(photo credit: Thinkstock/Imagebank)
The Association of Americans and Canadians in Israel has appealed to the US
Congress to correct a “major flaw” in the estate tax, which it claims unfairly
discriminates against many US citizens living abroad.
president Asa Cohen wrote to House Ways and Means Committee Chairman Dave Camp
last week, pointing out that the estate-and gift-tax exclusion for US citizens
and green-card holders is capped at $5,000,000, while the exclusion for
nonresident aliens is limited to only $60,000. Since 1988, Cohen said, the
exclusion for citizens and green-card holders has grown almost eight-fold, but
the nonresident exclusion has not changed.
Many of the 180,000 US
citizens who reside in Israel are married to nonresident aliens, and many of
these couples have bank accounts and investments in the US as joint tenants,
Cohen wrote. They often wrongly assume that the exclusion applicable to one
spouse’s estate is also applicable to the other spouse’s estate and are
“flabbergasted” to discover that the exclusion is only $60,000 and that they are
subject to a heavy tax.
“The situation is not only fundamentally unfair,
but dangerous,” Cohen wrote. He warned that if nonresidents with bank or
brokerage accounts in the US discover the “woefully inadequate exclusion,” there
may well be a large number of accounts removed from US banks and brokerage
houses and taken abroad. In addition to posing a risk to AACI members, he added,
this will also have an obvious impact on the American economy.