The attorneys with the Law Offices of Nay & Friedenberg explain how estate planning options may differ for a non-citizen living in the United States.
A non-citizen resident in the US would have most of the same estate planning issues that a citizen might have. They would plan for the possibility of incapacity or disability through financial powers of attorney or health care directives. They would try to insure for health care and disability. If they owned things here, they would have a will, a trust or beneficiary designations that addressed their US assets.
Of course there are also great points of difference. For example, if they own things abroad, they must also plan in that nation for those things. Again, that would be with powers of attorney and wills or will-equivalents. If they have a lot of family abroad this may complicate beneficiaries or naming fiduciaries. If their English language skills are limited, the options and plan may be difficult to understand.
The biggest difference tends to be in tax treatment. US citizens are given privileges because, living here, it is expected that they will pay taxes here. Non-citizens, it is thought, can leave the country and thus avoid paying taxes. As a result, the US has less favorable treatment in the assessment of the inheritance tax. If a non-citizen dies, his or her estate subject to US tax may include assets held abroad. Further, it is subject to lower estate exemptions. (These change yearly.) In order to take advantage of the higher US citizen exemption, the inheritance to a spouse can be protected through a qualified domestic trust (or QDOT). If a non-citizen is a beneficiary, there will be income tax withholding not applicable to citizens. If a non-citizen owns modest assets, these tax issues do not affect them much. But for the wealthy non-citizen and family, they can be a landmine.
While it is a personal decision of each person, the truth is that becoming a citizen does solve a lot of tax problems.
Estate Planning for a non-US citizen can be complex. An experienced estate planning attorney can make all the difference in knowing what documents fit your specific needs. Contact the Estate Planning attorneys with the Law Offices of Nay & Friedenberg in Portland, Oregon at (503) 245-0894 to set an appointment.