Estate planning takes on an added layer of complexity when immigration issues are involved. Among other factors, it is important to consider the immigration status of the person creating plans, the immigration status of intended beneficiaries, and the value and location of assets to be allocated under the plan. Tax issues associated with estate planning can become particularly complicated when they intersect with immigration issues. A comprehensive plan may require coordinated efforts from estate planning attorneys in jurisdictions where property is located in the U.S., an immigration attorney familiar with cross-border inheritance issues, a qualified tax advisor, and possibly legal advisors abroad.
Immigration Status Does Not Affect Inheritance Rights But Could Lead to Logistical Problems
Generally, an individual’s immigration status does not impact their ability to inherit property through the laws of intestate succession or as the beneficiary of a will, trust, or other instrument. For instance, Section 732.1101 of the Florida Probate Code specifies that “Aliens shall have the same rights of inheritance as citizens,” and the laws of other U.S. jurisdictions contain similar provisions. Therefore, even an individual who is in the U.S. illegally has the right to receive property as the beneficiary of an estate plan.
However, in practice, it could prove difficult for an individual without lawful status—and sometimes even those with lawful status—to gain the use and wield control over property they are supposed to receive. Someone creating an estate plan who wishes to leave assets to an individual in the U.S. who is not a citizen should consider taking steps to protect the beneficiary’s rights in case of detention, removal, or other problems. This might include creating a durable financial power of attorney to enable a U.S. citizen to manage the assets if necessary. If the beneficiary is a minor, it would be wise to prepare a guardian and/or conservator nomination to provide for management of the assets received. An immigration attorney will be able to recommend the most effective strategies based on the particular circumstances.
Tax Issues Require Careful Consideration
Immigration issues may require additional estate planning strategies to reduce tax burdens, particularly for estates that are near the threshold for estate tax liability. Remember that the current high thresholds for federal estate tax exemptions will expire at the end of next year, and it is quite possible that thresholds will return to lower levels of the past. That means this substantial tax would impact many individuals and families with business interests or real estate holdings.
There are certain tax exemptions and opportunities only available to U.S. citizens. For instance, one spouse may leave their entire estate to the other spouse without incurring estate tax liability if both spouses are U.S. citizens. However, if a surviving spouse is not a U.S. citizen, they do not qualify for the unlimited marital deduction. It may be necessary to take additional steps to reduce or eliminate estate tax liability for a non-citizen spouse. A non-citizen may also want to consider establishing domicile to qualify for estate tax exemptions at the federal and possibly state level.
Depending on the situation, gifts and inheritances may trigger foreign tax obligations that can potentially be offset by foreign tax credits. These are just a sample of some of the tax issues that could impact estate planning. The bottom line is that when parties consider all the potential tax consequences at the planning stage, they can take steps to minimize obligations.
Planning for Foreign Assets or Foreign Beneficiaries
When estate planning in the U.S. involves assets held overseas or the intent to leave assets to individuals located abroad, issues can be complicated by a variety of factors. For foreign assets, it is important to consider any restrictions on property transfer in the country where the property is located, as well as tax implications. Does that country have a reciprocal tax treaty with the U.S.? Are there substantial additional costs if you leave particular foreign property to a U.S. citizen compared to leaving the asset to a native citizen? Will placing the property in a trust alleviate certain difficulties or create more administrative burdens?
When an individual wants to leave assets to a foreign national living abroad, the most effective method often involves the creation of a trust. This avoids the need for foreign beneficiaries to coordinate probate matters from a distance.
Get Information from Qualified Professionals Before Implementing Estate Plans
Because there are numerous ways the immigration concerns can affect an estate plan, it is important to consult knowledgeable professionals who can identify potential problems and help formulate a plan to reduce the negative impacts. Whenever the person creating an estate plan, one of their intended beneficiaries, or an heir at law is a non-citizen, it is wise to investigate to be prepared for any potential challenges.