Tuesday, April 15th, 2014, 6-8pm at Espace MLK
I. Introduction.
Jessica welcomed all participants and introduced panel members.
• Lucy Laederich, president of AARO
• Kathleen de Carbuccia
• Tim Ramier
• John Fredenberger
Each panel member then proceeded to present the issues they're concerned with, answer questions sent in prior to the workshop by attendees, and then opened the floor to questions where time permitted.
II. Lucy Laederich, background information on AARO (Association of Americans Resident Overseas).
• AARO is a global, member-based organization formed in 1973 to advocate for overseas Americans.
• AARO was instrumental in getting the vote for overseas Americans in 1975 and other various changes in citizenship laws over the years. Brochures available about AARO's work (see website: aaro.org).
• AARO members make regular trips to Washington DC to lobby for Americans. AARO has worked on several issues over the years (social security, voting, citizenship, banking), but currently the main issue is taxes, and recent legislation affecting American women living abroad with foreign spouses and partners. (Women finding themselves vulnerable because they are deciding to be removed from joint accounts to avoid reporting to the US govt.)
• Lucy encouraged AWG members to join AARO, and reminded us that whether we decide to join or not, AARO is there to support us. AARO has good relations with a number of offices in DC and will do their best to take our story where it should be heard.
• Lucy reminded us that it's very easy to register to vote. Advice from AARO: Vote in federal elections. You have protections under the UOCAVA (Uniformed and Overseas Citizens Absentee Voting Act). If you vote in local elections, you lose those protections. (California is the worst state. If you vote local in Californian they'll come after you for taxes and jury duty.)
III. Kathleen de Carbuccia, Citizenship.
• Rules about citizenship for children born abroad: Can become citizens at birth if they're born abroad to two American parents or one American parent who has lived in the US after the age of 14, or if born abroad to unwed mother who has lived in the US for one uninterrupted year.
• Two other ways to obtain citizenship: must be used before kids are 18 and assume they have at least one American citizen parent and child must be in physical and legal custody of both parents. Timing is uncertain. First way is called facilitated naturalization (law passed in 1990s), which allows kid to get citizenship if American grandparent had lived for at least 5 years in the US after age 14. Must apply to USCIS office in the US, provide required documentation, prove grandparent fulfills requirements, get tourist visa, brief interview/meeting, and then go to the US. Second way is via immigrant visa from local consulate. Nowadays, if you go to a consulate, you need to go though USCIS. Takes months and costs hundreds of dollars. Very hard to get reliable information. Start early and be prepared for lots of delays. This method is becoming more complicated, onerous and time consuming. Can be done, but requires patience.
• If you don't do either these methods, your child is in the same situation as a foreigner if he/she wants to immigrate to the US at the age of 18 and must apply for a visa. If you, the parent, fulfill the residency requirement and you don't ask for a passport for your child, your child could still be required to file taxes.
• How to prove residence in the US? Use third party sources: College transcript, pay slip, family membership at the local country club has worked. Must have credible documentation.
• Should you try to get citizenship for your children? Until recently, people were largely unaware of tax obligations and thought more about advantages of getting citizenship: can travel to the US easily, can work there, get scholarships to study. Disadvantages: military service (no draft, but still something to think about), and taxes.
• You can renounce your American citizenship at age 18 fairly easily. Something to consider if you're certain of where your kids are going to spend their lives.
• Kathleen encouraged AWG to cultivate the local consulate officers in Marseille and establish a rapport to facilitate relationships. She also advised sending any problems to AARO. AARO can take that info to the State Dept and advocate.
IV. Tim Ramier, Estate Planning. (See Tim’s handout: Surviving Death in France as a U.S. Citizen and Estate Planning in a Rapidly Changing Franco-American World for more detailed information.)
• The State Dept has a duty to help overseas Americans. They're starting to close down services all over the world, so contact the State Dept to make an effort to keep our administrators in DC aware of our issues. State Dept knows there are 8 million Americans living abroad but no voice in DC.
• Estate planning. As an American citizen, your estate is taxable. Because you're a French resident, all your worldwide assets are taxable. First piece of advice: prepare. Start by taking an inventory of your assets, where they are, and create a file for those who'll come after you. The US isn’t concerned about who you're going to give your assets to, they just want to know how big your pie is and want a slice. If your estate doesn't exceed a certain threshold (currently $5,350,000), you don't owe anything to the US. Make sure your assets are easily transferable to designated heirs. Bank will require you to prove you've filed the required papers with the US. You can leave your money to whoever you want.
• The French have a different system. The French system decides who will inherit from you (children and spouse). 60% of estate goes to French govt if you don't have family members to inherit from you. Tim recommends making a will. Designate an executor to administer and manage your assets. Deposit a will where your US bank is located. If you don't do a will, you have to prove who inherits and the procedure becomes more administrative. Much easier if you have a valid will that can be probated in the US. If you are beneficiary of a trust fund, you have to declare it to the French or the trust will be taxed by the French government.
