate or reduce double taxation, said Peter Spero, a lawyer in Santa Monica who specializes in tax planning and offshore trusts. His book, “Asset Protection, Legal Planning and Strategies,” has a section advising foreigners to prepare before immigrating to the United States--especially if they wish to avoid or minimize U.S. estate, gift and generation-skipping transfer taxes.

U.S. citizens cannot completely escape U.S. taxes by living and working abroad, Spero said, but they do get a tax break. This year, a U.S. citizen working and living in another country may exclude $76,000 of earned income from U.S. income taxes. Establishing a foreign trust would protect assets of individuals who live in a country that might subject them to liability under that country’s rules and customs, Spero said.

“Without proper planning, there can be unintended consequences,” said Nigel Taylor, a certified financial planner in Santa Monica specializing in international and estate planning. “I urge people to seek competent counsel.”

In common-law countries, such as the United States and Britain, “you can give money to whoever you want and you can completely disinherit anybody you like,” Taylor said. That’s not the case in many civil-law jurisdictions such as France, where laws of forced heirship empower children and parents to demand a greater share of an estate than the surviving spouse, he said.

“Never make the assumption that your spouse will inherit everything,” Taylor warned. “It’s not always yours to give away.”

In some instances, a form of disinheritance is possible in Germany but serves only to reduce a child’s share of the estate by half. Disinheritance in Japan is possible only by showing cause and obtaining a court order.

People who work in two or more countries can participate in the Social Security programs of those countries, depending on the situation. Comprehensive treaties between the United States and other nations govern whether a worker is allowed to tap into two systems or transfer benefits from one country to another.

Taylor said several Web sites can help people with international issues:

* https://www.ssa.gov/statistics/ssptw99.html. Describes, in English, social security programs in other nations.

* https://www.ssa.gov/international/links.html. Offers links to Web sites posted by social security administrations in other countries.

* https://www.protectassets.com. Discusses estate planning and retirement.

* https://www.irs.ustreas.gov/plain/ind_info/index.html. Offers information that is useful at tax time.

* https://www.irs.ustreas.gov/plain/forms_pubs/index.html. Lists forms and publications of the Internal Revenue Service.