Planning for Foreign Nationals

Planning for Foreign Nationals

Estate & business

succession planning for mexican nationals resident & nonresident

introduction

succession planning is not easy, but it’s one of the most important things you can do for your family. If you’re a Mexican national living in the US, it’s even more crucial to ensure your family doesn’t run into any legal issues or hold-ups with your estate in the event of your death.

None of us enjoys thinking about what will happen to our families, businesses, and assets after we’re gone — but if you don’t have a written plan in place, you’ll make things much harder on those you leave behind. For Mexican nationals — both resident and nonresidents — it’s essential to understand the US taxes and laws surrounding succession planning. Some tax laws affect residents differently than nonresidents, and these differences may affect how you distribute your assets and through which
vehicles.

This ebook will help you understand the legal intricacies and how they apply to you, so you can craft an estate plan that not only makes the process as smooth as possible for your family, but also allows you to maximize how much they receive — giving you the peace of mind that if anything happens to you, your loved ones will be taken care of.

CHAPTER 01

 

THE 4 TAXES

There are four taxes in the United States that have an impact on business and personal estate planning. We briefly outline each one below:

01 INCOME TAX

This is a tax on personal income, wages, business income, and capital gains. Information on income taxation of nonresident aliens can be found in IRS Publication 519.

02 GIFT TAX

This is a tax on gratuitous transfers — which are defined as a direct or indirect transfers to an individual, where nothing is received in return, either in the form of money, goods, or services. The gift tax provisions for non-resident aliens can be found in IRS Code Sections 2501, and further information about the gift tax can be found in IRS Publication 559.

03 ESTATE TAX

This is a tax that occurs after an individual dies. Estate tax is levied against the property in the decedent’s estate. The IRS Code addressing estate tax for nonresident aliens can be found in Sections 2101 through 2108, and in Code Sections 2208 and 2209.

04 GENERATION SKIPPING TRANSFER TAX (GSTT)

This is a tax on a gift to a grandchild, or an unrelated person at least 37.5 years younger than the transferor. A generation-skipping transfer (GST) made by a nonresident alien is subject to the US GST tax only if the transfer is also subject to the US gift tax, or the US estate tax. It is also subject to the US GST if the transfer is from a trust, and the non-resident alien’s transfer to the trust was subject to US gift or estate tax.

With an understanding of the four taxes at play, the rest of this ebook will act as a guide to estate and business succession planning for Mexican nationals. In the following chapters, you’ll learn how to determine whether you fall under the “resident’ or “nonresident” tax classifications, how the laws affect both residents and nonresidents, and some of the options available to you for transferring your wealth and assets to the appropriate people.