Published on and written by Cyril Jarnias
Anticipating a Professional Expatriation to the United States as a business leader, significant shareholder, or entrepreneur is not just about visas, compensation packages, or family relocation. It is above all a major estate planning project that begins several years before departure, shaping your tax situation, asset protection, wealth transfer to loved ones, and ultimately your ability to exit the U.S. tax system without damage.
Experts estimate that a minimum of 3 to 5 years is needed to seriously prepare for a cross-border move. Below that horizon, preparation is considered insufficient; beyond that, it allows you to effectively structure your assets, business, deferred income, and future exit options.
This article provides a guiding framework, specifically designed for a key executive or major partner planning to move to the United States, with a relocation targeted in three to five years. The goal is not to offer magic solutions but to explain the major levers to pull, in what order, and with what quantified stakes.
Understanding the Timing Issue: Why 3 to 5 Years Make All the Difference
For a business owner, planning an expatriation to the United States is like a multi-year campaign, not a one-off operation. Data from succession and exit planning practices is very clear: most complex structures (trusts, capital reorganizations, intrafamily transfers, stock option and retirement strategies) need several tax years to fully take effect and be defensible before the tax authorities.
Estate planning professionals typically mention:
– a baseline of 36 months for a credible exit plan;
– an optimal “business” horizon of 48 to 60 months to orchestrate restructurings, transfers, and tax optimization.
In a typical scenario, the staircase looks like this: it includes steps, a stringer, and a railing, with standardized dimensions for riser height and tread depth.
| Plan Year | Key Issues for the Executive Moving to the United States |
|---|---|
| Year 1 | Complete asset mapping, audit of structures, begin business restructuring, initial transfers into vehicles such as trusts or family holding companies. |
| Year 2 | Optimize retirement plans and stock options, model conversions (Roth, etc.), portfolio adjustments before change of tax residence. |
| Year 3 | Fine-tune asset allocation, decisions on real estate and unlisted holdings, final choices for residency (tax and immigration) strategy. |
| Years 4–5 | Finishing touches: clean up compliance issues (prior filings, complex foreign structures, PFICs), refine timing of compensation and capital gains around the exact installation date. |
The importance of this timeline for an executive is twofold:
1. Entering the United States with a “clean” estate from a tax perspective: updated tax bases (step‑up), structures compatible with U.S. law, no time bombs like penalized foreign funds (PFIC) or opaque trusts improperly reported.
2. Not getting trapped when exiting, several years later, by the U.S. “exit tax” regime (Section 877A of the Internal Revenue Code), which can treat the end of your U.S. status as a deemed worldwide sale of your assets.
First Pillar: Conduct a True Cross-Border Estate Review
Three to five years before an expatriation to the United States, the starting point is a meticulous inventory of everything you own, hold, or control, directly or through companies, holdings, or trusts.
Map All Assets and Liabilities
The report provides a very broad list of what should be on your radar:
– real estate (primary residence, secondary homes, rental or business property);
– holdings in companies (public and private), including your business, BSPCEs/BSAs/RSUs/options, carried interest, fund shares;
– financial assets (stocks, bonds, ETFs, structured products, cryptoassets, precious metals);
– retirement contracts (company plans, PERs, foreign equivalents, 401(k)s, IRAs, etc.);
– life insurance or annuity contracts;
– trusts, foundations, and other estate structures;
– bank accounts, including foreign ones, and cash;
– debts (real estate financing, business loans, shareholder current accounts, personal loans).
This inventory is not just about archiving; it aims to position each asset according to a matrix of jurisdiction, tax status, liquidity, and sensitivity to U.S. rules.
