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  • Understanding California’s Revocable Transfer on Death Deed

    California Revocable Transfer on Death Deed – How it Works

    1. Makes a donative transfer of real property to a named beneficiary 2.  Operates on the transferor’s death 3.  Remains revocable until the transferor’s death 4.  Avoids Probate on Subject Real Property Residence

    California Revocable Transfer on Death Deed – Limits on Types of Properties

    • Residential 1-4 properties
    • Condominium units and
    • Single tract agricultural land (40 acres or less) improved with a single-family residence

    California Revocable Transfer on Death Deed – Requirements to Qualify

    1. The revocable Transfer on Death deed must be signed, dated and acknowledged before a notary public 2. Must be Recorded within Sixty (60) Days after Execution During the owner’s life, the deed does not affect his or her ownership rights and, specifically, is considered part of the owner’s estate for the purpose of Medi-Cal eligibility and reimbursement.

    California Revocable Transfer on Death Deed – How to Revoke

    1. Complete, have notarized and record a revocation form (the law creates a statutory form for this purpose) 2. Create, have notarized, and record a new Transfer on Death deed; and 3. Sell or give away the property, or transfer it to a trust, before your death and record the deed. 4. A Transfer on Death cannot be revoked by will 5. The law may void a revocable Transfer on Death deed if, at the time of the owner’s death, the property is titled in Joint Tenancy or as community property with right of survivorship

    California Revocable Transfer on Death Deed – How to Challenge

    • Challenge must be filed within 120 Days of Decedent’s Death
    • Lis Pendens must be filed within 120 Days of Decedent’s Death
    • Hearing must be held to determine validity of contest
    • It becomes Difficult to Sell RE subject to a Transfer on Death Deed within 120 days because a challenge can be filed at any time
    • Trusts and Wills can have NO CONTEST Clauses but not a Transfer on Death Deed
  • Inherited IRAs No Longer Protected From Creditors

    In a major decision, the Supreme Court ruled in June of 2014 that inherited IRAs are not considered protected retirement funds—and are thus subject to creditors’ claims if the beneficiary files for bankruptcy. In the case of Clark v. Rameker, Heidi Heffron-Clark argued that a $300,000 IRA she inherited from her mother in 2001 qualified as a protected retirement account. As such, she contended, the account was exempt from the claims of creditors after Heffron-Clark and her husband filed for bankruptcy in 2010. However, under U.S. tax code regarding inherited IRAs, Heffron-Clark was required to withdraw a minimum amount of money from the account each year, even though she is not yet retirement age. Given this, the court decided the account was not a protected retirement fund because the beneficiary wasn’t using it as one. Why does that matter? The Clark v. Rameker decision means that, in the case of bankrupt estates, inherited IRAs will now be considered assets—fully available to satisfy creditors’ claims. If you pass a retirement fund down to a child or grandchild, that inherited money will no longer be protected if your beneficiary must file for bankruptcy. What should I do? Careful estate planning can ensure that inherited IRAs remain safe from your beneficiary’s creditors. In most cases, establishing a Standalone Retirement Trust will protect your assets without restricting your beneficiary’s access to them. How does it work? Upon the retirement plan participant’s passing, his or her funds will flow into the third-party trust instead of passing directly to the beneficiary. Because the beneficiary does not establish the trust, doesn’t fund the trust with his or her own money, and cannot modify the trust, the trust will—in most jurisdictions—enjoy substantial protection from the claims of the beneficiary’s creditors. An independent trustee—who isn’t the beneficiary—can also be appointed to oversee the trust’s distributions in order to ensure further protection from creditors’ claims. What do I need to do? Make an appointment with an estate planner in your area to discuss your options. Standalone Retirement Trusts must be drafted carefully in order to ensure that the trust qualifies as a “Designated Beneficiary.” This guarantees that the trust will be able to take out the minimum required distributions according to the beneficiary’s life expectancy, not the plan participant’s. If the trust is not set up properly, the entire inherited IRA will need to be withdrawn within five years of the plan participant’s death. Work with a reputable planner to make sure your trust is structured correctly and that your beneficiary—and not his or her creditors—will receive the funds you pass down.  
     
