Category Archives: Insurance and Americans abroad

Part 24: What God Hath Wrought – The #FATCA Inquisition (Review, Identify and Report on “U.S. Persons”) – #FATCA and #Americansabroad with life insurance

As the following tweet makes clear, the problems of “Life Insurance Policies” are NOT restricted to Canada:

Sad but true. It’s quite understandable that from a “U.S. Worldview” that a life insurance policy is nothing but a “sacred instrument of tax deferral” (and therefore of tax evasion). U.S. citizens are the most highly regulated people in the world. As such it is no surprise that the possible purchase of life insurance could trigger FATCA scrutiny. (In that “Shining city on the hill” those who purchase life insurance are clearly “up to no good” – “no good at all”!)

Thank of it! A Canadian citizen who resides in Canada is now being asked the most important biographical question of the 21st century:

“Where were you born? Are you or have you ever been an American citizen?”

(Given the dangers of interacting with U.S. citizens, one’s citizenship status should be required information on every profile …)

So, what led up to this post …

Last night (fear of U.S. citizenship takes place 24 hours a day) I received an email from a man in his seventies. In order to provide for his wife (should he die) he was in the process of applying for a life insurance policy. Now (if it matters), I am not entirely clear on what kind of life insurance policy he was seeking (and unfortunately neither was he). (The policy very likely had a “cash value” component.) That said, shouldn’t a normal person be allowed to apply for a life insurance policy without being accused of being – the only “carbon life form” not deserving of human rights – an American?

The question – “Where were you born?” is interesting. Some overpaid lawyer in the company’s legal department obviously thought that a “U.S. place of birth” was proof positive of “USness”. Well, no. It’s proof positive that somebody was born a U.S. citizen. The U.S. has always used “citizenship as a weapon”. In fact, almost all of the law of U.S. citizenship is a study of the U.S. Government forcibly stripping people of their citizenship – AKA the law of relinquishment. But, I digress … Bottom line: it was and continues to be possible for people born in the United States to relinquish U.S. citizenship.

In this case, (say it isn’t so), this poor guy had actually been born in that great Museum to freedom and opposition to “taxation without representation” – the state of Massachusetts. You know, of “Boston Tea Party” fame and assorted other historical shrines to liberty. Well fortunately, the poor guy had overcome his disabilities triggered by birth (being born American) and had (many years ago) voluntarily naturalized as a Canadian citizen with the full intent of relinquishing U.S. citizenship. Of course he did NOT follow up this liberating event by receiving a CLN (who knew they existed at that time). He therefore, proudly “self-certified” the fact of his “non-USness” and presumably will avoid becoming a FATCA victim.

In any case, I thought it might be important to make people aware, that even the simple act of applying for a life insurance policy can now subject people to the FATCA inquisition. I have decided to NOT identify the company in question. But, I promise you that it is a rather large (is there a small one?) Canadian life insurance company. You would know them. And of course:

“To know, know, know them … is to avoid, avoid, avoid them” – as the song goes!

(All Canadian insurance companies presumably operate in the same way.)

Casualty Insurance and the American abroad …

Speaking of insurance in general. Let me remind you Americans living outside the United States that:

1. Although you are allowed to purchase a home or automobile insurance policy from a non-U.S. company that;

2. You are subject to a special excise tax for buying that policy.

You will find this in Section 4371 of the Internal Revenue Code which talks about “Policies issued by FOREIGN insurers” and is in the broader section on “Miscellaneous excise taxes“.


Spread the word! You can now be FATCAed by attempting to provide for your family by applying for life insurance. Oh and by the wife. Policies with a cash value are likely PFICs! To learn more about the problems of “PFICs and Americans abroad” read here.

John Richardson