A sample working summary table for an executive might look like this:
| Asset Category | Main Location / Jurisdiction | Tax-Sensitive Features Upon Entering the United States |
|---|---|---|
| Operating company held >25% | Home country / other country | Risk of reclassification as Controlled Foreign Corporation (CFC), future “exit tax” basis calculation, complex valuation. |
| Foreign funds (local mutual funds, non-US ETFs) | Home country / Europe | Risk of classification as PFIC (punitive U.S. regime), heavy reporting (Form 8621). |
| Primary residence | Home country | Possibility to realize gain before or after departure, with different effects under tax regimes. |
| Local retirement plan | Home country | Analysis of U.S. recognition, interaction with treaties and tax deferral mechanisms. |
| Trust or family foundation | Offshore / Europe | Possible reclassification as a taxable U.S. trust, special rules for U.S. beneficiaries. |
Understand the Step-Up in Tax Basis
Before becoming a U.S. tax resident, there is, in certain cases, a major benefit to “restating” the tax basis of some assets closer to their fair market value. The idea is as follows:
– if you enter the United States with an asset that has significant unrealized gain, all the past appreciation may be taxed later upon a sale;
– if, before becoming a U.S. resident, you carry out a properly structured “sale and repurchase” or reorganization, under local constraints, you can increase the asset’s tax basis without incurring U.S. tax on the “old” portion of the gain.
This strategy requires: allocating adequate resources, rigorous progress tracking, and continuous adaptation to changing needs.
To successfully expatriate to the United States, it is essential to have documented appraisals (real estate appraisals, 409A valuations, financial reports) and to precisely structure the sale or reorganization so that it is recognized in the home country, without prohibitive taxation or challenge under U.S. anti-abuse rules.
Clean Up Problematic Investments (PFICs & Co.)
The report strongly recommends that future U.S. residents get rid of, before departure, any funds and vehicles that would be classified as PFICs (Passive Foreign Investment Companies) by the IRS. For a European or Canadian executive, this often includes:
– Local SICAVs / mutual funds;
– Non-U.S. domiciled ETFs;
– Certain private equity or venture capital funds held in passive foreign entities.
Owning PFICs triggers a particularly aggressive U.S. tax regime and heavy reporting (Form 8621 for each vehicle each year, even without a sale). Hence the idea, 3 to 5 years before the move, to:
– sell these funds while managing the local tax on the gain;
– or reallocate them into more “U.S.-friendly” vehicles (U.S. ETFs, direct stocks, etc.) held in U.S.-recognized wrappers (treaty-covered retirement plans, specific contracts, etc.).
Second Pillar: Align Private Assets, Business, and Succession
For an executive-shareholder, the estate review is not limited to a portfolio: the main economic value is often concentrated in the business. However, arriving in the United States changes how that business is perceived for tax purposes (CFC, place of effective management, intragroup transfers, etc.), as well as how it fits into your transfer strategy.
Rethink Governance and Business Succession
Best practices in succession planning emphasize several areas:
Structure the succession and governance to ensure business continuity and resilience, even in the event of the owner’s prolonged absence.
Review bylaws, shareholder pacts, and buy-sell agreements: transfer conditions, buyback clauses (death, disability), valuation mechanisms, and rules for admitting new partners (including non-family investors).
Document a comprehensive plan: successor profile, job description, list of potential candidates, ramp-up plan, and timeline for transferring responsibilities.
Create a family council and a strategic committee to ensure that executive functions are not indispensable on a day-to-day basis, crucial for delegating or being away for long periods.
This governance approach is not just about organization. It has a direct impact on:
– the value of the business (and therefore on your future U.S. “exit tax” basis);
– the possibility of progressively transferring shares into trust or family holding structures before your entry or potential exit from the U.S. tax system.
Integrate Trusts and Succession Structures
The report notes the intensive use, in common law jurisdictions, of trusts to organize the holding and transfer of family businesses. For an executive anticipating an expatriation to the United States, two difficulties combine:
Some foreign trusts may be reclassified as taxable in the United States if the grantor or beneficiaries become U.S. residents. Conversely, well-structured trusts created before entering the United States can isolate part of the assets from U.S. tax risks.
The reasonable approach, within a 3–5 year horizon, consists of:
– having any existing trust or family foundation audited by U.S. and local tax experts;
– analyzing the opportunity to set up a foreign “pre-immigration” trust to hold certain non-U.S. assets destined for non-U.S. beneficiaries, thereby keeping them outside the U.S. taxable estate.
