Lately, renouncing US citizenship has become more and more fashionable with the full implementation of the “Foreign Account Tax Compliance Act (also known as “FATCA”), looming on the horizon. If you wish to read more about the US tax consequences of expatriation or the latest legislative proposals heaping additional sanctions on certain expatriates, read my other blog postings here , here , here and here .
I am now more often receiving inquiries about expatriation from the foreign parents of a child born in the United States while the parents were studying there or were there on some other temporary basis. Increasing inquiries are also coming from parents of a child who was born overseas but to parents, only one of whom was a US citizen and who resided in the US for a certain time period before the child was born. In both of these cases, the children have acquired US citizenship “at birth”. In these sometimes frantic phone calls, the parents are protesting the child’s “involuntary” acquisition of US citizenship and want to know how soon it can be renounced. Lest everyone panic who is reading this post, it is important to note that children born in the United States to diplomats accredited to the United States are not subject to US jurisdiction and do not acquire US citizenship.
Brave New World — Assisted Reproduction (Sperm Donors and Egg Donor Can Transmit US Citizenship)!! What About Same-sex Marriages?
These issues are gaining prominence in the modern times in which we live and are very critical topics for Americans who are living abroad. According to Karl Jauch of the American Citizens Abroad Inc., based in Geneva, who has assisted many Americans with citizenship issues for several decades, the US Department of State applies a basic rule for recognizing US citizenship of children born abroad. Under this rule, what counts is the actual blood relationship and nothing else. In other words, if the donor is a US citizen, the donated ova or sperm can transmit the donor’s US citizenship to the future child. According to Mr. Jauch, “US citizenship is not automatically conferred by an American surrogate mother or a same-sex American partner. This situation can cause delight or anguish, depending on the circumstances, especially if the parent(s) were unclear about the legal situation beforehand.” So, before accepting that donated egg or sperm you had better check whether the child will be carrying the desirable? undesirable? US citizenship trait as well other traits! Mr. Jauch has prepared a very helpful set of FAQs regarding transmission of US citizenship. Access it here.
The Department of State information on the critical topic of an American’s use of assisted reproductive technology abroad can be found here.
Planning Will Help In Difficult Expatriation Cases
There are certain situations when giving up one’s US citizenship becomes extremely difficult, sometimes even impossible. In cases when a minor or mentally challenged individual wishes to renounce US citizenship special and very sensitive considerations come into play. In these cases, the individual should seek appropriate counsel as to what the US Consulate or Embassy will be looking for during an interview with the would-be renunciant and what factors are most important to the Department of State in approving the renunciation by issuance of that critical document called a Certificate of Loss of US Nationality (CLN) .
US tax planning in these cases is even more important. If the individual cannot expatriate currently, it is very important to structure his affairs to minimize any US tax bite during the time he remains a US citizen and in planning for a future expatriation. It the individual is under a permanent mental incapacity such that renunciation will never be possible, then proper planning of US tax matters becomes even more critical.
Next week’s blog post will cover the details and hurdles for expatriating minors and mentally challenged individuals.
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