When you are married to a non-citizen, part of your estate planning needs to take into account what happens if you want to leave him or her a considerable amount of money. Non-citizens do not qualify for the same tax breaks that citizens do, which could mean heavy taxation for the surviving spouse.
There are two options that you and your spouse can explore to resolve the tax issue.
The most obvious way to avoid heavy taxation on the inheritance your spouse stands to gain from you is for him or her to become a citizen. Citizenship has requirements that need to be met first.
The first step to gaining citizenship is acquiring a visa. Chances are, your spouse probably already has one, but if he or she does not, do not fret. Due to your marriage, your spouse is considered an immediate family member. Immediate family members are in the first tier of people to receive a visa. There is no waiting list to worry with to get a visa.
If your spouse was in the country illegally up to this point, do not apply for the visa without first talking to an attorney. He or she could be in danger of being deported. The attorney will advise you both of the best route to take to gain citizenship.
If your spouse had the visa or other form of legal status, becoming a citizen is a bit easier. After a three-year period of being in the country, submit an application to the United States Citizenship and Immigration Services. After an interview and a civics test, your spouse will be a citizen.
Qualified Domestic Trust
Another method that you and your spouse can explore is setting up a Qualified Domestic Trust (QDOT). When you die, your assets will go into a trust that you have established.
When you establish the trust, you have control over it. There are other rules established by the Internal Revenue Service (IRS) that must be followed when you set it up. For instance, if your spouse is going to be listed as a trustee with you, a bank within the United States must also be listed as one.
After you die, your spouse will receive money from the trust on an annual basis. You can determine how much. By doing it this way, your spouse can avoid estate taxes. Of course, income taxes are due on the assets.
QDOTs have many other rules that need to be observed. To ensure that you have covered all your bases and provided for your spouse after your death, talk to an estate planning attorney. To learn more, or if you have other questions, contact a company like Donald B Linsky & Associate Pa.