  • IRS Examples of FLIP-CRUT Triggering Events that Work

    Oakland, CA – 800-775-7612 – Clearly, the whole FLIP-CRUT concept depends upon the Treasury Department’s meaning of a Triggering Event – at which time the Net Income CRT transforms to the Requirement CRT, with its yearly payment requirement. So let’s analyze this Triggering Event concept by checking out some essentials: 1. The Triggering Event must be clearly specified in the FLIP-CRUT document. Treas. Reg. §1.664-3(a)(1)(i)(c) 2. The Triggering Event may be a certain DATE that is defined in the FLIP-CRUT document OR it MAY be upon the specific occurrence of an EVENT, however:. If the Triggering Event is defined as an Event, then the occurrence of that Event can not be “Discretionary With”, or “Under the Control of” the Donor, the Trustee, or any other person. Treas. Reg. §1.664-3(a)(1)(i)(c)(1) Examples of Triggering Events that WOULD NOT Work. 1. Upon the choice of the Donor (or Trustee) to sell the profile of highly appreciated openly traded securities;. 2. Whenever the Trustee feels like it;. 3. Upon the advice of the Donor’s financial consultant, Certified Public Accountant or other fiduciary that now is a perfect time to sell. Each of these are examples of EVENTS that are “Discretionary With”, or “Under the Control of” the Donor, the Trustee, or any other individual. Examples of Triggering Events that WOULD Work:. 1. On the first day of June in the Third year after the FLIP-CRUT is established; 2. Upon the marriage, divorce, death, or birth of a child of the Donor; 3. Upon the sale of unmarketable properties that are not cash, money equivalents, or other possessions that can be readily offered or exchanged for money or cash equivalents. # 1 works due to the fact that it is a set date that is specified in the FLIP-CRUT document. # 2 works because these life occasions are not “Discretionary With”, or “Under the Control of” the Donor, the Trustee, or any other person. # 3 works due to the fact that the sale of unmarketable possessions requires two parties – a Buyer and a Seller – both of whom must concur on a a great deal of determining factors. Therefore, both sides are not “Discretionary With”, or “Under the Control of” the Donor, the Trustee, or any other individual. Additional Treasury Department Guidance as to Appropriate Triggering Events. In Treas. Reg. §1.664-3(a)(1)(i)(e) the Regulations provide seven (7) examples of exactly what an appropriate triggering event may look like. These “safe harbors” ought to not be thought about unique in nature. They are:. 1. Upon the sale of the Donor’s previous individual house;. 2. The sale of securities for which there is no offered securities exemption permitting a public sale. 3. When the income recipient reaches a particular age;. 4. When the Donor gets married;. 5. When the Donor divorces;. 6. When the earnings recipient’s first kid is born; and. 7. When the earnings recipient’s father passes away. While these are not the only scenarios that will certainly be authorized, each of them is a safe harbor, meaning they should be authorized if the fact-pattern matches the safe harbor. It is vital to have the guidance of competent legal and tax counsel when thinking about setting up a FLIP-CRUT. Connect with a Family Philanthropy Attorney at Ainer and Fraker 800-775-7612 right now to learn more about the incredible tax benefits of a FLIP-CRUT
  • A FLIP-CRUT is the Ideal Way to Sell Real Estate

