It is not uncommon for a Texas resident to be married to someone who is from another country and is not a citizen. Non-citizens who are permanent U.S. residents are referred to as resident aliens. Because of many complications, standard estate planning advice is not the same for these couples. The following is what you need to know if this is your situation.
Estate tax basics
American citizens and resident aliens are covered by federal estate tax exemptions. In 2022, the individual estate tax exemption is $12.06 million and $24.12 million for a couple. For an estate that is valued over this amount the federal estate tax on the estate is 40% after the first $1 million. Avoiding this federal estate tax is important for those who have a large estate. Some options for a couple where one spouse is a resident alien include:
- Gifting up to the tax exemption to your children
- Gifting the remaining to your spouse if they are a U.S. citizen
Non-citizen spouse
When one spouse is not a citizen then any money gifted to them will be taxes at 40%. Ideas to get around this would include:
- Resident alien spouse becomes a U.S. citizen
- Make sizable gifts to the non-citizen spouse while you are still alive.
- Set up a Qualified Domestic Trust.
Planning ahead is important for high-income couples where one spouse is not a U.S. citizen. A legal professional who is skilled in estate planning can help their client understand their options and protect their hard-earned assets.
