QDOTs Can Be Effective Estate Planning Strategy For Non-Citizens
February 26, 2014
The United States was founded by immigrants, and this could be one reason that American laws are designed to allow non-citizens living in the country to obtain some of the benefits of American society and culture. However, non-citizens do not have exactly the same rights as American citizens do in Florida or in any other state. One example is how estate planning laws treat non-citizen spouses differently.
Usually, estate planning laws will allow an individual to leave an unlimited amount of assets to his or her spouse without being subject to the estate tax, as long as both spouses are citizens. However, current laws do not allow the usual unlimited exemptions for leaving estate assets to a non-citizen spouse. Therefore, if a citizen dies and leaves his or her non-citizen spouse assets, the spouse must obtain citizenship by the time the estate tax return is due to the IRS.
On the other hand, there are other options available to help solve this issue regarding a non-citizen spouse. One possible solution would be to utilize a qualified domestic trust (QDOT). The assets set to be inherited by the non-citizen spouse will be put into the trust which will defer the estate tax bill on the assets until the spouse withdraws assets or money from the account. This can buy a non-citizen spouse more time to obtain citizenship in order to avoid tax liabilities.
Along with avoiding tax liabilities, there are many other goals associated with estate planning in Florida. However, every case is different, which means a estate planning instrument that works for one person may not work for another individual’s estate planning goals. Therefore, it is important to have a good understanding of estate planning laws when forming an estate plan.