    Orinda, CA – 800-775-7612 – Previously, we explored the FLIP-CRUT technique in which a Charitable Remainder Trust begins as as a Net Income Charitable Remainder Trust, and at the time of a “Triggering Event”, switches over to a Standard Charitable Remainder Trust at a predetermined Unitrust or Annuity payout. We also reviewed various Treasury Department definitions of Triggering Events, that are judged not subject to the control of the Trustee or Grantor or another person. Among the most popular examples of Triggering Events is the sale of Unmarketable Assets, for instance, the sale of a Personal Residence, or any other real or commercial property, securities or various business holdings that are not publicly traded, and therefore are without any type of formal marketplace to value and sell. In Treasury Regulations § 1.664-1(a)(7)(ii), the meaning of Unmarketable Assets includes: Assets that are not cash, cash equivalents, or other assets that can be readily sold or exchanged for cash or cash equivalents. For example, unmarketable assets include real property, closely-held stock, and an unregistered security for which there is no available exemption permitting public sale. Why this definition is essential when using a FLIP-CRUT to sell appreciated real estate. A Charitable Remainder Trust is an excellent way to postpone the tax on sale if you own a piece of real estate that has appreciated in value, so that selling it outright would trigger considerable capital gains tax. The IRS will unfortunately not allow the deduction due to the Step Transaction Doctrine if you contribute the real property to a Charitable Remainder Trust after a binding contract to sell already exists. Putting real property in a Standard Charitable Remainder Trust may also not be feasible due to its fixed annual obligation to distribute the Unitrust or Annuity amount to the Grantor. A Standard Charitable Remainder Trust will not work, if the real estate takes takes a while to sell (certainly more than a year). This is why the Treasury Departments inclusion of Real Property as not being readily marketable is crucial. It allows you to donate the property immediately, take the appropriate deductions, and after that convert to a Standard Charitable Remainder Trust after there is enough liquidity (post-sale) to achieve the yearly distribution requirements. The FLIP-CRUT is truly the preferred vehicle when selling appreciated assets that are not readily marketable, like real estate. Get in touch with a Charitable Giving Lawyer at Ainer and Fraker 800-775-7612 today to find out how you can profit from the incredibly powerful tax benefits of a FLIP-CRUT.
  • Exploring the Planned Giving Benefits of a FLIP-CRUT

    Saratoga, CA – 408-777-0776 – One of the most flexible techniques in the Planned Giving Attorney’s toolbox is the FLIP-CRUT. It helps clients who wish to contribute a specific piece of real estate (or other unmarketable assets) to a Charitable Remainder Trust, but they aren’t certain exactly when the real property is going to be sold. As a General Rule, this is going to be a big problem, since a Standard Charitable Remainder Trust is obligated to distribute its Unitrust or Annuity amount regardless of whether sufficient income exists. The FLIP-CRUT solves this problem by permitting you to defer the Unitrust or Annuity distribution until after the investment property (or other unmarketable asset) is sold. This is the way it works. Usually, a Charitable Remainder Trust is required to disburse either a fixed percentage (unitrust) or fixed payment amount (annuity) to the Donor, no less frequently than on an annual basis. But what happens the Trust doesn’t have assets that are capable of paying out the required amount yearly? The answer is to start with a Net Income Charitable Remainder Trust, which has provisions allowing it to switch over (or FLIP) into a Standard Charitable Remainder Trust on a specified event in the future. During the initial term, the CRT distributes the lesser of Net Income or the Unitrust amount. The amount paid out that year will be zero if there is no Net Income. Upon the occurrence of a “Triggering Event”, the Trust then converts to a Standard Charitable Remainder Trust, and pays out the originally specified percentage. For this client’s scenario, he contributed a $3.2 million piece of investment property, into an 8 %, 12 year FLIP-CRT. During the initial period, prior to the sale of the real estate, the net income will be zero. The CRT begins its annual 8 % unitrust distribution to the Grantor upon the occurrence of the Triggering Event – here in this situation the sale of the real estate. A couple of critical rules to the use of a FLIP-CRUT: (1) The “triggering event” may not be something that is “under the control” of the Donor. Interestingly enough, , the sale of real estate is not treated as to be “under the control” of the Grantor. (2) The Donor may also be the Trustee of the CRT in some cases. An outside Special Independent Trustee is going to be required to manage the transactions if hard to value assets are donated – such as real estate, partnership interests … pretty much anything other than cash or publicly traded securities . IN CONCLUSION: The FLIP-CRUT is an excellent instrument when you wish to donate Unmarketable Assets – or those that do not immediately produce income – to a Charitable Remainder Trust. You may still enjoy the substantial tax benefits of a Charitable Remainder Trust, while not being required to disperse Income until it is actually available. Get in touch with a Family Philanthropy Attorney at Ainer and Fraker 408-777-0776 right now to find out how you can profit from the amazing tax benefits of a FLIP-CRUT.
  • Tax Advantages of Selling Real Estate in a FLIP-CRUT

