Not a citizen? These estate planning rules matter


Q. My wife is an immigrant from Mexico and she’s been here for 30 years. We’re finally going to do our wills. I’ve heard some property rules could be different because she wasn’t born here. What do we need to know?
— Husband

A. Basic estate planning is critical for any family, but you’re right. You may have to deal with some complications.

You didn’t say if your wife is a citizen of the U.S. This will be important for your planning.

Let’s start simple.

Executing a will that dictates the distribution of assets at death is the focal point of estate planning.

There are other factors to consider, such as powers of attorney, healthcare powers of attorney and guardianship designations, said Bryan Smalley, a certified financial planner with RegentAtlantic in Morristown.

“They will help ensure that decisions regarding your assets and family will be made by trusted individuals assigned by you,” he said. “Once the will is drafted, it is recommended that you check the beneficiary designations associated with your retirement accounts as well.”

Retirement assets flow outside of the will and are distributed per these designations, so be sure to check those.

Working with an attorney and accountant who have experience in cross-border tax and estate planning would be beneficial for you, Smalley said. They should have a deeper insight into the various transfer tax rules between countries.

Also, different rules apply to different family situations, Smalley said.

“For example, if your wife is a U.S. citizen, all of her assets – whether in the U.S. or Mexico – are subject to U.S. federal estate tax,” he said. “For non-resident aliens, however, only certain assets held within the U.S. are subject to federal estate tax.”

Also be aware of the lifetime estate/gift tax exemption.

U.S. citizens have a lifetime exemption amount of $11.2 million per individual, meaning that the first $11.2 million of their assets are not subject to estate tax, Smalley said.

But for non-citizens and non-residents, that exemption amount is only $60,000.

“U.S. citizens also have the ability to transfer an unlimited amount of assets to their U.S. citizen spouse at death without any estate tax consequences,” Smalley said. “If married to a non-resident, then that unlimited marital deduction is not always applicable.”

You can however, gift up to $152,000 per year during your life to your non-citizen spouse, Smalley said.

“There are some strategies that can be implemented during your lifetime to mitigate estate taxes, but the appropriate estate planning techniques truly depend on your family’s situation,” he said. “Please consult with your trusts and estates attorney, accountant, and financial planner before constructing your estate plan.”

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