Wills, Trusts & Estates Prof Blog: Owning a vacation home in Mexico or retaining Canadian citizenship are just two scenarios that can create complex estate planning and tax issues. Below are five scenarios that can affect estate planning in a global economy.
1. Owning a home in Mexico
A home in Mexico is likely acquired through a fideicomiso (similar to a trust), and the IRS considers fideicomios to be trusts that are subject to reporting requirements for foreign trusts. As a result, homeowners must file Form 3520 and 3520-A every year to stay in compliance with IRS regulations. Additionally, after March 18, 2010, homeowners who use or let relatives use the home are subject to income tax on the property’s fair rental value. Owners have until August 31, 2011 to come into compliance with the IRS regulations.