When a couple approaches our firm for estate planning, one of the first questions we must ask is whether they are both US citizens. If one spouse is a noncitizen, that has a significant impact in how we approach their estate plan.
Assets passing to a noncitizen spouse do not qualify for the unlimited estate tax marital deduction unless certain conditions are met. Those conditions being:
- The noncitizen spouse must be from a country that has a treaty with the US providing for a martial deduction; or
- The spouse was a legal resident since the spouse’s death and becomes a US citizen before the deceased spouse’s estate tax return is due.
We also discuss the option of Qualified Domestic Trusts (QDOT) in these situations. Assets qualify for the martial deduction if they are received through a QDOT for the benefit of a noncitizen surviving spouse. Proper planning is essential with QDOTs as they have many technical requirements in order to preserve benefits under portability and unlimited marital deduction rights. Setting this up prior to death is always best; however, it may be possible to set up the QDOT after the first spouses dies if the surviving noncitizen spouse irrevocably assigns the assets to a QDOT before the deceased spouse’s estate tax return is due.
If you are part of a couple that includes a noncitizen spouse, it is vital to consult an experienced estate planning attorney. Contact Stouffer Legal at 443-470-3599 in the Greater Baltimore area for a consultation.