Again, everything depends on timing: certain U.S. rules consider the date of creation and funding of the trust relative to the start of tax residency.
Third Pillar: Structure Your Executive Compensation and Retirement Plans Before Departure
For an executive moving to run a U.S. subsidiary or join a U.S. company, the estate dimension of the compensation package is central. Salaries, bonuses, restricted stock, options, supplemental executive retirement plans, 401(k)s, IRAs, foreign plans… Mismanaging these elements in relation to your tax residency timeline can be very costly, both at the time of installation and at a potential departure.
Anticipate Income and Capital Gains Flows
The report details income timing strategies particularly relevant for an executive:
Advance or defer bonuses, incentives, RSUs, and stock options to tax them in the most advantageous country/year. Coordinate RSU vesting with the U.S. timeline to avoid concentrating taxable income that could raise your average tax rate over 5 years (a covered expatriate criterion). Consider converting stock options before entering the U.S. system.
For retirement and employee savings instruments, the logic is similar:
The 33 French retirement regimes are recognized by U.S. tax treaties, allowing avoidance of double taxation and benefiting from tax deferral by maximizing contributions before departure.
Set Up Your U.S. Retirement Plans from the Start
Once a U.S. tax resident, an executive has access to local retirement plans (401(k), 403(b), 457(b), IRA, Roth IRA, etc.). Contribution limits are significant, and the benefit in terms of deduction and tax deferral is particularly attractive if you plan to stay for several years.
The report provides order-of-magnitude figures for annual limits (current trends):
| Type of U.S. Retirement Plan | Indicative Annual Amount (Order of Magnitude) | Relevant Features for an Expatriate Executive |
|---|---|---|
| 401(k) | Around $23–24k + possible “catch‑up” after age 50 | Immediate deduction from U.S. taxable income, possible employer match. |
| Traditional IRA / Roth IRA | Approximately $7–7.5k + “catch‑up” after age 50 | Income limits and interplay with FEIE/Foreign Tax Credit for expats. |
| 403(b), 457(b) Plans | Similar in structure to 401(k) | Common in the public sector or certain large organizations. |
For an executive in international mobility, the basic strategy often involves: ensuring employees are informed about cultural changes, legal and tax aspects related to their assignment, as well as company expectations regarding performance and commitment.
– maximizing contributions to U.S. retirement plans while a U.S. tax resident;
– then, if a return or new expatriation is planned, letting the U.S. plans grow while carefully managing the timing and location of withdrawals in light of tax treaties.
Fourth Pillar: Prepare Now for a Potential Exit from the U.S. Tax System
Even if your plan is to stay in the United States for a long time, any savvy executive should know—and plan for—the exit regime. U.S. tax law is one of the few that provides for a heavy “exit tax” for certain individuals who cease to be citizens or long-term residents.
Keep the “Covered Expatriate” Criteria in Mind from Day One
The covered expatriate status triggers Section 877A, which treats the day before your expatriation as a deemed worldwide sale (“mark‑to‑market”) of your assets. Three main tests apply at the time of exit:
A U.S. citizen renouncing citizenship is considered a “covered expatriate” if they meet any of these three tests: a net worth ≥ $2 million on the expatriation date, an average federal tax liability greater than $211,000 (2026 threshold) over the preceding five years, or a failure to certify tax compliance via Form 8854.
Even though these thresholds are assessed at exit, it is during your years of U.S. residence that you build:
– your net worth trajectory;
– your five-year average tax liability;
– your compliance history (returns, FBAR, forms for foreign structures, etc.).
An executive who anticipates well can therefore enter the United States while keeping an eye on the exit scenario, notably by:
– avoiding piling up assets directly on their personal balance sheet;
– using intrafamily transfers, structured gifts, or well-designed trusts to avoid crossing the $2M threshold too broadly;
– managing the timing of major taxable events (sale of a company, massive option exercise) to avoid inflating your average tax burden.
