The new US exit tax scheme: breaking off a long-term relationship with Uncle Sam

The US ‘alternative tax regime’ in place since 17 June 2008 captures both US nationals who renounce citizenship and long-term residents who give up their ‘Green Cards’. The scheme subjects their non-retirement assets to an immediate mark-to-market tax on unrealized gains and levies other immediate or deferred income taxes on retirement assets. Furthermore, there is a new inheritance tax on the recipients of certain gifts or bequests from an expatriate. Creative planning, however, can circumvent the taxes entirely or at least ameliorate their effect. The ‘expatriation trust’ is the primary vehicle for providing relief.