Estate Planning for Non-U.S. Citizens
Moving to the United States to build a new life and leave a legacy for one’s children is the dream of many immigrants to this country. America is known for giving people greater opportunities to advance their situation in life than most other countries, and the acquisition of property is the principal way most people display their success. At some juncture, hopefully sooner rather than later, these individuals realize the need to create an estate plan, so their children will have the financial security they worked so hard to obtain. Many considerations go into the development of an effective and appropriate estate plan, such as the type of property owned, any special needs of certain family members, and the intention of the creator. In other words, it takes a lot of planning and effort to make a precise plan. Non-U.S. citizens have additional hurdles to overcome when crafting an estate plan because they do not ascend to all of the legal protections and benefits citizens receive and often incorporate into their estate plans for inheritance and asset protection purposes. An overview of the federal and State laws that treat non-citizens differently, and a few options to reduce the impact of these disparities, will follow below.
Federal Gift and Estate Taxes
One valuable and often used asset protection tactic to reduce an estate’s overall tax liability when a person dies is to take advantage of the federal gift and estate tax exemption rules by giving cash and other types of property to family members and other intended heirs while alive. By gifting these assets, the overall value of an estate is reduced. However, to avoid triggering gift tax obligations, most people keep these gifts at or under the annual or lifetime gift tax exclusion amounts (annually $15,000 per recipient and a lifetime exemption of $11.2 million per individual as of 2018). But, if a person is a nonresident alien, as opposed to a U.S. citizen or permanent Green Card holder, they are only allowed a $60,000 exemption for certain U.S. property, primarily real estate, which puts them at a severe disadvantage. In addition, Green Card holders and nonresident aliens may be subject to taxation in their home country as well, introducing the possibility of double taxation and further depletion of the estate (the U.S. does have treaties with a number of countries to reduce or avoid this result, but it could be an issue). In addition, gifts or transfers between spouses are given unlimited marital deductions, but if the spousal recipient is not a U.S. citizen, only $149,000 may be transferred tax free.
Homestead laws are a potent and attractive feature for estate planning purposes because of the broad protections given to a person’s principal residence against creditors seizure and disinheritance. However, only U.S. citizens and permanent residents lawfully in the State, as well as spouses and children with permanent rights to remain in this country, have the ability to exercise these benefits. Those here on temporary non-immigrant visas cannot claim the same exemption, and the property will be used to satisfy creditor claims and other expenses.
Creating a Strong Estate Plan
The best way to implement asset protection strategies as a non-U.S. citizen is to take action before becoming a permanent resident. Pre-immigration planning that involves transferring or retitling assets into structures that are not subject to U.S. estate and gift taxes is the most direct and effective method of ensuring assets are not double taxed or in danger of regulation by U.S. courts in the probate process. An experienced estate planning attorney will know the structure that best suits the assets in question and the needs of the individual seeking estate planning advice.
Contact a Florida Estate Planning Attorney
Regardless of citizenship status, estate planning is a crucial issue for anyone who owns property and wants to retain control over its distribution after death. William Rambaum has handled a variety of estate planning and asset protection issues for over three decades, and will bring the dedication and skill you need to protect your family’s financial security. Contact the Oldsmar law firm to schedule an appointment.