In the U.S., citizens are individuals who were born in the U.S., individuals who have completed the naturalization process, and individuals born to U.S. citizens abroad. People in this last category must do further research and should seek legal assistance to ensure the numerous specific requirements are fulfilled and all applicable deadlines are met to ensure U.S. citizenship.
Non-citizens, also called aliens, are individuals who were born outside the U.S., who are subject to some foreign government, and who have not been naturalized under U.S. law. Aliens fall into at least two categories: resident aliens and nonresident aliens. Resident aliens have legally established domicile in the U.S. Any specific questions regarding one’s status or how to change status should be
directed to an attorney who specializes in immigration law. The specific requirements change often. Moving through the immigration bureaucracy is time consuming and riddled with pitfalls for the unwary.
For married couples where one or both spouses are non-citizens, the U.S. estate and gift taxes can operate very differently than for U.S. citizens. And there is considerable variation in how resident and non-resident aliens are treated as well. Additionally, specific
details can lead to very different results from one couple to the next.
Generally, a U.S. citizen can leave an unlimited amount at their death to their U.S. citizen spouse without incurring any immediate estate tax liability. This is referred to as the unlimited marital deduction. Only upon the death of the surviving spouse is any estate tax incurred. And with early planning for both spouses, estate tax liability can often be avoided entirely!
However, bequests from a U.S. citizen to their non-citizen spouse do not qualify for the unlimited marital deduction. This means that estate tax liability will be imposed in full as soon as the first spouse dies. When the first spouse to pass away is the non-citizen,
their tax liability will depend on whether they were a resident or non-resident alien. Resident aliens may pass up to 2 million dollars in wealth before incurring estate tax liability in 2007 and 2008. If the surviving spouse is a U.S. citizen, they will qualify for
the unlimited marital deduction. If the surviving spouse is not a U.S. citizen, they will not qualify for the unlimited marital deduction.
For non-resident aliens, the rules are even more complicated! Generally, a non-resident alien can only pass $60,000 of U.S. property before incurring estate tax liability. It should be noted that only specific types of U.S. property would be counted for estate tax purposes. And there is a patchwork of tax treaties between the U.S. and other nations that may totally or partially alleviate the tax burdens mentioned here.
The estate tax thresholds are set to change for several years, and then revert back to their previous low levels unless Congress can agree on new legislation. Thus, all affected people will have to revisit the issue over the next few years. Finally, citizens of other nations may be subject to taxes imposed by their home country for giving or receiving property. Specific, competent legal advice is an absolute must in this area.
Do you need to have your Will done? Do you have questions about Estate Planning for Non-Citizens residing in Georgia? Then e-mail or call me at 770-795-4992. Let’s discuss your plans, goals and concerns.