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Estate Planning With a Non-Citizen Spouse

Davidson Estate Law Nov. 21, 2023

Estate Planning text concept written on wooden blocks lying on a tableToday, many American citizens are married to individuals born in another country. According to the most recent statistics from the U.S. Census Bureau, about 21% of all married-couple households in the United States have at least one foreign-born spouse. Essentially, you’re allowed to make provisions for your spouse, descendants, and other loved ones in your estate plan. However, some special legal and tax rules may affect estate planning when it involves a noncitizen spouse. 

At Davidson Estate Law, we’re dedicated to offering trusted legal guidance and advocacy to individuals and families in complex estate planning matters involving noncitizen spouses. Our experienced California estate planning attorneys can evaluate your unique circumstances and enlighten you about how to include your noncitizen spouse in your estate plan. We’re proud to serve clients across Oakland, Walnut Creek, Alameda, San Francisco, Berkeley, El Cerrito, and throughout the Bay Area, California. 

Can Noncitizens Inherit Property?  

Yes. Just like U.S. citizens, non-U.S. citizens can also inherit property. Hence, when you draft your will or living trust, or name a beneficiary in your estate planning documents, you’re allowed to name your noncitizen spouse to inherit some of your assets and property. However, there are some unique legal issues and tax rules that apply to a noncitizen spouse in an estate plan. 

Should My Spouse Create an Estate Plan? 

Yes. Having an estate plan is essential for every adult, regardless of whether you’re a U.S. citizen or noncitizen. With an estate plan, your non-U.S. citizen spouse can leave specific instructions regarding who should inherit their assets and property and how their affairs should be managed after their demise. In addition, your spouse can make adequate provisions for their family members, both in the United States and in their home country, using their estate plan. 

The Effect on Taxes 

Under the current estate tax laws, only individuals and families who are very wealthy are affected by federal gift and estate taxes. Essentially, only estates that are worth at least $12.92 million will be subject to federal estate taxes for deaths in 2023. In addition, legally married couples are eligible to leave twice this amount tax-free. There is no estate tax in California. 

Assets Left at Death 

Assets and property left at death to a surviving U.S. citizen spouse are exempted from federal estate tax, notwithstanding the worth. This is known as the unlimited marital deduction rule. However, this rule doesn’t apply to noncitizen spouses and permanent residents. Therefore, if a non-U.S. citizen spouse inherits from their deceased partner’s estate that is worth the federal estate tax threshold, they must pay the required federal estate tax. 

Gifts While Alive  

If your spouse is an American citizen, any gifts given to them while alive are exempted from federal gift taxes. Conversely, if your partner is not a U.S. citizen, they will only enjoy a tax-free treatment for such gifts that is limited to $175,000 a year in 2023. Any amount by which the gift is worth more than this threshold will be subject to federal gift taxes. In California, the annual gift tax exclusion for 2023 is $17,000 per recipient. 

An experienced estate planning attorney can help determine the amount of taxes your noncitizen spouse may need to pay on inheritance and gifts and explore the possible options to avoid such estate and gift taxes, including QDOT Trusts. 

What Is a QDOT Trust, and Do I Need One?  

A qualified domestic trust (QDOT) is a special trust that allows surviving noncitizen spouses to inherit from their U.S. citizen spouse’s estate without being subject to estate and gift taxes. When you create the QDOT, you can fund the trust with assets and money, and make your spouse the only beneficiary of the trust. 

Rather than giving the assets directly to your noncitizen spouse, a QDOT can help your surviving partner benefit from the full marital deduction and exemptions on estate taxes. It will become active following the death of the U.S. citizen spouse. 

Get Help From an Attorney 

Estate planning with a noncitizen spouse has different tax rules and may involve a lot of complexities. At Davidson Estate Law, we have the diligence and resources to advise and guide clients through the complex procedures and tax rules governing estate planning with noncitizen spouses. As your attorney, we can explore your possible legal options, help establish the QDOT, and walk you through every legal phase involved in estate planning with your noncitizen spouse. 

Contact us at Davidson Estate Law today to schedule a simple case evaluation with seasoned estate planning lawyers. We can offer you the personalized legal counsel and dedicated advocacy you need to make intelligent decisions in your estate planning matters. Our firm proudly serves clients across Oakland, Walnut Creek, Alameda, San Francisco, Berkeley, El Cerrito, and throughout the Bay Area, California.