    San Jose, CA – (408) 777-0776 – In a prior post, we explored the FLIP-CRUT concept in which a Charitable Remainder Trust starts its life as a Net Income Charitable Remainder Trust, and at the time of a specific “Triggering Event”, converts to a Standard Charitable Remainder Trust with a defined Unitrust or Annuity distribution. Additionally we discussed various Treasury Department definitions of Triggering Events, that are deemed not under the control of the Trustee or Grantor or any other person. Among the most popular instances of Triggering Events is the sale of Unmarketable Assets, for instance, the sale of a Residential or Commercial property, closely-held securities or various business holdings that are not publicly traded, and therefore are without any sort of formal marketplace to value and sell. Looking at Treasury Regulations § 1.664-1(a)(7)(ii), the definition of Unmarketable Assets includes: Assets that are not cash, cash equivalents, or other assets that can be readily sold or exchanged for cash or cash equivalents. For example, unmarketable assets include real property, closely-held stock, and an unregistered security for which there is no available exemption permitting public sale. Why this definition is essential when using a FLIP-CRUT to sell appreciated real estate. A Charitable Remainder Trust is an exceptional way to postpone the tax at the time of sale if you own a piece of investment that has appreciated in value, and selling it outright would cause substantial capital gains. The IRS will prohibit the deduction due to the Step Transaction Doctrine if you contribute the real property to a Charitable Remainder Trust once an irrevocable commitment to sell exists. Contributing real property in a Standard Charitable Remainder Trust is also problematic due to its predetermined yearly obligation to pay the income to the Donor. A Standard Charitable Remainder Trust does not work, if the investment property takes takes a good amount of time to sell (certainly more than a year). This is why the inclusion by the Treasury Deparment of Real Property as not being readily marketable is essential. It allows you to grant the asset immediately, qualify for the appropriate deductions, and then make the conversion to a Standard Charitable Remainder Trust after there is enough liquidity (post-sale) to accomplish the annual distribution requirements. The FLIP-CRUT is really the best vehicle when offering for sale appreciated assets that are not readily marketable, like real property. To learn how you can take advantage of the amazing tax advantages of a FLIP-CRUT Contact a Charitable Giving Attorney at Ainer and Fraker 800-775-7612 right away.
  • What FLIP-CRUT Triggering Events will the IRS Permit?

    Los Gatos, CA – 800-775-7612 – In a prior post, we went over the FLIP-CRUT idea in which a Charitable Remainder Trust starts its life as a Net Income Charitable Remainder Trust, and upon a “Triggering Event”, transforms to a Standard Charitable Remainder Trust at a fixed percentage distribution. Certainly, the whole FLIP-CRUT idea depends upon the Treasury Department’s definition of a Triggering Event – at which time the Net Income CRT converts to the Standard CRT, with its yearly payment requirement. So let’s analyze this Triggering Event concept by exploring some fundamentals: 1. The Triggering Event must be clearly defined in the FLIP-CRUT document Treas. Reg. §1.664-3(a)(1)(i)(c) 2. The Triggering Event may be a certain DATE that is specified in the FLIP-CRUT document OR it MAY be upon the certain incident of an OCCASION:. 3. If the Triggering Event is specified as an Event, then the event of that Event needs to not be “Discretionary With”, or “Under the Control of” the Donor, the Trustee, or other individual. Treas. Reg. §1.664-3(a)(1)(i)(c)(1) Examples of Triggering Events that WOULD NOT Work. 1. Upon the decision of the Donor (or Trustee) to offer the portfolio of extremely valued openly traded securities;. 2. Whenever the Trustee gets around to it;. 3. Upon the recommendations of the Donor’s financial advisor, CPA or other fiduciary that now is an ideal time to offer. Each of these are examples of EVENTS that are “Discretionary With”, or “Under the Control of” the Donor, the Trustee, or any other person. Examples of Triggering Events that WOULD Work:. 1. On the very first day of June in the 3rd year after the FLIP-CRUT is established;. 2. Upon the marriage, divorce, death, or birth of a child of the Donor;. 3. Upon the sale of unmarketable assets that are not cash, money equivalents, or other possessions that can be easily offered or exchanged for money or cash equivalents. # 1 works because it is a set date that is specified in the FLIP-CRUT document. # 2 works due to the fact that these life events are not “Discretionary With”, or “Under the Control of” the Donor, the Trustee, or any other person. # 3 works due to the fact that the sale of unmarketable assets requires two parties – a Buyer and a Seller – both of whom should concur on a a great deal of figuring out factors. Both sides are not “Discretionary With”, or “Under the Control of” the Donor, the Trustee, or any other individual. Additional Treasury Department Guidance about Acceptable Triggering Events. In Treas. Reg. §1.664-3(a)(1)(i)(e) the Regulations offer seven (7) examples of exactly what an acceptable triggering occasion may look like. These “safe harbors” should not be considered exclusive in nature. They are:. 1. Upon the sale of the Donor’s former individual residence;. 2. The sale of securities for which there is no available securities exemption allowing a public sale. 3. When the income recipient reaches a specific age;. 4. When the Donor gets married;. 5. When the Donor divorces;. 6. When the income recipient’s very first child is born; and. 7. When the earnings recipient’s father dies. While these are not the only circumstances that will be approved, each of them is a safe harbor, indicating they should be authorized if the fact-pattern matches the safe harbor. When considering setting up a FLIP-CRUT, it is critical to have the advice of competent legal and tax counsel. To learn more about the amazing tax benefits of a FLIP-CRUT Consult with a Planned Giving Attorney at Ainer and Fraker 408-777-0776 right away.
  • The FLIP-CRUT is One of the Most Flexible Tools in Planned Giving

