By Melissa Teixeira, ChFC, CLTC Vice President, Fifth Avenue Financial
If you are like many advisors serving the high net worth clients, you probably work with or have access to a several people who are non-U.S. residents. The United States has long been a top destination for worldwide millionaires, welcoming 10,000 new global millionaires in 2018 alone.
Foreign-born residents now represent 14% of the U.S. population or approximately 44.5 million people. According to the latest U.S. Census Bureau data, the number of foreign-born people in the United States rose in 2018 to the highest share in over a century.
Not only does the sheer growth and demographic projections of the market segment make it an attractive, but non-U.S. residents share a common need for sound financial advice. They likely face unique financial, tax, and estate planning challenges.A pervasive pitfall for non-residents is they do not realize that their physical presence in the United States may constitute residency for income and estate tax purposes. A non-resident may live outside the United States for the majority of the year. He or she comes to this country for work, school, sports, or to visit family, for example. The visit, however, is temporary. If a non-resident lives in the U.S. for a portion of the year for multiple years and derives income from a business or employment while in the U.S., such person may be considered a resident which can cause significant changes to income and estate taxes.
Regardless of citizenship status, individuals will likely owe estate taxes on anything owned in the United States, whether it is real estate, jewelry, cars, or businesses. So what is the biggest difference between being a resident or citizen and a non-resident for estate tax purposes? If one qualified as a resident, estate taxes will be calculated based on the value of all assets held … worldwide. It has, however, gotten easier for non-resident individuals to protect and preserve wealth using U.S. based life insurance. Life insurance may be a compelling solution for non-resident individuals for multiple reasons, including the following:
Historically, life insurance carriers have been somewhat reluctant to write policies on non-resident citizens, but given global migration trends, past restrictions have eased somewhat. Along with the typical underwriting review, insurers will seek information on the ties to the United States. Specifically, they will want to know how often the proposed insured travels to the United States, and the purpose of his or her visits. In addition to other potential items, the proposed insured will have to supply information about U.S. based property, investments, accounts, and business interests. The insurer will also likely ask the proposed insured to disclose their global net worth, not just their stateside investments. Keep in mind, every life insurance company has unique criteria. For some, the country of citizenship/residency plays a more significant factor than others. It’s also important to remember that some countries prohibit their residents from purchasing life insurance from non-resident (U.S.) carriers. Life insurance is just one of the value-added solutions you may want to discuss with non-U.S. resident individual clients. Massachusetts Mutual Life Insurance Company (MassMutual) helps brokers address complex needs of their clients, particularly in this ripe marketplace.
Melissa Teixeira, ChFC, CLTC a Vice President at Fifth Avenue Financial who has nearly 20 years’ experience assisting financial service professionals help clients establish the financial security they want for themselves, their families and their businesses. firstname.lastname@example.org | 212.642.4829
1NWWealth: Global Wealth Migration Review, April 2019 2 https://www.migrationpolicy.org/article/frequently-requested-statistics-immigrants-and-immigration-united-statesCRN202110-254304