We all know this. Despite that, some still try to bury their heads in the sand about some of the planning pitfalls we face. Case in point - foreign nationals. It would seem on the surface that foreign nationals holding US assets would be subject to US estate taxes on the assets held in the US, right? Sort of. While they are subject to US tax laws regarding transfer taxes, the actual laws are very different from those for a US resident.

How different? How about an estate tax exclusion amount of $60,000 versus $5 million.

That's not a typo. That is a problem waiting to happen. Admittedly, this is a rather unique niche, but if the recent statistic quoted by Lincoln Benefit is any indication, there is $82 billion of real estate in the US held by international buyers. The need for US insurance in rather significant amounts is very real, and has the distinct advantage of very clear laws rather than some sunset provision and potential reform clouding the issue. In other words, the wait and see approach that your US clients are using as an excuse to do nothing does not apply here.

Need more ammunition? Try this one: The taxes may be due at both the first and the second death! No unlimited marital deduction for these folks (You can check out more details on the laws here.). With $82 billion held by international buyers, the need for insurance is staggering ($28 billion?!), and my guess would be largely unfunded. Admittedly, as great as all of this sounds from a need perspective, this type of business presents unique challenges. At a minimum, competent tax and legal advisors well versed in these issues need to be involved. Our concern in the life business, however, is more about how to close the sale once we have identified the need.

The hurdles presented by underwriting foreign nationals who do not reside in the US are many, but there are pockets we have identified with relatively clear paths to follow. Obviously, these cases are all very unique, and the country of origin and travel details are critical variables. There is the possibility, however, of being able to complete the cases with carriers you already work with and in some instances even complete the medical requirements in the home country.

The exam is really just the tip of the iceberg, and if the client owns property here, having the exam done in the US is really not that large an issue. The rest of the case, however, can be a bear. Medical records retrieval and translation, financial documentation, and inspection reports are all far more complicated than in a "domestic" case. You'll need a competent guide through this process, and that is where we can help. If a client has come to mind while you read this, it's time for us to get on the phone. After all, simply because the client did not know about the tax does not mean they don't have to pay. Ignorance is no excuse!