    Oakland, CA – 408-777-0776 – One of the most flexible techniques in Charitable Giving is the FLIP-CRUT. The FLIP-CRUT helps clients solve the problem where they wish to donate a specific piece of real estate (or other non-liquid property) to a Charitable Remainder Trust, but they aren’t sure exactly when the real property will be sold. As a General Rule, this is going to be a problem, since a Standard Charitable Remainder Trust is always required to distribute its Unitrust or Annuity amount, whether or not adequate income exists. The FLIP-CRUT overcomes this problem by enabling you to defer the Unitrust or Annuity payout until after the real estate (or other non-liquid property) is sold. Here’s how it works: Normally, a Charitable Remainder Trust is required to pay out either a fixed percentage (unitrust) or fixed dollar amount (annuity) to the Income Recipient, no less than on an annual basis. What happens if the Trust doesn’t have sufficient assets that are capable of generating the required amount annually? The solution is to start with a Net Income Charitable Remainder Trust, which contains provisions permitting it to switch over (or FLIP) into a Standard Charitable Remainder Trust on a specified future event. During the initial period, the CRT will distribute the lesser of Net Income or the Unitrust amount. If there is no Net Income, then the amount distributed during that period will be zero. Upon the occurrence of a “Triggering Event”, the Trust then converts to a Standard CRT, and pays out the originally defined percentage. In this particular client’s example, he donated a $3.2 million piece of investment property, into an 8 %, 12 year FLIP-CRT. The net income is going to be zero during the initial period, prior to the sale of the real property. However, upon the occurrence of the Triggering Event – in this instance the sale of the real property – the CRT begins its annual 8 % unitrust distribution to the Client. Here are a few essential rules to using a FLIP-CRUT: (1) The “triggering event” may not be something that is “under the control” of the Grantor. Interestingly enough, however, the sale of real estate is not considered being “under the control” of the Grantor. (2) The Client can also serve as the Trustee of the CRT in certain cases. However, if hard to value assets are donated – such as real property, partnership interests … essentially anything other than cash or publicly traded securities – than an outside Special Independent Trustee will be required to manage those transactions. IN CONCLUSION: The FLIP-CRUT is actually a great instrument when you want to transfer Unmarketable Assets – or those that may not immediately produce income – to a CRT. You will still enjoy the substantial tax benefits of a CRT, while not being required to payout Income until it is actually available. To learn how you can profit from the incredible tax benefits of a FLIP-CRUT Get in touch with a Planned Giving Attorney with Ainer and Fraker 408-777-0776 right away.
  • Mandatory Health Insurance Starts This Month—Are You Ready?

