Squire Lemkin + Company, LLP

What estate planning strategies are available for non-U.S. citizens?

What estate planning strategies are available for non-U.S. citizens?

by | Apr 16, 2018 | Blog, Financial Planning, Latest News, Tax, Tax Briefs

2 minute read

Non-U.S. citizens in the United States face some estate planning challenges when it comes to taxes. If you’re a U.S. resident, but not a citizen, the IRS treats you similarly to a U.S. citizen, with a few exceptions. But if you’re a nonresident alien, the tax treatment of your estate will be significantly different. Understanding residency IRS regulations define a U.S. resident for federal estat e tax purposes as someone who had his or her domicile in the United States at the time of death. One acquires a domicile in a place by living there, even briefly, with a present intention of making that place a permanent home. Whether you have your domicile in the United States depends on an analysis of several factors, including the relative time you spend in the United States and abroad, the locations and relative values of your residences and business interests, visa status, community ties, and the location of family members. If you’re considered a resident, you’re subject to federal gift and estate taxes on your worldwide assets, but you also enjoy the benefits of the $11.18 million lifetime gift and estate tax exemption and the $15,000 gift tax annual exclusion. And you can double the annual exclusion to $30,000 through gift-splitting with your spouse, so long as your spouse is a U.S. citizen or resident. However, the unlimited marital deduction isn’t available for gifts or bequests to noncitizens, though it is available for transfers from a noncitizen spouse to a citizen spouse. Estate tax law for nonresident aliens If you’re a nonresident alien — that is, if you’re neither a U.S. citizen nor a U.S. resident — there’s good news and bad news in regard to estate tax law. The good news is that you’re subject to U.S. gift and estate taxes only on property that’s “situated” in the United States. The bad news is that your estate tax exemption drops from $11.18 million to a miniscule $60,000, so substantial U.S. property holdings can result in a big estate tax bill. Taxable property includes U.S. real estate as well as tangible personal property (such as automobiles and artwork) located in the United States. Determining the location of intangible property — such as stocks and bonds — is more complicated. For example, if a nonresident alien makes a gift of stock in a U.S. corporation, the gift is exempt from U.S. gift tax. But a bequest of that same stock at death is subject to estate tax. On the other hand, a gift of cash on deposit in a U.S. bank is subject to gift tax, while a bequest of the same cash would be exempt from estate tax. Your status as either a U.S. resident or a nonresident alien will affect the estate planning strategies available to you. We can help you create an estate plan that will minimize estate tax and allow you to pass more on to your loved ones. © 2018

About the Author

We are CPAs and Accountants serving Rockville, MD, Virginia and the Washington, D.C. metropolitan area.

Subscribe to Our Newsletter

  • This field is for validation purposes and should be left unchanged.

Related Articles

Need a new business vehicle? Consider a heavy SUV

  Are you considering buying or replacing a vehicle that you’ll use in your business? If you choose a heavy sport utility vehicle (SUV), you may be able to benefit from lucrative tax rules for those vehicles. Bonus depreciation Under current law, 100% first-year...

Is an S corporation the best choice of entity for your business?

  Are you thinking about launching a business with some partners and wondering what type of entity to form? An S corporation may be the most suitable form of business for your new venture. Here’s an explanation of the reasons why. The biggest advantage of an S...

Nonprofits: Heed these financial danger signs

  Many not-for-profits are just starting to emerge from one of the most challenging environments in recent memory due to the COVID-19 pandemic. Even if your organization is in good shape, don’t get too comfortable. Financial obstacles can appear at any time and...

Archives