Financial Briefs

More Articles  Printer Friendly Version

 

Foreign Intrigue In Estate Planning

Are you married to someone who isn't a U.S. citizen? If you are, special estate planning considerations may come into play.

Whether your spouse is a citizen or not, you can use the same basic estate planning documents without any reservations. You can create a will bequeathing assets to your spouse, name him or her as a beneficiary of retirement accounts, and designate your spouse as the agent under a power of attorney. No problems there.

But things get trickier when your spouse inherits assets. Normally, property transferred from one spouse to another, during your lifetimes or when one of you dies, is completely exempt from gift or estate tax thanks to an unlimited marital deduction. But that doesn't apply to non-citizen spouses.

Instead, you can make use of a $5.49 million unified gift and estate tax exemption that covers transfers to any beneficiaries, including a non-citizen spouse.

In addition, you can give a non-citizen spouse as much as $149,000 (in 2017; the amount is indexed for inflation) in gifts during your lifetimes.

Other ways to avoid being subject to the rules for non-citizen spouses may include:

1. Have your spouse become a U.S. citizen. This can be an obvious solution. It allows your spouse to qualify for the unlimited marital deduction by the time your federal estate tax return is due. That's generally nine months after death, but the IRS may grant a six-month extension.

Because it takes time to obtain citizenship—there is a waiting period before you can even apply—it's important to start sooner than later.

2. Rely on a QDOT trust. With a qualified domestic trust (QDOT), you can leave property to the trust, rather than directly to your spouse. Then your spouse can receive income from the QDOT that is exempt from estate tax.

But there are a couple of extra wrinkles. If your non-citizen spouse withdraws principal from the QDOT, it will be taxed like a distribution from your taxable estate, which can increase estate tax liability. There are also limitations on investments made by QDOTs. In some cases, it could make sense to complement a QDOT with other kinds of transfers to your spouse. Finally, a QDOT can be structured to end if your spouse becomes a U.S. citizen.


Email this article to a friend


Index
The myRa Is Cut Short, But Other Options Abound
6 Ways To Close The Retirement Gap
Are You "Rich" Or Not? New Survey Hits The High Points
Why Aren't More Millennials Moving On Up And Out?
Lending Money? Watch Your Tax Step
How To Spell Estate Tax Relief
Watch Out For "Grandparent Scams"
ETFs Can Provide Some Other-Worldly Benefits To Investors
Four Tax Strategies In Retirement
This Tax-Free Rollover Goes Right To Charity
Why Turn Down An Inheritance?
Do You Deserve A High Grade In Financial Literacy?
Six Tax Items For Small Businesses
How Now, Dow Jones Industrials?
Five Steps When You Inherit Assets

This article was written by a professional financial journalist for Blattel & Associates and is not intended as legal or investment advice.

©2017 Advisor Products Inc. All Rights Reserved.

The articles and opinions on this site are for general information only and are not intended to provide specific advice or recommendations for any individual. We suggest that you consult your advisor with regard to your individual situation.
All summaries/prices/quotes/statistics presented here have been obtained from sources we believe to be reliable, but we cannot guarantee its accuracy or completeness. Past performance is no guarantee of future results.
When you access certain links on the Blattel & Associates website you may leave this website. We do not endorse the content of such websites nor the products, services or other items offered through such websites. Any links to other sites are not intended as referrals or endorsements, but are merely provided to the users of the Blattel & Associates website for convenience and informational purposes.
Robert Blattel is a CERTIFIED FINANCIAL PLANNERTM practitioner. The partners of Blattel & Associates are not registered in all states. Please contact us to verify availability in your state. This is not an offer to buy or sell any security.
CFP® and CERTIFIED FINANCIAL PLANNERTM are certification marks owned by the Certified Financial Planner Board of Standards, Inc. These marks are awarded to individuals who successfully complete the CFP Board’s initial and ongoing certification requirements.
Securities and Investment Advisory Services offered through Cutter & Company Brokerage, Inc., 15415 Clayton Road, Ballwin, Missouri 63011 * (636) 537-8770. Member FINRA/SIPC.
Privacy Policy can be read at http://www.cutterco.com/privacypolicy.htm.