    Tax Attorneys at Ainer & Fraker, LLP Discuss the Mandatory Health Insurance Requirements of the Affordable Care Act (Obamacare) in 2014. Beginning in January 2014, everyone, with certain exceptions, is required to have minimum, essential health care insurance. This issue has received a significant amount of press coverage recently, both negative and positive. Regardless of your opinion related to the issue, the mandatory insurance requirement, together with the accompanying penalties for not being insured, premium assistance credits, and insurance subsidies, all begin in 2014. The new marketplace, also called exchanges, where insurance policies can be purchased, have debuted already, but with mixed success. These new provisions are all part of the Affordable Care Act (sometimes referred to as Obamacare) that are being phased in over a number of years. How this will affect you and your family will depend upon a number of issues: Already insured – If you are already be insured through an employer plan, Medicare, Medicaid, the Veterans Administration, or a private plan that provides minimal, essential health care, then you will not be subject to any penalties under this new law. Those exempt from the mandatory insurance requirement – The following individuals are exempt from the insurance mandate, and will not be subject to a penalty for being uninsured: Individuals who have a religious exemption Those not lawfully present in the United States Incarcerated individuals Those who cannot afford coverage based on formulas contained in the law Those who have an income below the federal income tax filing threshold Those who are members of Indian tribes Those who were uninsured for short coverage gaps of less than three months Those who have received a hardship waiver from the Secretary of Health and Human Services, who are residing outside of the United States, or who are bona fide residents of any possession of the United States. Help for those who can’t afford coverage – Individuals and families whose household income is between 100% and 400% of the federal poverty level will qualify for a varying amount of subsidies to help pay for the insurance in the form of a Premium Assistance Credit. The lower the income, the more substantial the credit, which slowly phases out as the income increases, and is totally eliminated when the income reaches 400% of the poverty level. For those in the lower income levels, the subsidy will usually cover the bulk of the insurance costs. To qualify for that credit, the insurance must be acquired from an insurance exchange operated by the individual’s or family’s resident state, or by the federal government when the state does not have an exchange. These exchanges have been up and running (more or less) since October 1, 2013, allowing individuals and families to apply for coverage which will become effective as of January 1, 2014. There has been considerable negative press related to the federal exchange. The federal Internet site has not been functioning efficiently, but the administration says the problems will be corrected so everyone who needs to, can apply. Individuals who reside in states with their own exchange will use their state’s exchange and should not be concerned with the federal exchange. In general, the state-run exchanges seem to be operating smoother than the federal exchange, but some of the state exchanges have also had their problems. Some insurance companies offering insurance through an exchange also offer assistance in signing up through the exchange without going through the website. But be cautious—to be eligible for a subsidy, the insurance must be purchased through an exchange. If you purchase a policy directly from an insurance company without going through an exchange, you won’t be qualified for a subsidy, regardless of your income level. It is important to note that the subsidy is really a tax credit based upon family income. It can be estimated in advance, and used to reduce the monthly insurance premiums; it can be claimed as a refundable credit on the tax return for the year; or it can be some combination of both. However, it is based upon the current year’s income and must be reconciled on the tax return for the year. If too much was used as a premium subsidy, some portion may need to be repaid. If there is an excess, it is refundable. If household income is below 100% of the poverty level, the individual or family qualifies for Medicaid. Penalty for noncompliance – The penalty for noncompliance will be the greater of either a flat dollar amount or a percentage of income: For 2014, $95 per uninsured adult ($47.50 for a child), or 1 percent of household income over the income tax filing threshold For 2015, $325 per uninsured adult ($162.50 for a child), or 2 percent of household income over the income tax filing threshold For 2016 and beyond, $695 per uninsured adult ($347.50 for a child), or 2.5 percent of household income over the income tax filing threshold Flat dollar amounts – The flat dollar amount for a family will be capped at 300% of the adult amount. For example, in 2014, the first year for the penalty, the maximum penalty for a family will be $285 (300% of $95). But for 2016, the maximum penalty jumps to $2,085 (300% of $695). The child rate will apply to family members under the age of 18. Overall penalty cap – The overall penalty will be capped at the national average premium for a minimal, essential coverage plan purchased through an exchange. This amount won’t be known until a later date. Please Contact a Tax Attorney at Ainer & Fraker, LLP if you have any questions as to how the new insurance requirements of the Affordable Care Act (Obamacare) will affect you.  
  • IRS Form 8938 – Who is Required to File?

