UTMA/UGMA for US/Japan Dual Citizen Children

[esotEric]

Does anyone have any experience with UTMA/UGMA for children who have dual citizenship? Japan requires dual citizens to renounce one of their citizenships when they reach adulthood. I'm wondering if I open an account for a child who is currently a dual citizen, if they later give up their citizenship, what happens to their UTMA/UGMA account? Will they still be able to access it? If not, is it possible to close out the account and transfer the funds before that happens?

Thanks.

[captainspoke]

Japan requires dual citizens to renounce one of their citizenships when they reach adulthood.

This is not the case. Duals as a result of birth are not forced to choose--I have yet to hear of a case where this has happened. Our two kids are 28 and 32, and the older one just renewed her j-passport for some coming travel (and is still dual, and has not been pressed to choose).

Apart from that point, I'm not sure how things play out with those accounts. One thing to check on is tax implications, since what is tax free in the US is based on their rules, which are unique to the US and not worldwide.

[TokyoWart]

Does anyone have any experience with UTMA/UGMA for children who have dual citizenship? Japan requires dual citizens to renounce one of their citizenships when they reach adulthood. I'm wondering if I open an account for a child who is currently a dual citizen, if they later give up their citizenship, what happens to their UTMA/UGMA account? Will they still be able to access it? If not, is it possible to close out the account and transfer the funds before that happens?

Thanks.

I would agree with captainspoke that I do not see Japanese dual citizens in practice being forced to choose a citizenship. I was in charge of a conference late last year where a very senior Japanese government official spoke and joked about the fact that he is a dual Japan-US citizen (he was born in the US of Japanese parents) and that had eased his ability to travel and get vaccinated at key points during the pandemic.

Regarding the UTMA/UGMA accounts these are custodial accounts at US financial institutions but they do not have a restriction based on citizenship. They do require a valid taxpayer identification number or Social Security number so the institution can report on the account to the IRS but that is only used when you open the account. Changing your address to a non-US address may cause trouble in maintaining the account but not giving up US citizenship because there are already plenty of people who are not US citizens who have these accounts.

https://blog.myrawealth.com/insights/un ... -and-utmas

[RetireJapan]

Japan requires dual citizens to renounce one of their citizenships when they reach adulthood.

My understanding of this is that Japan requires dual nationals by birth to choose a nationality, but once they choose Japan current government policy is not to enforce this in any way.

[ClearAsMud]

"Force" may not be the most appropriate term -- and personal decisions are personal decisions -- but according to the Nationality Law (Articles 14, 15 and 16 concern the choice of nationality), those with dual citizenship are indeed legally obligated to choose one of their nationalities within a specified period of time (選択しなければならない, or "shall choose" in the English version).

That deadline is up to the day of one's 22nd birthday for those who have acquired a second nationality before the age of 20 (including but not restricted to dual nationals by birth) or within a period of two years if the second nationality has been acquired after one's 20th birthday (which includes naturalizations).

If the selection is not made by the deadline, the Minister of Justice can serve written notice to the individual to make the selection (書面により、国籍の選択をすべきことを催告することができる), and if within one month the individual has not yet selected Japanese citizenship, the individual loses Japanese citizenship (日本の国籍を失う) unless unavoidable circumstances are responsible, in which case the individual has two weeks from the time it again becomes possible to make the choice.

But note the qualifications involved: 1) the Minister of Justice "can" notify the individual to choose a nationality; 2) the individual has a month to comply after receiving or becoming aware of this notification; 3) circumstances may make a delay reasonable. The implications are that enforcement is at the discretion (or whim) of the Minster of Justice, that reasonable warning must be given, and that extenuating circumstances may be considered. In practice, depriving someone of Japanese citizenship for failing to make a choice of nationality is not easy to do, and official guidance suggests that missing the selection deadline by itself is insufficient cause for doing so (missing the deadline does not relieve the individual of the obligation to make the selection, is how the wording goes). This difficulty/vagueness means that the law basically goes unenforced.

Moreover, an individual choosing Japanese nationality has two methods of doing so: either by "depriving himself or herself of the foreign nationality" (外国の国籍を離脱する) OR by submitting a declaration "in which he or she swears that he or she chooses to be a Japanese national and that he or she renounces the foreign nationality" (日本の国籍を選択し、かつ、外国の国籍を放棄する旨の宣言）. The verb 放棄する may be closer in nuance to "relinquish" than "renounce" in this case, but the declaration is a short form that can be filled out in a few minutes at your local municipal office and is later entered into the family register. As a declaration to the Japanese authorities, it has no necessary bearing on how other countries treat the individual's citizenship, and although the Nationality Law states (in Article 16) that the individual submitting the declaration "shall endeavor to deprive himself or herself of the foreign nationality" (選択の宣言をした日本国民は、外国の国籍の離脱に努めなければならない), no details are mentioned and no deadline is stipulated.

A celebrated recent case of Japan's treatment of dual nationality involves Naomi Osaka. Despite the wording of many English-language news reports in 2019, it remains unclear whether she actually renounced her American citizenship (which takes time, must be done overseas, costs over $2300, and would probably make someone like her liable for a hefty exit tax) or whether she simply submitted the necessary Japanese declaration to the embassy or consulate and kept her American passport (and from the American perspective, her US citizenship). Her decision, of course, but it appears that Japan's nationality law isn't very well understood by the foreign media. In any case, retaining US citizenship does have tax implications that have been pointed out in the various discussion threads in this forum.

An image of the actual declaration of choice form can be viewed here:
https://www.moj.go.jp/ONLINE/NATIONALITY/6-4-1.html

The Japanese text of the Nationality Law is here:
https://www.moj.go.jp/MINJI/kokusekiho.html

An English translation is available here (Japanese is the legally binding version):
https://www.moj.go.jp/ENGLISH/information/tnl-01.html

The MOJ's Japanese website explanation of the selection process is here:
https://www.moj.go.jp/MINJI/minji06.html

The English version of that page is here:
https://www.moj.go.jp/EN/MINJI/minji06.html

And the official J-E bilingual pamphlet on the declaration process can be downloaded here:
https://www.moj.go.jp/content/001343325.pdf

[TJKansai]

Does anyone have any experience with UTMA/UGMA for children who have dual citizenship? Japan requires dual citizens to renounce one of their citizenships when they reach adulthood. I'm wondering if I open an account for a child who is currently a dual citizen, if they later give up their citizenship, what happens to their UTMA/UGMA account? Will they still be able to access it? If not, is it possible to close out the account and transfer the funds before that happens?

Thanks.

I set one up for my son (dual citizen). I tried to find out when it gets turned over to him, but the answer was "it depends on where he lives" as it seems the state of residence is what they go by (rules range from 18-21 but can even go higher).

[esotEric]

Belated thanks to everyone who replied.

[Tkydon]

I seem to remember reading somewhere that if a US Citizen or Greencard Holder (Resident Alien) expatriates and the reason is deemed by the IRS to be to avoid US Taxes, then the ex-Citizen or Greencard Holder can still be subject to US Taxes (and maybe State Taxes) for 10 years post-expatriation.

[Tkydon]

Just found this discussion on UTMA/UGMA

https://youtu.be/iNAXVsWNj70

20 minutes in.