How the Exit Tax Works If You Become a Covered Expatriate
If, despite everything, you meet one of the criteria, the exit tax mechanism works like this:
A U.S. resident leaves the United States. They value all their assets (real estate, stocks, crypto, artwork) as if they died the day before the expatriation. For each asset, they calculate the unrealized gain (fair market value minus tax basis). They aggregate gains and losses, apply a global exemption of approximately $910,000 in 2026, then tax the remainder at 23.8% for long-term gains (20% + NIIT surtax).
A simplified illustration table:
| Exit Tax Calculation Step | Brief Description |
|---|---|
| 1. List all assets | Real estate, business, listed stocks, digital assets, etc. |
| 2. Calculate unrealized gains | FMV – tax basis for each asset |
| 3. Net gains and losses | Sum of gains – sum of losses |
| 4. Apply exemption (~$910k) | Subtract the exclusion from the taxable base |
| 5. Tax on the balance | Long-term rate (up to 23.8%) depending on asset type |
Even though this mechanism applies at exit, it should inform your choices 3 to 5 years before entry:
– structure the ownership of your company (and possibly freeze the value through recapitalization or preferred stock mechanisms);
– document valuations with minority and illiquidity discounts where justified;
– avoid excessive concentration of wealth in highly volatile assets that could balloon or collapse at the wrong time.
Fifth Pillar: Organize Banking, Investments, and International Flows for a Viable Daily Life
Beyond the large tax structures, a successful expatriation also depends on an operational financial setup: bank accounts, market access, cash management, currency hedging, etc. An executive overseeing cross-border flows has every interest in streamlining these matters upfront.
Choose Where to Hold Your Financial Assets
The analyses highlight several principles:
For a U.S. taxpayer, it is generally preferable to hold the bulk of investments in U.S. accounts to avoid complexities related to foreign assets and PFIC rules. For a future U.S. expatriate, it is recommended to consolidate holdings with a limited number of institutions capable of handling non-residents and providing appropriate tax reporting. If some assets remain in the home country (such as life insurance policies, PEA accounts, or local plans requiring retention), anticipate their treatment by the IRS and ensure all required forms can be produced.
A possible framework table:
| Location of Assets | Main Advantages for a Future U.S. Resident | Points of Caution |
|---|---|---|
| U.S. investment accounts | Standard tax reporting (1099 forms), wide choice of U.S. ETFs, IRS compatibility. | Manage foreign account reporting obligations if you keep other accounts outside the U.S. |
| Foreign investment accounts | Geographic diversification, continuity with home country. | PFIC risk on funds, reporting complexity (Form 8621, FBAR, FATCA). |
| Foreign rental real estate | Income in local currency, real diversification. | Local taxation, U.S. reporting on rental income, remote management. |
Manage Cash and Currency Risk
For a global executive, the question is not just “where” to invest, but in which currency. The report emphasizes the importance of:
Align the currency of your investments with your long-term goals—for example, in euros if your retirement is planned in Europe even while living in the United States. Also, set aside local liquidity reserves in your expatriation country (checking and savings accounts) to cover expenses and emergencies without incurring excessive currency conversion fees.
In practice, a typical structure could be:
– a U.S. checking account for daily expenses and receiving salary or distributions;
– a checking account in the home country for ongoing local charges (family, real estate, taxes);
– U.S. investment accounts for the majority of the financial portfolio;
– possibly, real estate or business locations (office, second home) in one or two financial centers deemed strategic for your family.
Sixth Pillar: Don’t Overlook Estate Planning and Potential Double Taxation
Finally, preparing your expatriation to the United States also means accepting the challenge of navigating between two (or more) systems of inheritance, gift, and wealth taxes, sometimes linked by bilateral conventions. For an executive with significant wealth, this dimension becomes central.
General Framework of U.S. Estate and Gift Taxation
Key points to know:
– The United States taxes citizens and residents on their worldwide assets for estate and gift tax purposes;
– Nonresident noncitizens are subject only to certain “U.S. situs” assets (real estate located in the United States, certain holdings, tangible property…) with a much lower exemption;
– Estate and gift tax rates can reach 40% above the applicable exclusions.
