If you are married, protecting, and providing for your spouse are undoubtedly strong motivators when you think about estate planning. For most people, these goals are relatively easy to achieve within their estate plan; however, if your spouse is not a United States citizen, protecting, and providing for him/her within your plan becomes more complicated and complex. To help you better understand, the Los Angeles attorneys at Schomer Estate & Wealth Advisors discuss estate planning when your spouse is a non-citizen.
The Rise of Multi-National Marriages
Geographic, economic, and societal barriers once made multi-national marriages relatively rare. The relentless march of progress in science, technology, and transportation, however, has dissolved those barriers, rendering the globe a smaller, more interconnected place. Today, the prevalence of multi-national marriages has surged, reshaping the demographic landscape of matrimony. No longer confined by borders, love knows no boundaries, with approximately one in five marriages in the United States now featuring a spouse hailing from a foreign country.
Estate Planning Implications of Marrying a Non-Citizen
The implications of marrying a non-citizen extend far beyond the confines of romance. Common estate planning considerations when your spouse is a non-citizen include:
- Tax Implications: One of the primary challenges of estate planning with a non-citizen spouse is navigating tax implications. In the United States, estate taxes may apply differently to assets passed to a non-citizen spouse compared to a citizen spouse.
- Immigration Status: The immigration status of the non-citizen spouse can impact their ability to inherit assets and manage finances in the event of the other spouse’s death. Without proper planning, there may be delays or complications in transferring assets to the non-citizen spouse.
- Complex Asset Structures: If you and your spouse have complex asset structures, such as overseas investments or properties, estate planning becomes even more intricate. Different countries have varying laws regarding inheritance and taxation, adding another layer of complexity to the process.
- Unlimited Marital Deduction: While having a comprehensive estate plan in place is always advisable, married couples can typically rely on the unlimited marital deduction to transfer assets tax-free to a surviving spouse when one spouse passes away. Unfortunately, the marital deduction doesn’t work the same way for a surviving spouse if that spouse is not a U.S. citizen. Instead of being able to transfer an unlimited amount of assets, you can only transfer up to $185,000 worth of assets (as of 2024) to a surviving non-citizen spouse.
How Can a Qualified Domestic Trust (QDOT) Help?
For anyone trying to figure out how to protect and provide for a non-citizen spouse in their estate plan, a Qualified Domestic Trust, commonly known as a QDOT, is worthy of consideration. A QDOT offers a lifeline to couples navigating the treacherous waters of cross-border matrimony.
A QDOT trust is a specialized trust that helps you ensure financial security for a non-citizen spouse without relying on the unlimited marital deduction. Once the QDOT is established, your non-citizen spouse will be entitled to the interest from the trust assets; however, your spouse will not own the assets, nor can your spouse access the principal held by the trust unless he/she can show “extreme hardship.” Showing “extreme hardship” requires your spouse to show an “immediate and substantial” need for money relating to “heath, maintenance, education or support” of either your spouse or someone your spouse is legally obligated to support, such as a child.
When your surviving spouse passes away, the assets held in the trust will be distributed to the named beneficiaries chosen when the trust is created. Typically, married couples with children name their children as the beneficiaries of a QDOT. If any federal and/or state estate taxes are due when the trust principal is distributed, they will need to be paid at that time. The complexities of the federal and state tax systems in the United States coupled with the possibility that you and your spouse may also owe taxes in his/her home country make consulting with an experienced estate planning attorney extremely important when creating your estate plans.
In the United States, where the complexities of tax law intersect with the nuances of international relations, seeking the counsel of an experienced estate planning attorney is imperative to ensure that your spouse is financially secure and protected if he/she outlives you.
Do You Need Help with Estate Planning for a Non-Citizen Spouse?
For more information, please join us for an upcoming FREE seminar. If you need incorporating your non-citizen spouse into your estate plan, contact the experienced Los Angeles estate planning attorneys at Schomer Estate & Wealth Advisors by calling (310) 337-7696 to schedule an appointment.
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