When Your Spouse is Not a Citizen

If you are married to a person who is not a United States citizen you need to plan accordingly. This is important to note, because when one or both spouses are not citizens, the rules change. Under the rules for married citizens, if one spouse dies all of the assets pass tax free to the surviving spouse, with estate tax due at the death of the surviving spouse. The government is concerned that the surviving spouse, who is not a citizen, may move back to their country of origin after the death of their citizen-spouse, and take their assets with them. Once the assets are out of the country and belong to the citizen of another country, the odds of the IRS being able to collect the taxes due are slim to none.

Assets that pass from a United States citizen to his or her United States citizen spouse generally qualify for the unlimited marital deduction, which allows for an unlimited amount of assets to pass from spouse to spouse without any tax liability. This however is not the case when one of the spouses is not a United States citizen. The transfer will not qualify for the unlimited marital deduction unless it passes via a QDOT (a Qualified Domestic Trust). A QDOT has several requirements. Basically, there must be at least one Trustee who is a U.S. citizen. The Trustee must have the right to withhold the tax due from any distribution, and the Executor of the decedent’s estate must elect for QDOT treatment. Although they should ask, make sure your attorney is aware that you are not a citizen, as this will greatly affect your estate plan.