Matthew Ledvina

As with life insurance, annuities are tax-favored investments under the Code. Unlike life insurance, however, the primary income tax benefit of an annuity is derived from the compounding effect of the tax deferral on the investment gains within the contract, rather than the avoidance of income tax, as with investment in a life insurance policy. Generally, under § 72(a), gross income includes any amount received as an annuity under an annuity, endowment, or life insurance contract. The income tax effect of an annuity depends, however, on numerous factors, such as whether the tax is being applied to a distribution during the a nnuity’s accumulation period or annuitization period and whether the distribution occurs after the death of the holder of the annuity contract or after the death of the annuitant (assuming that the holder and the annuitant are different persons). Section 72: Annuity Contract Defined To qualify as an annuity, the annuity contract must satisfy the requirements o...

Being a high net worth individual allows you to see and do more than you ever dreamed of, but it also produces a number of issues which can require detailed planning. Moving your assets into the US can often feel confusing and overwhelming, and it can be a stressful and time-consuming process if done incorrectly. To give you an idea of how you can tackle the issues involved many overlook, we’ve create a simple guide that talks you through everything you need to know.   The Importance of Avoiding Gray Areas Clarity is the name of the game when it comes to the complex issue of cross-border taxation. Just because something isn’t prohibited doesn’t necessarily mean it’s a good idea, which is why it’s vital to get all of the basics in order in a proven way. Once you have a solid foundation, it’s then much more straightforward to fine tune everything else.   Accounting For State-Specific Taxation The state you move to can have a significant impact on how your assets and esta...

  N onresidents and residents face a different set of rules when filing their taxes in the United States than those who are citizens. Filers who are not citizens may be excused from declaring definite types of income, based on their circumstances. Resident aliens are not US citizens but they have green cards enabling them to work in the US or they have been in the country for no less than 183 days over a three-year period including the present year. Nonresident aliens are in the United States legally but do not have green cards. They may be tourists or other visitors.   Taxation of Nonresident Aliens Nonresident aliens are needed to pay income tax only on income that is earned in the United States or earned from a US source. They do not have to pay tax on foreign-earned earnings. Investment income comprehended in the US that is not from a US source is taxed at the rate of 30% usually unless otherwise specified by treaty. Nonresident aliens should keep records to show the...

  A U.S. person is entitled to a 100 percent estate tax marital deduction for assets left to his or her surviving spouse if the spouse is a U.S. citizen. This applies also to an NRA who leaves U.S. situs assets to the surviving U.S. citizen spouse. However, in either case, if the surviving spouse is not a U.S. citizen, the estate tax marital deduction is not available unless the assets pass to a qualified domestic trust (QDT). (IRC § 2056 (d)(2)(A))  To qualify, a QDT must meet the following requirements:   1.     The trust must pay all income to the surviving spouse for life. 2.     The trust may not permit principal distributions to anyone other than the surviving spouse during his or her life. Any principal distributions to the surviving spouse (except distributions for hardship) will be subject to estate tax at the time of distribution at the top bracket of the deceased spouse's estate. The remaining principal in the trust on the d...

A. NRAs Generally: Reducing U.S. Taxes  The three cardinal rules for NRAs who wish to minimize U.S. taxes are: 1.     Minimize contacts with the United States to avoid becoming U.S. residents for income or estate tax purposes. 2.     Minimize U.S. situs assets to avoid estate taxation. Typically, this means holding U.S. real estate, tangibles located in the United States and shares of stock of U.S. corporations through non-U.S. corporations (or entities that can elect to be treated as non-U.S. corporations). This step offers no protection from income taxes on U.S. source income; the income is still payable to a non-U.S. entity and thus subject to income tax withholding. Also, the transfer of U.S. real estate to the non-U.S. corporation may have income tax consequences. (In some cases, an irrevocable trust may be structured to serve as an effective estate tax blocker.) 3.     Minimize taxable U.S. source income to avoid U.S. inc...

E state planning for non-U.S. persons differs from domestic planning, not only in the specific rules that apply but also in the mental outlook that the planner must bring to the process. To put it simply, in planning for a U.S. person we begin with the assumption that all income and assets are subject to U.S. income, estate and gift taxes, and we then hunt for exceptions (aka "loopholes") that will shelter some income and assets from these taxes, e.g., municipal bond interest, charitable deductions, the estate tax marital deduction. Non-U.S. persons, on the other hand, start out in an environment in which no U.S. income or estate taxes are payable , and the planner's job is to keep an eye out for pitfalls (U.S. residence, U.S. source income and U.S. situs assets) that may create such taxes. WHO IS A U.S. PERSON? A.    Individuals, Corporations and Trusts. The term "U.S. person" includes U.S. individuals as well as domestic corporations and U.S. trusts. (IRC § ...

High net worth individuals looking to protect their assets from taxation are often faced with a variety of challenging decisions. They know the end result they want to achieve, but the processes and options at their disposal can often feel like they’re written in a foreign language. To give you some food for thought we’re going to take a look at the issue of accumulation distribution: what it is, why it occurs, and how to solve it. That way you’ll be able to make an informed decision that will stand the test of time. What is Accumulation? High net worth individuals will commonly set up Foreign Non-Grantor Trusts (FNGTs). These are legal tools that allow a non-US citizen to transfer their income to a US beneficiary in a safe and secure way. A common example of this would be a high net worth parent looking to financially support a child or relative living in the US. Whilst FGNTs have a number of attractive benefits, they can also have their downsides if not structured ...

Matthew Ledvina has taken his extensive legal and tax training into the world of an exciting new Fintech company in London. While he is slowly moving on from the day-to-day of tax advisory, he has left behind some accomplishments and legacy in the field. After working at Baker McKenzie, a prestigious law firm with offices spanning Europe, for several years, Matthew Ledvina and other Baker colleagues took the initiative to start their own company, a boutique law firm offering services to multiple jurisdictions. In 2010, Matthew and his friends founded a firm that specialized in advising multinational cross-border -families about private wealth management. One of Matthew Ledvina’s accomplishments during his time at his law firm is advising Swiss-based banks for the August 2013 program, United States and Switzerland Issue Joint Program on Tax Evasion Investigations. Matthew advised on the best possible strategy, as well as if the banks should follow Category 2, 3, or 4. His val...