For high-net-worth individuals and families with global wealth footprints, navigating the US tax system can be especially complex. If you are a US taxpayer with foreign ties—whether through offshore investments, foreign trusts, international businesses, or dual citizenship—your obligations extend far beyond the standard Form 1040.
Failing to comply with global reporting rules could expose you to significant penalties, audits, and even criminal liability. Avestar Capital highlights the critical tax and reporting considerations every UHNIS US taxpayer should understand.
Worldwide Income Is Taxable
All US citizens and resident aliens, regardless of where they reside, are taxed on their worldwide income. That means foreign salaries, dividends, rental income, and capital gains must all be reported to the IRS. UHNI taxpayers with cross-border investments must carefully track and disclose every income source—domestic or not.
If you have signature authority or financial interest in foreign accounts that exceed $10,000 in aggregate at any time during the year, you must file FinCEN Form 114, also known as the FBAR. This applies to offshore accounts, including those held in Swiss banks, Caribbean trusts, or European financial institutions.
Understanding CFCs, GILTI, and FEIE
Controlled Foreign Corporations (CFCs): If you own more than 50% of a foreign corporation (directly or indirectly), it may be classified as a Controlled Foreign Corporation (CFC).
GILTI (Global Intangible Low-Taxed Income): For US shareholders of CFCs it’s a must to include a portion of the company’s income on their US tax return—even if no distributions are made.
Foreign Earned Income Exclusion (FEIE): Expats may qualify to exclude up to $126,500 (2024 amount) of foreign earned income using Form 2555 under the FEIE.
Foreign Real Estate Reporting
While foreign real estate is generally not reportable on Form 8938 if held directly (not through a foreign entity), rental income and gains on sale must be reported. Also, if the real estate is held via a foreign corporation or trust, reporting is triggered.
Exit Tax for Expatriates
For US expatriation tax 2024, renouncing US citizenship or a green card may subject you to the exit tax if you’re classified as a “covered expatriate.” Criteria include net worth >$2 million or average annual tax liability >$201,000 (2024). A mark-to-market tax on unrealized gains may apply. Families considering citizenship planning or expatriation for tax reasons must perform a thorough net worth analysis and plan carefully to avoid surprise liabilities.
Estate and Gift Tax & Foreign Treaty Planning
Foreign estate tax planning in US are generally included citizen’s estate for estate tax purposes. If gifting foreign assets, the US gift tax still applies unless specific exclusions or treaties apply. Multi-jurisdictional families must coordinate estate planning across borders to avoid double taxation and unintended results in both US and foreign courts.
The US income tax treaties with many countries, which can help mitigate double taxation through foreign tax credits and reduced withholding rates. However, proper elections and disclosures are essential to benefit from these treaties. Sophisticated taxpayers often require tailored treaty-based structures in cross-border income management efficiently and legally.
Proactive Planning for Global Families
For UHNWIs and families with international exposure, US tax compliance is not just about avoiding penalties—it’s about preserving legacy wealth across generations and jurisdictions. With the IRS and foreign governments increasing information-sharing, the cost of oversight or delay is higher than ever.
Avestar Capital is a trusted multi-family office with global expertise can help structure, report, and optimize your cross-border holdings while remaining compliant. From FATCA to foreign trusts, from FBAR to GILTI, these are not issues to navigate alone.
