Increased mobility and ease of travel have made our world a smaller place. It seems that nothing has been untouched by the changing landscape of the global village, including the makeup of the U.S. population. For over 22 million people residing in the U.S. who are not U.S. citizens, estate planning comes with some special considerations. If you or your spouse or partner happen to be a non-citizen, you will need to make sure you're working with an experienced attorney who understands those considerations.
In many regards, estate planning is the same for non-citizens as it is for citizens. Whether you're a lawful permanent resident (also known as a “green card holder” or “LPR”), a conditional resident, a non-immigrant (such as individuals granted temporary protective status, or certain visa holders) or undocumented, your status as a non-citizen should not prevent you from creating an estate plan.
Non-citizens living in the U.S. need all of the same estate planning documents that citizens need, including:
- Will
- Trust
- Powers of attorney
- Advance directive
- HIPPA waiver
- Beneficiary designations
During the process of completing these documents, you'll find that some of the content may differ slightly, depending on things such as your immigration or citizenship status, marital status and the location of the property you own. You may also have different federal estate and gift tax liability than a U.S. citizen.
How is estate planning different for non-citizens who are married to U.S. citizens?
If you are one of the over 3 million married couple households in the U.S. in which one spouse is a U.S. citizen and the other spouse is a non-citizen, you will still need all of the standard estate planning documents listed above. You may also need a Qualified Domestic Trust (QDOT) to help reduce or postpone your federal estate and gift tax liability.
Can a non-citizen inherit property in the U.S.?
Yes, if you are a non-citizen you are able to inherit property in the U.S., regardless of whether it was left to you by a citizen or a non-citizen. However, there are different estate tax consequences when a spouse who is a U.S. citizen leaves property to a spouse who is a non-citizen, than when both spouses are citizens.
If you are concerned about potential federal gift tax liability in this circumstance, you may be able to use a QDOT to defer tax on amounts gifted to or inherited by a non-citizen spouse.
Is federal estate and gift taxation different for a non-citizen?
For a married couple in which both spouses are U.S. citizens, they enjoy an “unlimited marital deduction” that enables them to transfer an unlimited amount of assets to each other during their lifetimes or after death. For a married couple in which one spouse is a U.S. citizen and the other is a non-citizen, the unlimited marital deduction only applies if the non-citizen spouse passes away first and leaves asset to the citizen spouse. However, the unlimited marital deduction is not available for gift or inheritance transfers made to the non-citizen spouse. With transfer tax rates as high as 40%, this can be a potentially expensive difference and is another reason that proper planning is crucial for non-citizens.
Can a non-citizen transfer property located in a foreign country through a U.S. will?
A U.S. estate plan will not affect the transfer of assets located in a foreign country (particularly real estate). If you own property outside the U.S., one option is to hire an attorney in the country in which the property is located to prepare a “supplemental will” that is limited to only disposing of that property. This should be done in coordination with your U.S. estate planning attorney to ensure that neither the U.S. nor the foreign will inadvertently revokes the other will. There is also a mechanism known as an “international will” which may be effective, as long as the country in which the property is located has signed the treaty recognizing international wills, and the will meets the strict requirements of that treaty.
| FEDERAL ESTATE & GIFT TAX FOR TRANSFERS TO A U.S. CITIZEN VS. TO A NON-CITIZEN | ||
|---|---|---|
| To Spouse who is U.S. Citizen | To Spouse who is Non-Citizen | |
| Unlimited Marital Deduction for assets left after death | Yes | No - Federal Exclusion Amount applies ($11.38 million, indexed for inflation) |
| Unlimited assets transferrable as gifts during lifetime | Yes | No - Limited to $157,000 per year (indexed for inflation) |
| Might benefit from a Qualified Domestic Trust (QDOT) | No | Yes |
Can a will name a foreign person as guardian for minor children?
All parents of minor children should nominate a guardian for the children in their wills. Parents who were born in a foreign country may sometimes prefer that, in the event of their death, their children be raised by relatives living in their native country. Nominating a guardian who lives in another country is legal, but from a practical standpoint, it can cause challenges that should be anticipated and planned for in order to avoid unnecessary delays or displacement of the children. For example, the will can also nominate a “temporary” guardian who lives in the U.S. The role of the temporary guardian is to be immediately available to support the children, while the permanent guardian makes arrangements to travel to the U.S.
How are advance directives different for non-citizens?
Advance directives for non-citizens should contain clear and specific language regarding any wishes to be transferred to a foreign country during a prolonged period of incapacity. There should also be clear burial instructions in your will if you wish to have your remains transported to another country for final disposition.
If you or your spouse live, work or own property in the U.S. but are not U.S. citizens, it is important that you work with an experienced estate planning attorney to create a plan that will achieve your goals and avoid some of the pitfalls of estate planning for non-citizens.