A fundamental rule for an attorney when he or she first meets a client is to assume nothing about the client. This is particularly true for Estate Planning attorneys, where faulty assumptions regarding whether a client’s children are biological children, whether a client’s children have any special needs or the citizenship status of the client can defeat a client’s otherwise well-crafted estate plan.
The good news for U.S. citizens and non-citizen residents is that the applicable exemption is now $5 million. However, for a nonresident non-citizen (“nonresident alien”) the applicable exemption continues to be limited to $60,000. Thus, estate tax is due when a nonresident alien’s estate transfers U.S. situs assets above $60,000.
Unlike U.S citizens and residents, who are subject to estate and gift tax on their worldwide assets, nonresident aliens are subject to estate and gift tax only on assets that are considered U.S. situs property.
The first question for non-citizen clients (and their advisors) is to determine if the client is in fact a “nonresident”. We’ll discuss this more in following articles.
Beginning in 2011, nonresident aliens are subject to estate tax on value of all U.S. situs property in excess of $60,000. While an unlimited marital deduction is available when a non-citizen leaves U.S. property to a U.S. citizen surviving spouse, when the assets are transferred to a non-citizen the same unlimited marital deduction is available only if the property is transferred into a “qualified domestic trust” (“QDOT”) for the benefit of the non-citizen. Thus, proper estate tax planning is essential to protect your estate.
For more information about using a qualified domestic trust for estate planning purposes, please contact MartinWren, P.C.‘s Charlottesville Estate Planning Lawyers, G. Raye Jones, at (434) 817-3100. MartinWren, P.C. has Virginia offices in Charlottesville and Harrisonburg and services clients throughout Virginia, including with its Virginia Personal Injury Lawyers group.