Moving to the United States is a major step. Yet many French expatriates keep their existing contracts: life insurance, PER, Madelin contracts, or disability insurance.
This reflex, often reassuring, can actually become a risk. Once settled in the United States, these products often lose their effectiveness and can even create significant tax complications.
French products often poorly recognized in the United States
French savings vehicles do not benefit from the same tax treatment across the Atlantic.
Unlike in France:
- life insurance is not considered tax-advantaged,
- gains may be taxed under U.S. rules applicable to foreign assets,
- certain structures may fall under PFIC rules, with specific reporting and financial obligations (taxation often close to 40% with penalties).
The IRS indicates that a U.S. taxpayer holding shares of a Passive Foreign Investment Company (PFIC) may have to file Form 8621, which often applies to certain assets held through foreign contracts.
Source: https://www.irs.gov/forms-pubs/about-form-8621
FATCA: full transparencyonyour foreign contracts
The United States enforces global tax transparency through FATCA.
In practice:
- accounts and contracts held abroad must be reported,
- French financial institutions transmit certain information to the IRS.
This may include:
- life insurance,
- brokerage accounts,
- certain retirement savings products.
An omission, even unintentional, can lead to significant penalties.
Source: https://www.irs.gov/businesses/corporations/foreign-account-tax-compliance-act-fatca
Risks that appear several years later
The main trap is invisible at first.
Problems often arise at key moments:
- green card application,
- naturalization,
- estate transfer,
- asset resale,
- late regularization of foreign accounts or contracts.
The IRS provides compliance procedures for taxpayers who discover their obligations late, which clearly shows that these issues often arise after several years.
Source: https://www.irs.gov/individuals/international-taxpayers/streamlined-filing-compliance-procedures
Tax frictions between France and the United States
Even with the France-U.S. tax treaty, some products remain poorly coordinated.
This can lead to:
- lack of optimal tax credits,
- partial double taxation,
- inconsistent tax treatment between the two countries.
- Not all products are “portable” from one system to another.
Source: https://www.irs.gov/pub/irs-trty/france.pdf
Why a wealth audit is essential before expatriation
Before moving to the United States, it is essential to:
- conduct a full inventory of contracts held in France,
- analyze their U.S. tax treatment,
- restructure if necessary.
Objective:
- avoid unpleasant surprises,
- simplify compliance,
- optimize overall taxation.
Best practices to consider
- Do not automatically keep existing contracts
- Check their tax compatibility with U.S. rules
- Anticipate reporting obligations
- Adapt your wealth strategy to the new country of residence
Conclusion
Keeping French contracts after relocating to the United States may seem logical, but this choice can prove costly.
Without adaptation, these products often become: tax inefficient, administratively complex, legally risky.
At USAFF™, we support French expatriates in restructuring their assets before and after relocation, to avoid pitfalls and build a strategy truly tailored to their transatlantic situation.
Adrien
Partner, USAFF™
Future written communications may be in English only.
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