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Non-U.S. citizens face a number of unique challenges when it comes to estate planning. For one thing, the rules and exemptions for non-U.S. citizens differ from U.S. citizens. Additionally, it can make a difference whether someone is a domiciled non-U.S. citizen or an undomiciled non-U.S. citizen. 

Tax implications can also differ, especially if someone has citizenship in a country in which the U.S. does not have an estate tax treaty. Asset protection can also differ depending on whether assets are owned in the U.S. or a foreign country. Rosenblum Law attorneys are familiar with estate planning for non-U.S. citizens. We also have Spanish-speaking attorneys and staff with whom one can work on estate planning in their own language. Contact us today for more information, to set up a consultation, or to speak with a member of our staff.

Overview of Estate Planning for Non-U.S. Citizens

Estate planning for non-U.S. citizens is complicated in part because it makes a difference what type of non-U.S. citizen you are. Resident aliens are domiciled in the U.S. even though they don’t have US citizenship, and are taxed on estates as if they were U.S. citizens. Non-resident aliens only pay estate taxes on assets held in the U.S., but there is a much lower exemption amount.

Green card holders are considered to be resident aliens, as are visa holders. However, temporary residents are considered to be non-resident aliens. 

If someone is a resident alien or a domiciled non-U.S. citizen, the exemption for U.S. citizens applies, and all worldwide assets are taxed. If someone is a non-resident alien, the exemption is much lower and only U.S. assets are taxed. 

Wills, trusts, and beneficiary designations can help avoid probate and therefore estate taxes. However, setting up a will or trust can be complicated if foreign assets are involved. In addition, these documents can be made more complex if non-U.S. citizens are beneficiaries. 

U.S. Estate and Gift Tax Laws for Non-U.S. Citizens

U.S. estate and gift tax laws for non-U.S. citizens differ somewhat from tax laws for U.S. citizens. How estate laws are applied to an estate depends on whether the non-U.S. citizen is considered to be domiciled in the U.S. or not. 

If domiciled in the U.S., the estate laws for U.S. citizens are applied. The estate tax threshold in 2024 for U.S. citizens and domiciled non-U.S. citizens is $13.61 million for individuals or $27.22 million for married couples. Both U.S. and foreign owned property and assets are taxed.

The estate tax threshold for non-domiciled non-U.S. citizens is $60,000 for individuals or married couples. Only U.S. situated assets are taxed. 

Gift Tax Implications

Resident non-U.S. citizens and non-resident U.S. citizens are subject to a gift tax for the transfer of real and tangible property without return consideration. The gift tax exemption in 2024 is $18,000 per donee for individuals or $26,000 per donee for married couples who jointly own and transfer a gift. 

However, property can be transferred to a spouse who is a U.S. citizen without paying the gift tax. Alternatively, if the spouse is a non-U.S. citizen, the gift tax must be paid on transfer. 

Tools for Estate Planning for Non-U.S. Citizens

The tools for estate planning for non-U.S. citizens are similar to the tools for U.S. citizens. However, different laws govern them for non-U.S. citizens. 

Wills and Trusts

U.S.-based trusts with a non-citizen grantor are considered to be foreign trusts. Foreign trusts have different rules than U.S. trusts. For a foreign trust with a non-U.S. citizen beneficiary, only income from assets held in the U.S. are taxed annually. 

There are revocable and irrevocable trusts. A revocable trust is one in which the grantor can revoke or change the trust and beneficiaries. If someone has a revocable trust, they must claim the income from the trust on their tax return. 

With an irrevocable trust, the grantor has no rights or access to the assets in the trust. The downside to an irrevocable trust is that any U.S.-based assets transferred to the trust will be subject to the gift tax. 

Offshore trusts and foreign entities are not taxed by the IRS. 

Life Insurance

Life insurance is an important estate planning tool for non-residents. Most importantly, life insurance on a non-resident non-U.S. citizen is not considered a U.S.-based asset, and therefore is not subject to estate taxes. 

Life insurance is a great way to ensure that beneficiaries are taken care of, final expenses are met, and estate taxes on any other property can be paid. 

