If your spouse is not a United States citizen, some special rules may affect your Estate Planning. We recommend that you proceed just as if your spouse were a citizen, when it comes to estate planning. It doesn't matter whether or not you or your spouse are citizens, it is essential that you place your assets in a Living Trust in order to protect those assets in the United States. You can leave property to someone who is not a U.S. citizen. Non-citizens can inherit property just as citizens can. When preparing your Living Trust, or naming beneficiaries for your retirement accounts or life insurance policies, there is no problem with naming your noncitizen spouse. Our firm will prepare durable powers of attorney for your finances and for your health care. With our Estate Planning package, you can also lay out your last wishes in detail. It would be a good idea to name beneficiaries for your retirement accounts as well. By taking these crucial steps, together we will protect you, your family, your assets and your future.
Federal Estate & Gift Tax (Rules for Spouses): The tax is imposed on transfers of property both during life and at death, the rate is the same in both circumstances. Those who leave more than $11.7 million are potentially subject to the tax. Married couples can leave a total of twice that amount. These figures are from 2021 and the limits are set to expire on 2026. Most likely the tax- free limits will be set much lower in 2026 and will have an effect on most families.
The Marital Deduction Rule: Assets left to a surviving spouse are not subject to federal estate tax, no matter how much they are worth, when the surviving spouse is a U.S. citizen. This rule is called the unlimited marital deduction. The rule does not apply when the spouse who inherits is not a U.S. citizen, even if the spouse is a permanent U.S. resident. The federal government prevents non-citizens from inheriting large amounts of money, avoiding estate taxes and leaving the country. Currently, you can leave assets worth up to the exempt amount ($11.7 million in 2021) to anyone, including your noncitizen spouse, without owing any federal estate tax. If the noncitizen spouse dies first, assets left to the spouse who is a U.S. citizen do qualify for the unlimited marital deduction. If your spouse become a U.S. citizen by the time your estate's federal estate tax return is due, he or she will qualify for the unlimited marital deduction.
Qualified Domestic Trust (QDOT): At First Class Counsel we are able to create this special trust so your noncitizen spouse can inherit from you free of estate taxes (Internal Revenue Code section 2056A). With a QDOT, you will be able to leave the property to the trust, instead of directly to your spouse. He or she will be the beneficiary of the special Trust. Keep in mind that there cannot be any other beneficiaries while your spouse is alive. While your spouse receives income the trust property generates, these amounts will be tax free. If you have more questions about “QDOTs for non-citizen spouses" contact our firm today to speak to one of our experienced attorneys at First Class Counsel.
We are here to serve your estate planning needs. Whether you have a small estates or a large, complicated plan, we will discuss every option and find the best solution to protect you, your family and your assets.