I am acting for a client who would like to put in place Lasting Powers of Attorney. However, her only child is about to become a US citizen and her child is concerned that if she becomes her mother’s attorney, FATCA will apply as she will have potential control over her mother’s investments. She is also worried that the IRS will want to tax her on the value of her mother’s assets.
As such, she is hesitant about taking on the role if FATCA will make it onerous.
There are no other family members on hand who can act and we are probably looking at an appointment of professional attorneys if it is onerous for daughter to act due to FATCA.
This is not something I have come up against or advised on in terms of LPAs – does anyone have experience of this or know where I can point my client’s daughter re her worries concerning becoming her mother’s attorney and her possible obligations under FATCA?
We attend to the administration of US assets on a daily basis and as such we have the need to look into FATCA frequently. For more complicated issues, we have found the Tax Attorneys at Bennett Thrasher to be very helpful. I have used Tim Kelly recently and found his advice to be thorough. Tim.Kelly@btcpa.net
You must distinguish between FATCA and the tax consequences. FATCA will apply in this case. FATCA merely requires that the IRS be informed of the situation, and the various Forms such as FinCEN Form 114 FBAR (which replaces TDF 90-22.1) will have to be filed by the US Citizen.
The tax consequences are different, and if the US citizen is merely in effect acting as a Trustee for her mother, and not applying any monies for herself, she should not be taxed in the USA, but any monies she does receive she must declare and pay any USA taxes that might be assessed upon her receipt of the monies. Do not overlook the Double Tax Agreement which does provide for an offset for UK Income tax against US Taxes.
Certainly professional USA accountancy advice should be sought from a person familiar with dealing in these situations. It is not for your usual high street accountant who is not familiar with foreign activities of US Citizens, as this is an area which is new, and is a minefield at this time.
Peter Double / Probate Resealing Services.
Thank you, this is very helpful. My client’s daughter is extremely wary of doing anything that may cause any complication. She is also mindful that this is a new area and there should hopefully be more clarity (and reassurances) for her as time passes.
Fortunately my client is fine to manage her own affairs for now and there is a limited EPA which we can fall back on if the position should change.