Estate Planning for Non-Citizens of the United States

December 15, 2015

By:  Verena Meiser, Senior Associate, 443-393-7696

Non-citizens need to be aware that some of the estate tax planning techniques commonly used for U.S. citizens are not available to them. Here are just some of the estate and gift tax differences an estate planning attorney can address and provide guidance for. (1) Gifting between spouses during life is not unlimited but subject to an annual limit: $147,000 in 2015. (2) The marital deduction for transfers to a non-citizen spouse is not available upon death, however, a restricted marital deduction can be applied to property transferred to a Qualified Domestic Trust (QDOT) for the benefit of the surviving non-citizen spouse. All property distributed from the Qualified Domestic Trust will be subject to estate tax at the rate in effect during the year the first spouse died. (3) A federal estate tax exemption is available, however, portability of the federal estate tax exemption is not available. The same federal estate tax exemption levels available to citizens are available to resident aliens, however, a non-citizen who is not a resident of the U.S. only has a federal estate tax exemption of $60,000 on assets located in the United States. (4) As for citizens, the taxable estate of a resident alien consists of the value of all assets worldwide. Credits are available for taxes paid abroad, in accordance with tax treaties between the U.S. and other countries. In the case of a non-resident individual, only U.S. situated assets are subject to federal estate tax. Such assets consist of American real estate, tangible personal property and securities of U.S. companies. (5) Individuals who plan to move to the U.S. should consult with a financial adviser or an estate planning attorney before moving to the U.S. to ensure that each spouse can make use of the federal estate tax exemption.

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