In today's global world, many people who are U.S. citizens are married to someone who is not a citizen. This can make the process of estate planning more complicated.
However, as long as you plan ahead and make arrangements to deal with the issue, the probate process should go smoothly as non-citizens are allowed to inherit property. This includes homes and land in the United States. A qualified probate attorney can help spouses and other heirs throughout the process of probating a will and distributing assets after death.
Estate Planning and Probate with a Non-Citizen Spouse
Market Watch addresses some of the options to consider for estate planning with a non-citizen spouse. The suggestions are intended to help reduce the federal estate tax burden, which applies to larger estates. However, they can be useful for all couples who want to make the probate process as simple and straightforward as possible after a death.
One option is for the U.S. citizen spouse to give away the maximum permitted amount in gifts to the non-citizen spouse each year while still alive. In 2014, a husband or wife may give his/her spouse a gift of $145,000 per year. This exclusion is much larger than for other types of gifts, which are maxed out at $14,000 annually.
Giving the maximum gift annually will reduce the size of the estate until it falls under the estate tax exclusion. When the money is gifted to your non-citizen spouse over the course of your life, you do not need to worry about this money going through probate upon death.
Another option is for the foreign spouse to become a U.S. citizen. This can even be done after the death of the citizen spouse, as long as the citizenship goes through before filing the federal estate tax return for an estate. Typically, this deadline is nine months after the death has occurred. An attorney who handles the probate process can explain specifically when the tax return must be filed. Becoming a citizen can, however, have significant implications including the need to give up citizenship in a home country.
Another final option is to create a qualified domestic trust (QDOT). A QDOT may be formed by an executor of the estate based on the terms of the will after the citizen spouse has died. A surviving spouse may also form a QDOT after death.
When this trust is formed, assets that are inherited by the non-citizen spouse go into the QDOT. The federal estate tax on the assets in the trust are deferred. When a spouse takes money out of the QDOT or passes away, the assets are then added back onto the estate and the taxes need to be paid. However, the non-citizen may become a citizen and then take the assets out and no deferred tax payment will be required.
Understanding the options and choosing the right one is important to ensure that a large amount of the value of the estate is not lost to taxes during the probate process.
Contact Bertolino LLP at 512-717-5432 or visit https://www.belolaw.com to schedule a consultation with a probate attorney today.