• Advice: Draft a will both for the US assets and French assets or a US will for anything you have outside of France. If you don't have any children and are married or have a civil union, anything you leave to your spouse won't be taxed. Children still have to pay tax above 100,000€ deduction. As a US citizen, you can do will in France or in US as there is a treaty between the two countries. Or you can do a French holographic will in the French civil code. Handwritten, signed and dated and even written in English.
• In case of becoming incapacitated: the US has trouble recognizing French tuteur. Try to give power of attorney to someone.
• Contrat de mariage. If you were married in France, you inherit communal property. There's a presumption that everything in your marriage is community. Even if one spouse brought a lot more in assets, and you're under community property, you only declare half of assets.
• Answer to question 11 (see list of questions distributed to participants). If you have a non-US spouse, the US only allows the same amount as the exclusionary amount. You can leave your $5,350,000 to your spouse.
• Question 12. You have to probate. In the US, we consider the estate as an entity. French law considers the estate as a void. Inquire with your US bank if they'll respect the pay on death form. You can fill it out and file it with your bank. It's a beneficiary clause. The beneficiary should be able to demonstrate with a death certificate. Send French death certificate to consulate to get it certified and recognize death of American citizen. There have been recent cases of US banks refusing or blocking account because person lives abroad. Bank might go to the IRS to make sure no tax due on account. Do TOD/POD / joint account document, but no guarantee survivor will be able to access the money without jumping through hoops. A Will will facilitate transfer of funds. French notaires are quasi govt officials.
• Question 13. If you're receiving a retirement from France, only France gets to tax it. Same with the US, only the US gets to tax it if it's from the US. Different regimes for each country. Technical issue.
• Lucy reminded us that AARO is finalizing a survey specifically on any problems you've had with your bank in France or the US as DC has asked for concrete statistics. Survey will be on AARO website soon. Please respond and share with other members of expat community. Please provide specific facts.
IV. John Fredenberger, Taxes. (See John’s handout for more detailed information.)
• When you get your French tax form, question on page 2 about who has to file. The French instruction this year says everyone has to file an income tax return for 2013 regardless of whether you had any income or any tax due if you're domiciled in France. Physical presence for 183 days, and 3 other rules.
• NIIT. (Net Investment Income Tax) If you have income over certain amounts, must pay 3.8% to help fund health care in the US. Even if you live and work abroad, you're required to file. See the case of George Friendly on John's handout.
• FBAR. (Foreign Bank Account Report) Began in 1970. Any American citizen with more than $10,000 liquidity outside the US has to report. If you’ve had an aggregate balance of 7000€ in your account at any time over the past year, you must report. AARO is putting pressure on US congress to raise minimum filing requirement. The response is lukewarm. Foreign spouse can file with American spouse as married filing jointly or can file as married filing separately. Many foreign spouses don’t want to file with American spouse. Must report joint account balance if over 7000€ threshold to US. Do FBAR by June 30th.
• FATCA. (Foreign Account Tax Compliant Act) Federal Penalty for not filing: 50% of maximum balance or $100,000.
• Way to avoid: Under communauté universelle, doesn't matter who's name is on the account because all your assets are considered both of yours
• Minimum income threshold $20,000 for married filing jointly. Threshold for married filing separately: $3,900. Threshold for a single person: $10,000. Decide if you want to file jointly or married filing separately.
• John's advice: It's easy to file, comply, and get back into the system now. This is the ideal time because there are budget cutbacks and fewer employees at the IRS. They don’t have the staff or budget to go after you (145,000,000 tax returns filed for 2012 in the US.) The US wants citizens abroad to comply. The IRS has under 10% compliance rate of 8,000,000 American expats. If you’re out of the system, panel advises: File tax return for 2013 and that should be sufficient.
• No link at the present time between passport renewal and tax returns. About a year and a half ago, the State Dept put on the website instructions that they would and could share info with other departments. Info on the passport renewal form can go to the IRS.
• AARO has a “friend” at the IRS. Nina Olson is a taxpayer advocate who defends US citizens at She works for fair fax treatment for US citizens. Staff of 130 to handle our issues.
• If in 2012 you earned less than $97000 you will not be taxed. You still have to file.
• You can deduct a habitation tax. And property tax.
• Assurance vie. Constant dispute between US and France. A real problem about how to treat it. The IRS doesn't recognize it as a tax deferred product. (Not like a 401K from the US point of view.) If you take a distribution out of it, that's where the possible tax incident occurs. It's a foreign account, should be declared if the maximum balance is over 7000€. (Must convert to dollars. Last year, 1€ = $0.783.) Get current figure from IRS website.
• IRS has now created tax topic index on its website, and very useful with country specific information. Download and read tax guide from IRS website. Must be filed online. First 5 pages provide basic information.
• French banks have already started reporting US citizens' bank accounts to US govt. Panel raised question about our security, as third party is being hired to obtain this information from French banks and this info could be hacked / used for malicious purposes.
Respectfully submitted,
Noel Gaussens
Secretary.
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