# Minor children and renouncing US citizenship



## naughtynewsjunky

Hello,

First time here but my spouse and I are long-time expats with US/UK/EU citizenship. We're finally getting serious about the idea of renouncing our US citizenship as we're sure we'll never live there again.

However, we have two children (10 and 12 yrs old) who won't be able to renounce (if they so choose) for several more years.

I'm looking for information on how our renunciation might impact them. Are there any pitfalls we need to be aware of?

They earn interest on UK savings accounts, so would we still need to file FBAR and tax returns for them?

Our (very modest) assets are all in the UK, except for some old Roth and Sep IRA accounts that we haven't contributed to while living in Europe and a small amount of cash in bank accounts.

We have family in the US and there might be some small inheritances in the future.

What do we need to consider to make sure our decision to renounce doesn't negatively impact our kids?

Thanks in advance for sharing any info or experiences.


----------



## Bevdeforges

Just a consideration - doesn't appear to be an issue at present, but could become so in the future. You say you don't plan to live in the US again - however you still have family back there. Do you plan to return to visit those family members? There is a section somewhere in the law that says that someone who has renounced their US citizenship "may" be refused a visa to enter the US (and this includes entry under the Visa Waiver Program). This doesn't seem to be happening all that much currently, but future governments may go "a little crazy" on their promises for "immigration reform" and this is a popular way of showing a rabid commitment to "border security." At present, if your traveling documents show that you were born in the US, you will need to carry your CLN (Certificate of Loss of Nationality) with you to "prove" that you are no longer a US citizen.

We have heard from some folks who have difficulty with the ESTA registration process, which you need in order to board a flight to the US. Basically it seems that ESTA does require you to indicate your place of birth and that's where the problems start. There does seem to be a way around this, though someone who has managed to register with ESTA after renouncing will have to jump in here.

You also should be aware that once you "come out" to your banks and/or IRA holders in the US, they will ask you to file a W8-BEN so that they can properly withhold any withdrawals you make from your accounts. (At NRA rates - which amount to 30% flat. Financial institutions have various policies on this and may withhold 30% across the board on all withdrawals to NRAs - if they over withhold, you'll have to file a 1040-NR to get the excess withholding back, though on an NR filing, you only have to report US source income.)

I'm sure others who have dealt with this may have other thoughts - though basically, your kids should be OK until the point when they can decide for themselves what they want to do.


----------



## JustLurking

Bevdeforges said:


> You also should be aware that once you "come out" to your banks and/or IRA holders in the US, they will ask you to file a W8-BEN so that they can properly withhold any withdrawals you make from your accounts. At NRA rates - which amount to 30% flat. ...


Residents of the many countries with US tax treaties should be able to get their IRA or 401k provider to withhold only at the relevant treaty rate. Under the US/UK treaty, the applicable rate is zero US tax withholding on (non-lump sum) withdrawals from an IRA or 401k when paid to a UK resident US NRA. Article 17 paragraph 1.

Anecdotal reports suggest that neither Vanguard nor Fidelity withhold for US tax when given an appropriate and correct W-8BEN. Ditto the SSA. Other providers may vary, but may be ... persuadable, when faced with the appropriate IRS instructions.


----------



## Bevdeforges

Just check with your local US-[name of country] tax treaty to see what rate applies to you where you are living. Or actually, for many countries, it's a matter of which country claims first dibs on taxing pensions from the US.


----------



## Moulard

So long as you avoid covered expatriate status, then there should be no issues for your children.

Non-covered expatriates can make gifts or leave bequests to anyone at all. The recipients do not have any U.S. tax burdens except perhaps to report the gift or bequest should it be large enough to be reportable. If they end up having signature authority on your accounts as you enter your dotage that may trigger FBAR reporting requirements on your accounts for them, and obviously they will have the ongoing tax obligations of being a US citizen until such time as they are old enough to decide whether to follow suit.

Covered expatriates, on the other hand, cannot make a gift or leave a bequest to a U.S. citizen or resident without a traumatic tax liability being imposed on the recipient. I think it is a 40% tax.

There is a minimum threshold for small gifts and bequests ... somewhere about $14k USD I think, but the key point is if you will end up a covered expatriate then you may want to think.. and plan very carefully


----------



## Harry Moles

The issue of gifts and covered expatriate status and all that would only be a concern if the children were US taxpayers. Assuming the children have another citizenship and were born outside the US, they can easily avoid FATCA and stay completely off the IRS radar by not filing US tax returns. Different story if they decide to move the US, of course.


----------

