It’s been much the rage for American olim – make the young ones born here United States citizens, enjoy the $1000 yearly allowance for each (courtesy of Uncle Sam), and thereby allow them to travel to and work in the US easily when the time comes. Until recently, this arrangement has been fairly cost-free and risk-free, and, in fact, quite beneficial to American citizens living in Israel. But recently, due to the passage of the FATCA legislation, it is reasonable to call into question the value of securing United States’ citizenship for our children and grandchildren.
The FATCA legislation requires foreign banks and financial institutions to report to the US government your holdings in said institutions. Last week, my wife and I opened an account in an Israeli bank. Many of the forms we signed were required not by the bank here, but by US authorities. The FATCA law threatens foreign banks with sanctions if they do not report the existence and holdings of US citizens in foreign countries. The banks here are not taking any chances. The Hebrew-language bank forms we signed contained references to W-9 forms and Social Security numbers.
Every US citizen is required to file a tax return each year with the IRS, as well as submit an FBAR report. The dilemma I wish to raise in this post is whether the benefits of US citizenship for our progeny outweigh the costs and disadvantages. I think this is a legitimate question these days, in view of the changes wrought by the FATCA law. Does my grandchild know that he will have to file US tax returns when he reaches working age? Am I doing him a favor or disservice? For many, citizenship can be very worthwhile. Retirees who put in enough working quarters in the US (as well as self-employed entrepreneurs here who have paid regularly into Social Security) will certainly want to continue to receive their Social Security pensions as citizens.
I am not taking a stand here, but I think that it behooves US citizens to do a cost/benefit analysis of the matter before deciding blindly to make our children and grandchildren US citizens. It’s a decision which binds them to financial obligations and procedures for a long time. I recommend a consultation with a US tax attorney to clarify the options, plusses and minuses of such a step.