Exceptional Investment Opportunities
A recent trend has become increasingly well established as a record number of international investors or foreign national buyers acquire U.S. real estate. Dwarfing the some $68 Billion spent in 2013, the total real property sales to international clients ballooned to over $92 billion in 2014. This trend is expected to continue well into 2015 and beyond as international buyers of real estate scoop up what is perceived to be exceptional investment opportunities. Many of these purchases involve high-end luxury properties and lavish estates.
The more popular states where buyer activity is centralized are places like New York, Texas and Florida as well as major portions of California. Desert southwest Arizona has also experienced its share of international investment activity. Here are three primary benefits that foreign national investors enjoy when choosing to buy a home in the United States.
1- Foreigners or non-U.S. citizens are able to own real estate that they purchase outright. They can legally hold title to the property - this is in stark contrast to what would be the case in most other countries.
2- One key advantage of owning property in America (as an international investor) is that the U.S. has an established economic and political landscape that is admired around the world.
3- Because the U.S. dollar is the world’s reserve currency buyers can expect a higher level of investment stability. In short, property values are better maintained and investments can be expected to hold their worth in a more predictable way.
While these advantages are well documented, there are a variety of estate taxation liabilities that must also be addressed by foreign nationals. International real estate investors are strongly encouraged to consult with an experienced estate-planning advisor or expert as a way to maximize tax credits and taxation efficiency issues. Successfully navigating the financial pitfalls of being an international investor in U.S. real estate can make the prospect of buying real estate in the United States much more appealing.
As such, it may be well worth considering a few clear and proven strategies available to non-resident buyers who may be wishing to more effectively manage tax exposure in the United States.
1- Perhaps one of the best ways of gaining much-needed tax credits is to purchase a life insurance policy. As discussed in other Silver Rock posts, a New York life insurance policy owned by a foreigner is not interpreted as being a part of a foreign national’s overall U.S. asset pool. A life insurance policy supports the intention of transferring an estate to heirs without tax penalties. It also provides for much needed cash flow in the case of a principle’s death.
2- Estate tax efficiency is improved for foreigners in light of the fact that the estate tax exemption is more than $5 million dollars for United States residents. While international investors are only entitled to a paltry $60,000 dollars in estate tax related exemptions. This is where a life insurance policy could have a big impact and level the playing field.
3- Strategic estate tax planning can help to protect the spouse of a non-U.S. citizen financially. This is simply due to the fact that a surviving spouse will typically be liable for estate taxes when the other spouse passes. Under this first-to-die circumstance the tax rate can exceed 40 percent. This can have a profound impact on a surviving spouse’s ability to enjoy maximum financial security. Tax efficiency planning is therefor a must today.