With respect to Scenario 1 - Tax Evasion vs. Avoidance: Moving assets is legal avoidance if the transfer is complete and bona fide. However, if there is a "side agreement" that Spouse B must gift the money back (Step 3), the IRS may view this as a fraudulent conveyance or tax evasion because the donor never actually gave up control. Reciprocal Gifts: Gifting assets only to have them gifted back later is a major red flag for "lack of economic substance."I'll lay out the gifting scenarios in a bit more granularity:
-assumption: spouse A and spouse B with 2 young children; German nationals, US green card holders, kids US citizens
-net worth: ~$5MM
-goal: obtain feasible plan to move from US to Europe while avoiding covered expatriate status and minimizing tax cost.
Scenario 1:
1) spouse A gifts spouse B sufficient assets for spouse A to meet the net worth test under the exit tax regime
2) the next calendar year or later, family moves to EU/Germany; spouse A expatriates and becomes NRA
3) subsequently, spouse B gifts spouse A (who is now a NRA) enough assets for spouse B to meet the net worth test (this would trigger gift taxes in Germany for the amount above Euro 500k)
4) the next calendar year or later, spouse B expatriates
5) assets stay invested throughout the process at US-based brokerages
6) Form 709 gets filed for the respective gifts, but no gift tax would be due in the US.
Scenario 2:
1) see above for 1) to 2), but spouse B obtains citizenship and does not expatriate. No gifting to spouse A above Euro 500k to avoid German gift taxes. Results in US citizen/NRA spouses and separate finances.
Scenario 3:
1) see Scenario 2), but the destination is Switzerland/ a Kanton that does not tax capital gains or inter-spousal gifts (recognized CH will assess an annual wealth tax)
2) spouse B gifts spouse A (when spouse A is a NRA) all non-retirement assets
3) spouse A realizes capital gains and invests proceeds in UCITS-compliant ETFs
4) family either stays in Switzerland or moves to EU/Germany eventually
Now, these scenarios don't address every nuance, but either should work within their inherent limitations, no? In terms of tax cost, it appears scenario 1>2>3. Are there major aspects I am overlooking?
Statistics: Posted by 7eight9 — Tue Feb 17, 2026 4:31 pm — Replies 40 — Views 2019