Estate plan file in a filing cabinetBy Mark A. Vergenes

Last week, we talked about financial planning for non-U.S. citizens. If you’re in a marriage between an U.S. citizen and a non-U.S citizen, you may face additional wealth transfer challenges that require advance planning:

  • Estate taxes work differently for non-citizens. When two U.S. citizens are married, the surviving spouse can inherit any amount of money free from federal estate taxes. This is not true for a non-U.S. citizen. Any assets passed to a non-U.S. citizen spouse, even those with green cards, are subject to federal estate taxation over the allowable exemption.
  • A qualified domestic trust (QDOT) may help avoid federal taxes when one spouse passes. At the first spouse’s death, assets are put into a qualified trust. The surviving spouse receives income from the trust but does not own the trust assets. It is important to keep in mind that a QDOT only defers estate taxation and U.S. estate taxes will still be due at the surviving spouse’s death.
  • A non-resident alien may own a life insurance policy on her or her own life; its death benefit will not be subject to U.S. estate tax. In addition, life insurance offers both resident and non-resident aliens tax-deferred growth of cash values and a federal income tax-free death benefit. Because of these tax advantages, life insurance can be one of the best options for providing liquidity to pay estate taxes on U.S.-based property.

The wealth management world is increasingly international, resulting in a multitude of new opportunity.

Mark A. Vergenes is president of MIRUS Financial Partners and Chairman of the Board for the Lancaster Parking Authority.

Investment Advisor Representative offering securities and advisory services offered through Cetera Advisor Networks LLC., member FINRA/SIPC. Cetera is under separate ownership from any other named entity. MIRUS Financial Partners nor Cetera Advisor Networks LLC. give tax or legal advice.