    According to the IRS, certain U.S. taxpayers holding specified foreign financial assets with an aggregate value exceeding $50,000 will report information about those assets on new Form 8938, which must be attached to the taxpayer’s annual income tax return. Higher asset thresholds apply to U.S. taxpayers who file a joint tax return or who reside abroad (see below). IRS Form 8938 reporting applies for specified foreign financial assets in which the taxpayer has an interest in taxable years starting after March 18, 2010. Upon issuance of regulations, FATCA may require reporting by specified domestic entities. For now, only specified individuals are required to file IRS Form 8938.
    • If you do not have to file an income tax return for the tax year, you do not need to file Form 8938, even if the value of your specified foreign assets is more than the appropriate reporting threshold.
    • If you are required to file Form 8938, you do not have to report financial accounts maintained by:
    • a U.S. payer (such as a U.S. domestic financial institution),
    • the foreign branch of a U.S. financial institution, or
    • the U.S. branch of a foreign financial institution.
    Refer to IRS Form 8938 instructions for more information on assets that do not have to be reported. You must file Form 8938 if: 1. You are a specified individual. A specified individual is: A U.S. citizen A resident alien of the United States for any part of the tax year (see Pub. 519 for more information) A nonresident alien who makes an election to be treated as resident alien for purposes of filing a joint income tax return A nonresident alien who is a bona fide resident of American Samoa or Puerto Rico (See Pub. 570 for definition of a bona fide resident) AND 2. You have an interest in specified foreign financial assets required to be reported. A specified foreign financial asset is: Any financial account maintained by a foreign financial institution, except as indicated above Other foreign financial assets held for investment that are not in an account maintained by a US or foreign financial institution, namely: Stock or securities issued by someone other than a U.S. person Any interest in a foreign entity, and Any financial instrument or contract that has as an issuer or counterparty that is other than a U.S. person. Refer to the Form 8938 instructions for more information on the definition of a specified foreign financial assets and when you have an interest in such an asset. AND 3. The aggregate value of your specified foreign financial assets is more than the reporting thresholds that applies to you: Unmarried taxpayers living in the US: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year Married taxpayers filing a joint income tax return and living in the US: The total value of your specified foreign financial assets is more than $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year Married taxpayers filing separate income tax returns and living in the US: The total value of your specified foreign financial assets is more than $50,000 on the last day of the tax year or more than $75,000 at any time during the tax year. Taxpayers living abroad. You are a taxpayer living abroad if: You are a U.S. citizen whose tax home is in a foreign country and you are either a bona fide resident of a foreign country or countries for an uninterrupted period that includes the entire tax year, or You are a US citizen or resident, who during a period of 12 consecutive months ending in the tax year is physically present in a foreign country or countries at least 330 days. If you are a taxpayer living abroad you must file if: You are filing a return other than a joint return and the total value of your specified foreign assets is more than $200,000 on the last day of the tax year or more than $300,000 at any time during the year; or You are filing a joint return and the value of your specified foreign asset is more than $400,000 on the last day of the tax year or more than $600,000 at any time during the year. Refer to the Form 8938 instructions for information on how to determine the total value of your specified foreign financial assets. Reporting specified foreign financial assets on other forms filed with the IRS. If you are required to file a Form 8938 and you have a specified foreign financial asset reported on Form 3520, Form 3520-A, Form 5471, Form 8621, Form 8865, or Form 8891, you do not need to report the asset on Form 8938. However, you must identify on Part IV of your Form 8938 which and how many of these form(s) report the specified foreign financial assets. Even if a specified foreign financial asset is reported on a form listed above, you must still include the value of the asset in determining whether the aggregate value of your specified foreign financial assets is more than the reporting threshold that applies to you. Please Contact an International Tax Attorney at Ainer & Fraker, LLP if you have questions about the IRS Form 8938 Statement of Specified Foreign Financial Assets and its reporting requirements.