Joint Ownership of Assets

Property held jointly with U.S. citizens is taxed based on U.S. tax laws for U.S. citizens. When a property is held jointly between a U.S. citizen and a non-U.S. citizen, and the non-U.S. citizen dies, the property automatically goes to the U.S. citizen without the need for probate, which avoids estate taxes. This is considered a joint tenancy with rights of survivorship.

There are pros and cons to this arrangement. While someone can avoid estate taxes and probate on jointly owned property with a U.S. citizen, it may not be the best option for estate planning. Parties cannot will their share of a property with joint tenancy with rights of survivorship. Additionally, relationships can be strained if one party does not keep up with their share of the responsibility for the property held with joint tenancy with rights of survivorship.

Tax Treaties and International Considerations

The U.S. has estate tax treaties with 15 countries as of 2022. These treaties can reduce or eliminate double taxation on estates. 

If a treaty is in place for the non-U.S. citizen’s country of citizenship, either U.S. or foreign estate tax law will apply, depending on the treaty and the country in question. These treaties are complex, and it is important to work with a legal professional familiar with how different estate tax treaties apply to estate planning. 

The U.S. does not have a federal inheritance tax, although some states do. This means the inheritance laws in the home countries of non-U.S. citizens will likely apply when non-U.S. citizens are named as beneficiaries of an estate or trust. Repatriation of foreign-held assets to foreign-held accounts is governed by the tax laws of the country in question.

How a Lawyer Can Help Non-U.S. Citizens Plan Their Estate

A lawyer can help non-U.S. citizens plan their estate in a number of helpful ways. 

Navigating Complex U.S. Tax Laws

It takes an experienced attorney to understand U.S. estate and gift tax laws, especially concerning how they apply to non-U.S. citizens. The attorney can ensure compliance and can seek to reduce estate tax liabilities through proper planning. 

Drafting Wills, Trusts, and Other Estate Documents

Experienced attorneys can tailor estate plans to meet the unique needs of non- U.S. citizens. For example, they can structure cross-border estate plans to give the most assets possible to someone’s beneficiaries and eliminate as much tax as possible in both the U.S. and the country of origin. 

Wills, trusts, and other estate documents must meet the rules established by the IRS and the foreign country to which the non-citizen belongs. 

Coordination with International Attorneys

Experienced attorneys like those at Rosenblum Law can collaborate with foreign legal professionals to ensure that estate plans are viable in both the U.S. and the country of citizenship. They can also handle foreign asset protection and distribution with the cooperation of foreign attorneys.

FAQs

Contact Rosenblum Law Today

After reading this article, you might still have some questions about how estate taxes work as a non-U.S. citizen. Estate tax laws are complex, and estate tax treaties differ from country to country. This makes having an attorney for estate planning very important.

Rosenblum Law has extensive experience in estate planning for non-U.S. citizens. We can help you understand the estate tax laws and regulations and develop an estate plan that protects your beneficiary’s assets. Contact us today for a free consultation. We have staff and attorneys that are Spanish-speaking for your convenience.

More Information

Estate Planning Attorneys in New Jersey

• A Guide to Estate Litigation in New Jersey
• A Guide to New Jersey Trusts
  • Can you Trust Protect My Assets from Creditors?
  • What Protections Can Go in the Basket of a Revocable Living Trust?
  • Spendthrift Provisions and How They Protect Your Heirs
• Contesting Will in New Jersey
  • Challenging a Will: Lack of Capacity
  • Challenging Will: Undue Influence
• Creating a Living Trust in NJ
• Creating a Power of Attorney for Finances in New Jersey
• Creating a Will in New Jersey
• Creating an Advance Directive for Healthcare in New Jersey

Estate Planning Lawyers in New York

• A Guide to Estate Litigation in New York
• Creating a Last Will in New York
• Creating a Living Trust in New York
• Creating a Power of Attorney for Finances in New York
• Creating an Advance Directive for Healthcare in New York
• Probate in New York
• Probate in NYC: What It Is and Why You Should Avoid It