Estate Planning for People With Noncitizen Spouses


No matter what your net worth or the size and shape of your family, estate planning is critical.If you're a U.S. resident, but not a citizen, you're treated similarly to a U.S. citizen by the Internal Revenue Code. You're subject to federal gift and estate taxes on your worldwide assets, but you also enjoy the benefits of, in 2024, the $13.61 million estate tax exemption (up from $12.92 million in 2023) and the $18,000 annual gift tax exclusion (up from $17,000 in 2023). For some, it can be relatively simple. But various factors — such as the complexity of one’s finances and certain family dynamics — can make estate planning much more complicated.

Another factor that affects a certain percentage of Americans is having a noncitizen spouse. In such cases, special rules apply that call for additional planning and, ideally, professional advice. Here’s an overview of some of the issues involved.

“Residency” vs. “Domicile”

If you’re a U.S. resident, but not a citizen, you’re treated similarly to a U.S. citizen by the Internal Revenue Code. You’re subject to federal gift and estate taxes on your worldwide assets, but you also enjoy the benefits of, in 2024, the $13.61 million estate tax exemption (up from $12.92 million in 2023) and the $18,000 annual gift tax exclusion (up from $17,000 in 2023).

You can even double the annual exclusion to $36,000 through gift-splitting with your spouse, so long as your spouse is a U.S. citizen or resident and agrees to the gift. Special rules apply to the marital deduction, however, as we’ll discuss below.

Residency is a complicated subject. IRS regulations define a U.S. resident for federal estate tax purposes as someone who had domicile in the United States at the time of death. One acquires domicile in a place by living there, even briefly, with a present intention of making that place a permanent home.

Whether you have domicile in the United States depends on an analysis of several factors, including the relative time you spend in the United States and abroad, the locations and relative values of your residences and business interests, visa status, community ties, and the location of family members.

Nonresident Aliens

If you’re a nonresident alien — that is, if you’re neither a U.S. citizen nor a U.S. resident — there’s good news and bad news regarding estate tax law. The good news is that you’re subject to U.S. gift and estate taxes only on property that’s “situated” in the United States. Also, you can take advantage of the $18,000 annual exclusion, though you can’t split gifts with your spouse.

The bad news is that your estate tax exemption drops from $13.61 million to a miniscule $60,000, so substantial U.S. property holdings can result in a big estate tax bill. Taxable property includes real estate in the United States as well as tangible personal property — such as cars, boats and artwork — located in the United States.

Determining the location of intangible property — such as stocks, bonds, partnership interests, or other equity or debt interests — is more complicated. For example, if a nonresident alien makes a gift of stock in a U.S. corporation, the gift is exempt from U.S. gift tax. But a bequest of that same stock at death is subject to estate tax. On the other hand, a gift of cash on deposit in a U.S. bank is subject to gift tax, while a bequest of the same cash would be exempt from estate tax.

Tax-Smart Strategies

The unlimited marital deduction isn’t available for gifts or bequests to noncitizens. However, there are certain options for making tax-free transfers to a noncitizen spouse. For instance, you can use the transferor’s $13.61 million estate tax exemption, provided the transferor is a U.S. citizen or resident.

You can also make annual exclusion gifts. The limit for gifts in 2024 to a noncitizen spouse is $185,000 (up from $175,000 in 2023). And last, you can bequeath assets to a qualified domestic trust, which contains provisions designed to ensure that the assets are ultimately taxed as part of the recipient’s estate.

Consult a Professional

As you can see, individuals with noncitizen spouses face some distinctive estate planning challenges. But, if this is your situation, you may have some intriguing tax-saving opportunities as well. It’s paramount to work closely with a CPA, as well as an attorney, when putting together the pertinent documents and exploring tax breaks.

If you’d like to discuss your situation with us, just leave us your contact information below and we will get back to you promptly.