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Katya Sverdlov Blog

Wednesday, September 9, 2015

Estate Tax Planning Considerations for Foreign Nationals

In 2015, a US citizen may gift during life or bequeath at death as much as $5.43MM without paying federal estate taxes. A foreign national, however, has an estate tax exemption of only $60,000. If a foreign national owns a $2MM house in US that they want to pass upon their death to heirs, the heirs will end up paying federal estate tax of $740,000 (plus additional state estate taxes).

To reduce the taxes, a foreign national can utilize the annual gift tax exemption of $14,000. This number is similar to the US citizens and the gift can be given to an unlimited number of beneficiaries, therefore Crummey trusts are very appropriate.

In addition, a foreign national can make gifts to a spouse. However, unlike a US citizen who can gift or bequeath an unlimited amount of money to a spouse without triggering an estate tax, a foreign national is limited to $147,000 of lifetime gifts to a spouse. Any amount greater will trigger a gift or an estate tax.

Canadians, however, benefit from a treaty that allows them the same exemption as US citizens.

Disclaimer: This article only offers general information.  Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions.  As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney-client relationship.


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