Money cannot flow back to the United States from a Covered Expatriate by gift or inheritance, except with a massive tax cost.
Covered Expatriates have a disincentive to make gifts to U.S. persons. They also have a disincentive to leave a bequest to a U.S. person when they die.
Anyone who receives a gift or inheritance from a Covered Expatriate must pay tax at the highest gift tax rate. The recipient pays the tax.
The usual exemptions in the gift tax laws apply. The Covered Expatriate can give $14,000 per year (the current gift tax exemption amount for 2013; this is indexed for inflation) without problem. Similarly, the Covered Expatriate can pay the correct type of medical or education expenses directly and these items will not be subjected to the tax haircut. Gifts to charities and surviving spouses are also exempt.
There is no official guidance from the IRS (yet) on the application of these rules.