Non-citizen spouse? Expect a tax bill

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Q. How is money left to a non-citizen spouse different from money left to a citizen spouse?
– Surprised to know

A. Money left to a non-citizen spouse is treated differently.

Under what is called the “marital deduction,” a transfer from a decedent — the person who died — to a surviving spouse is not subject to federal or New Jersey estate tax, said Yale Hauptman, an estate planning attorney with Hauptman and Hauptman in Livingston.

Hauptman said other transfers to non-spouses are free from estate tax only up to the exemption limit, which is $5.49 million for the federal estate tax and $2 million for the New Jersey estate tax in 2017.

But the marital deduction only applies to surviving spouses who are U.S. citizens.


“The government is concerned that it won’t get its estate tax when they die because they will leave the U.S. with the assets,” he said.

There is one exception.

Hauptman said the use of a Qualified Domestic Trust (QDOT) can avoid the estate tax for the non U.S. citizen surviving spouse as long as the property passes thru the QDOT. There are certain legal requirements to qualify a trust as a QDOT that are designed to assure that when the surviving spouse dies, Uncle Sam will get its tax bill paid, he said.

“By the way, if the non U.S. citizen dies first, leaving a U.S. citizen surviving spouse, that spouse is entitled to the marital deduction,” he said. “No QDOT is necessary in that case. It is the citizenship of the surviving spouse that matters.”

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