For a business owner expatriated to the United States who remains a long-term tax resident, this means that without planning, their entire worldwide estate (including the home country business, foreign real estate, etc.) may one day fall under this tax at death, subject to international treaties.
Role of Estate Tax Treaties
Many countries have signed estate and gift tax treaties with the United States, which determine:
The priority of taxation depends on the type of asset: real estate, business, or movable property. A tax credit in the country of residence avoids double taxation, and exemptions and credits are modulated depending on whether the resident is in one country or the other.
For an executive between two sophisticated jurisdictions, the interaction of domestic rules and the treaty often produces complex situations, including:
– cases where both countries consider the individual as a resident/domiciliary, requiring recourse to “tie‑breaker” rules (habitual abode, center of vital interests, etc.);
– divergent treatment of certain instruments (trusts, stock option plans, real estate income).
Hence the importance, in the 3 to 5 years before departure, of:
– reviewing all estate planning documents (will, power of attorney, healthcare directives, beneficiary designations on retirement and life insurance contracts);
– verifying their validity and enforceability in the U.S. jurisdiction of your future residence;
– considering drafting split or “multi-jurisdictional” wills, under the guidance of practitioners with dual expertise.
Manage Gifts and Intrafamily Transfers Before Entry and During U.S. Residence
Gift strategies play a key role in:
– reducing the size of the future estate that could be taxed at death or upon a potential exit tax;
– structuring future business ownership (for example, via a family holding company or trust accessible to children).
Some key takeaways from the report:
– gifts to a U.S. citizen spouse are effectively unlimited (under U.S. rules), making this a powerful wealth reallocation tool;
– gifts to a non‑citizen spouse are instead subject to annual caps at specific amounts;
– to limit the risk of retroactive reclassification as an exit tax avoidance maneuver, large, structuring gifts to children or trusts are ideally made several years before a change of residence or exit from the U.S. system.
For an executive who already knows they have a substantial estate well above the thresholds, it may be wise to consider, before even entering the U.S. tax system:
– making large gifts to children or beneficiaries who will not reside in the United States;
– creating “drop‑off” trusts to hold a portion of non‑U.S. assets, with limited retained rights for yourself during your U.S. residence.
Build Your Expert Team and a Realistic Timeline
Given the density of these issues, no executive can navigate such a project alone. Best practices in cross-border estate planning recommend assembling a coordinated team that includes at least:
– a financial advisor experienced in international issues for executives;
– a home-country tax specialist and a U.S. tax specialist experienced in bilateral treaties, trust regimes, employee stock plans, and exit tax rules;
– one or more estate planning / succession attorneys in each key country;
– if applicable, a business valuation expert to document valuations with justified discounts.
The 3 to 5 year horizon should be used to:
To effectively manage your estate between the United States and another country, build a quantified roadmap with specific milestones (reorganization, sales, trusts, wills). Regularly test your strategy against changes in laws (exemptions, treaties, case law). Simulate multiple scenarios: long‑term U.S. stay, return to home country, departure to a third country, or renunciation of U.S. residence.
The key for an executive is not to view their expatriation to the United States as a purely professional interlude. It is a life‑shaping event for your entire estate and succession, to be prepared like a true strategic business project… except that the business, this time, is your financial life and that of your family.
Have an estate project or a question? Contact us now to speak with a wealth management expert.
Disclaimer: The information provided on this website is for informational purposes only and does not constitute financial, legal, or professional advice. We encourage you to consult qualified experts before making any investment, real estate, or expatriation decisions. Although we strive to maintain up-to-date and accurate information, we do not guarantee the completeness, accuracy, or timeliness of the proposed content. As investment and expatriation involve risks, we disclaim any liability for potential losses or damages arising from the use of this site. Your use of this site confirms your acceptance of these terms and your understanding of the associated risks.
Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
