ACTEC Trust & Estate Talk U.S. Tax Considerations When Buying Property Abroad
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Apr 25, 2023 The podcast discusses the importance of tax planning for US citizens buying property abroad, highlighting the need for expert advice and compliance with reporting requirements. It explores strategies for purchasing real property abroad and the challenges of including foreign property in estate planning. The use of life insurance to cover local taxes is also discussed.
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Assemble Local And U.S. Tax Teams Early
- Hire local counsel for real estate, estate, and tax issues before buying foreign property.
- Engage a U.S. accountant experienced in international reporting early to handle FBAR and Form 8938 obligations.
U.S. Trusts May Fail Overseas
- A U.S. revocable trust may not avoid probate or work well for foreign property in many jurisdictions.
- Local ownership structures (like Mexico's fideicomiso) can be treated differently for U.S. tax purposes.
Check U.S. Reporting Before Using Foreign Entities
- If a local advisor recommends a foreign entity, ask your U.S. accountant how it will be reported and whether to file Form 8832.
- Avoid unexpected foreign trust or corporation reporting that carries large late-filing penalties.