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US Estate Tax Planning for Non-Resident and Non-Citizens

Whether you are a US Citizen, Non-Citizen or Non-Resident Alien, you still need to establish your Living Trust. However, your status can play a role in the type of Living Trust within your Estate Plan you require.

People immigrate to the US every day for the opportunity this great Country provides us. However, it is important to consider key factors when it comes to Federal Estate Tax laws imposed on non-citizens. If you are not a US Citizen, you must take great care in planning your estate in order to minimize estate taxes.

Do you have a permanent ‘intent’ to reside in the US?

In the US for Estate Tax purposes, the IRS defines residency as “an intent to remain in a place indefinitely with no intention to move away from it.”  Thus, the key question is: where the non-citizen considers “home” or “domicile” to be.  To determine where a non-citizen’s home or domicile is for Estate Tax purposes, the IRS uses a “Facts & Circumstances” test.  This test includes a review of the non-citizen’s VISA status, where his/her personal property is located, such as, cash, stocks, bank accounts, where their businesses are located, participation in community activity, where the person is licensed to drive, where the non-citizen has their primary residence, where their family and close friends live, and the location of any other residences they own.

If the above test can be met by a non-citizen, then the non-citizen will enjoy the federal exemption limits a citizen would enjoy for estate tax purposes.

US Citizen Federal Exemption Limits

Currently, US citizens enjoy a federal exemption of $5.45MM as an individual and $10.9MM between husband and wife (Federal Exemptions as of 2016). This means, you can transfer those amounts without being hit with an Estate Tax when you pass, commonly referred to as a death tax.  However, if your net estate is valued above these limits, then the delta is exposed to Estate Taxes. If you are a non-citizen and you meet the above Facts & Circumstances” test, then you too will be able to enjoy the high federal exemption amounts.

Click here for current IRS Exemption Limits

Non-Resident Aliens (NRA)

The Federal Exemptions of $5.45MM and $10.9MM mentioned above apply only to U.S. citizens or residents who meet the above test, not to non-resident aliens. Non-resident aliens have only a $60,000 exclusion.  An NRA is subject to a different estate tax regime than a U.S. taxpayer. The estate tax is imposed only on the part of the gross NRA’s estate that at the time of death is situated in the United States. If this is the case for you, then a Qualified Domestic Trust (QDOT) will be appropriate for you.

If you or your loved ones are non-Citizens, it is extremely important you consult with a qualified Estate Planning Attorney who understands your situation and this area of law.   They will walk you through the above test and properly plan your Estate utilizing cutting edge Living Trusts to avoid probate and protect your Estate against any erroneous Estate Tax implications based on your status in the US. For more information or to consult with an Estate Planning Attorney of the Singh Law Firm, Contact us at (510) 742-9500 or (831) 337-9000.

 

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