It's not Easy Marrying an Alien

By Bernard V. Kearse, III, Esq.

Ever since the summer Olympics of 1996 established it as an international city, Atlanta has continued to grow globally.  Today, over one thousand international firms call Atlanta home.  Many of the individuals working for these firms or companies live here for years and have families here, but they are not American citizens.  This can raise complex situations when dealing with estate planning. 

A married couple, where both of the spouses are U.S. citizens, enjoys the benefit of the unified tax credit upon the death of the first spouse.  The couple is considered a unit, and the payment of federal taxes is thereby deferred until the death of the second spouse.  The federal government does not grant the unified tax credit to a marriage in which the deceased spouse was a U.S. citizen and the surviving spouse is a non-citizen.  The reason is that it wants to collect its taxes, and if the non-citizen leaves the country, upon his/her death taxes on the marital property could be avoided.  Consequently, the surviving spouse can be left with a substantial amount of taxes.  There are steps, however, that such couples can take to mitigate their tax liabilities.

One of the most effective ways for a non-citizen to avoid paying taxes upon the death of a spouse, who is a U.S. citizen, is to create a Qualified Domestic Trust, or QDOT.  A QDOT is a tool that enables one to set aside assets in a trust, assets that will not be taxed until the death of the second spouse, or until the assets are withdrawn.  Federal law does require that the trustee be a U.S. citizen and that a portion of the assets be subject to U.S. jurisdiction.  The QDOT ensures that a non-citizen will not immediately owe taxes upon the death of a spouse, while also providing a means for the spouse to access the assets in the trust should they be necessary.

Contact Kearse & Associates, P.C. for more information on this and other estate planning solutions.

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