Estate Planning for Non US Citizen

For a non-U.S. citizen (“non-citizen”) the U.S. estate and gift tax system is onerous and requires a much higher degree of awareness.

Gift and estate tax planning for foreign nationals attempts to minimize the impact of U.S. gift and estate taxes on foreign nationals—individuals who are not citizens of the U.S. Non- U.S. citizens are further categorized as either resident aliens or nonresident aliens. A foreign national is taxed differently depending on his or her residency status, so it is important to determine whether the foreign national is a resident alien or nonresident alien.

A resident aliens is taxed essentially the same as a U.S. citizen, generally resulting in all asset transfers being subject to U.S. transfer taxes.

If the person is a nonresident aliens planning for U.S. transfer taxes should be aimed at those who own property situated in the U.S. Nonresident aliens are only subject to U.S. gift and estate taxes when they transfer property—either by gift or bequest—that is deemed to be situated (situs) in the U.S. Understanding the situs rules for U.S. gift and estate tax purposes can be difficult because those for gift taxes are different than those for estate taxes. Situs rules also differ depending on the type of property being transferred.

For non-U.S. persons, many may be surprised to learn that they may be subject to U.S. gift tax and estate tax even though they are neither U.S. citizens nor residents. With proper international tax and estate planning, the U.S. estate tax for a non-U.S. citizen who is not residing in the U.S. may be minimized or deferred.

We help clients minimize U.S. transfer taxes when one or both of the spouses is a non-U.S. citizen. Different planning techniques are available for resident aliens and nonresident aliens, as well as for those who plan to remain in the United States for a short time and those who plan a more extended or permanent stay.

The unlimited marital deduction allowing unlimited amounts to be transferred to a U.S. citizen spouse without being subject to gift and/or estate taxes is normally not available when an resident alien or U.S. citizen is married to a foreign national. Therefore, appropriate planning should take place for these individuals so unnecessary taxes on transfers to a non-U.S. citizen spouse can be avoided. For these couples, a “Qualified Domestic Trust” is often an integral part of their estate plan. The utilization of a “Qualified Domestic Trust” can defer and reduce transfer taxes upon the death of the U.S. citizen spouse.

Contact Legacy & Trust legal Counsel, PLLC if you have questions about estate planning for non-US Citizens and persons married to non-US Citizens.