Moving to America
If you’re working with an athlete or performer thinking about a move to America, there are a few issues that regularly appear. How many days can they spend in the U.S. before becoming a tax resident? What happens to the wealth they’ve built up overseas? And what are the mistakes we see time and time again? This isn’t the whole playbook, but it’s the first few chapters.
Managing Days: When Do They Become a U.S. Resident
1. Substantial Presence Test: The U.S. has a rule that looks at how many days someone spends in the country over a three-year period, not just the first year.
2. Being a U.S. Tax Resident: If they meet the threshold under this test, they’ll likely be considered a U.S. resident and subject to tax on their worldwide affairs. Overseas wealth and structures that worked well up to this point may no longer be effective.
3. The Solution: If your player is approaching this threshold, seek advice early—that’s the window to plan.
Overseas Wealth: What Stays and What Goes
Many athletes and performers have savings or investments in their home country. Here’s what they need to think about:
1. Foreign Accounts: Accounts outside of America are subject to complex reporting requirements.
2. Investments: Some investment vehicles that worked brilliantly while the player was overseas might not translate well to the U.S.
3. Trusts/Businesses: Foreign trusts or businesses may come into scope for U.S. taxation or reporting.
Common Mistakes: What We See Too Often
1. Waiting Too Long to Plan: By the time someone becomes a U.S. tax resident, it’s often too late to restructure assets without incurring extra tax. Planning ahead—ideally one tax year in advance—can save the player money and stress.
2. Assuming “It’ll Be Fine”: High-profile athletes and entertainers are often targets for scrutiny. Rules around foreign accounts and income reporting are strict. Missing a filing or failing to adjust an investment can lead to steep fines.
3. U.S. Planning That Doesn’t Work Back Home: Setting up U.S. investments and structures might seem like the right move, but these may not be fit for purpose in their home country and could trigger taxes immediately or in the future.
Takeaways
If there are three helpful things to take away:
1. Understand when they’ll be considered a U.S. tax resident.
2. Remember that wealth held overseas is of interest to the IRS and may be taxed heavily if not structured properly.
3. Be cautious that investments set up in the U.S. may not work well when the player returns to their home country.
Estate Planning, Inheritance Tax Planning and Tax Planning are not regulated by the Financial Conduct Authority
Investment advice and investment advisory services offered and provided through Blacktower Financial Management US, LLC. This communication is for informational purposes only based on our understanding of current legislation and practices which are subject to change and are not intended to constitute, and should not be construed as, investment advice, tax advice, tax recommendations, investment recommendations or investment research. You should seek advice from a professional before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.
