Are you Married to an Alien?

Dear Colleagues, Friends, and Clients,

My wonderful wife Katja and I have been married for eighteen years this summer. Katja came to the United States from Germany at seventeen and fell in love with her adopted land and its people. Eventually, she fell in love with me, too!

When we first did our estate plan many years ago, I was surprised to hear from our lawyer that we were at risk of paying a significant tax to the federal government upon my death because Katja held a “green card,” rather than being a citizen. I had assumed that the unlimited marital deduction applied, and I could give her, or leave her, any amount of money in life or after my death.

However, the federal gift tax exemption for annual transfers to a non-citizen spouse is capped at $145,000 (2014). A resident alien is protected by the federal estate tax exemption, but any excess will be immediately taxable upon the American spouse’s death. If the surviving spouse is a “non-resident alien,” the federal estate tax exemption is a mere $60,000.

We can create a “Qualified Domestic Trust” (QDOT) which will defer the estate tax until the death of the non-citizen spouse. Given the time value of money and the opportunity for investment growth, deferral for several years – or even decades – can result in significant savings to your family’s legacy.

If you have questions about estate or gift tax impacts on your family, call our office now at 603-554-8464 to make an appointment for a consultation.

Best Regards,