Estate planning for non US citizens can be more complicated than estate planning for American citizens is. If you are married to a foreign national residing in the United States, or if you are a foreign national who is married to a US citizen, you may need to follow special rules for estate planning. For basic estate planning, such as creating a will or a living trust, naming durable powers of attorney for financial and health matters, and naming beneficiaries, you can follow the same steps as citizens. When you reach a certain level of wealth, however, you should be aware of a few rules to avoid paying hefty taxes on your property.
Estate and Gift Taxes
The estate tax only applies to very wealthy families, so most people do not need to worry about it. In 2019, the amount that you can leave to others after death without being taxed is $11.4 million. For married couples, that amount doubles. Spouses, however, can transfer an unlimited amount of wealth and property to one another, as long as they both are US citizens. If either you or your spouse is not a citizen, you can still transfer wealth after death if you take advantage of the Qualified Domestic Trust, a trust that grants the unlimited marital deduction to spouses who are not citizens. When estate planning for non US citizens, it’s important not to overlook this trust.
For gift taxes, spouses who are both citizens also enjoy an unlimited amount that they can give to each other. Married couples in which one spouse is a foreign national have a limit of $154,000 for gifts given in 2019.
If you are the spouse of a non US citizen, you cannot automatically make decisions for them if they become incapacitated. Conservatorship proceedings that go through the courts can be time-consuming and expensive, so it’s best to plan ahead. By appointing a health care proxy or durable power of attorney, you can avoid the courts and ensure that your non US citizen spouse is protected.
Another way to pay fewer taxes on your estate is to name a non US Citizen spouse as the owner of any life insurance policies. Doing so keeps the proceeds of these policies from being included in the deceased’s estate. However, once the foreign national spouse passes away, those proceeds will be included in his or her estate. To avoid this so that you can pass on that wealth to any children, you can set up an irrevocable life insurance trust, which can limit or even eliminate taxation on life insurance proceeds. A catch does apply to this situation, though—the insured must survive the transfer of the ownership of the life insurance policy into the trust by three years.
Casal & Moreno Handles Estate Planning for Non US Citizens
Are you or your spouse residing in the US without citizenship status? Contact Casal & Moreno today to learn more about estate planning for non US citizens.