U.S. transfer taxes (U.S. gift, estate and generation skipping taxes) should be a concern to any practitioner creating an estate plan with U.S. links. The following article addresses U.S. estate tax consequences of a family comprised of Canadian citizen/resident parents with American children.
Transfer tax is imposed on the fair market value of the property transferred, reduced by any consideration received.
U.S. citizens, and non-U.S. citizen individuals that are domiciled in the U.S., are subject to the U.S. transfer tax system on global assets.
A person acquires a domicile in a place by living there, for even a brief period of time, without the presence of a definite intention to leave.
A facts and circumstances test is used to determine domicile. Factors include, e.g.:
- Statements of intent (as reflected, e.g., on tax returns filed, visa application, and similar evidence);
- Time spent in U.S. versus time spent abroad;
- Visa status (e.g., green card holder);
- Ties to the U.S. versus abroad;
- Country of citizenship;
- Location of employment, business, and assets;
- Other indicators such as voting, affiliations, membership, driver license, and similar items.
Residence without the intention to remain indefinitely will not constitute a domicile, and the intention to change domicile will not effect such a change unless accompanied by actual relocation.