When it comes to estate planning, one size doesn’t fit all, especially if your spouse is not a U.S. citizen. This is the first of two blog posts focusing on what you need to be aware of if your spouse is a noncitizen.
If your estate is below the federal estate tax exclusion threshold ($5,250,000 in 2013, $5,340,000 in 2014), there are few concerns:
Your spouse may inherit from you and can serve as your executor
Your noncitizen spouse can inherit from you under a will or trust and can be a named beneficiary of your life insurance and retirement accounts. With few exceptions, your spouse can also serve as executor of your will if your spouse is a resident of the state, has no criminal history and is competent to serve.
Holding property with a noncitizen
Generally speaking, property held jointly with a spouse (bank accounts, investments, real estate) is assumed by law to be owned one-half by each spouse. However, if the survivor is not a U.S. citizen, the entire value of the property is included in the decedent’s estate unless the executor can prove to the court that the noncitizen spouse paid for or otherwise furnished consideration for the property.
Guardianship
If you have minor children, it is important to specify in your documents the person or persons who are responsible for their care in the event that you and your spouse pass away, and who is in charge of managing the assets they inherit from you.
If your intention is for the children to be raised with family abroad but still remain in contact with U.S. relatives, you must name your preferences and make stipulations about how often the visits should take place and how they are going to be paid. You might also wish to name a temporary guardian to look after the children immediately after your death.
If your spouse becomes a U.S. citizen before your federal estate tax return is due, your spouse may qualify for the unlimited marital deduction. However, U.S. citizens are taxed on their worldwide income, so speak with an experienced estate planning attorney before taking this step. The other options available to shield your estate from estate taxes are addressed in Part II.