Whether you’re an expat adult beneficiary living abroad or a non-U.S. citizen who married the deceased, state planning becomes more complex and specialized as it involves collaboration with experts on international tax and immigration laws. In this article, we’ll cover some of what you need to know about American inheritance laws if you’re not an American citizen. It will also talk about domicile, international estate treaty guidance, and comparing a few countries, as well as what a non-U.S. citizen would have to report to the IRS.
For estate and gift taxation in the matter of transfer tax purposes, it depends on the concept of domicile rather than residency. A person achieves domicile by living in a jurisdiction without the intention of leaving at a later date and requires a move outside the country to sever the domicile. For example, a person with a green card would establish a domicile until they decided they no longer wished to live in the United States.
International Estate Treaty Guidance
If you’re an American expat abroad who inherits U.S. assets from a U.S. resident, you’re probably wondering whether an inheritance tax might apply to you. If you’re living in Australia, there is a bilateral U.S. estate and gift tax treaty. In Germany, you must have been deemed domiciled for ten years before being subject to inheritance tax. In South Korea, there is no inheritance tax on U.S. assets bequeathed by a U.S. citizen, but you may be subject to a gift tax if you bring the asset into the country.
What Do You Have To Report?
It’s a good idea to report your inheritance to the IRS even if you don’t think you owe any foreign inheritance taxes. If you’re a surviving spouse who isn’t a U.S. citizen, you must pay taxes on the inherited amount as per federal estate tax rules since the unlimited marital deduction rule doesn’t apply.
If the spouse who was a U.S. citizen gifted the non-U.S. citizen during their life, whether by making them a joint owner of a bank account, real estate, or stocks, those gifts are also subject to federal gift tax since the unlimited marital deduction doesn’t apply in that case either. The citizen spouse can gift up to $159,000 per year to a non-U.S. citizen spouse, but an experienced tax professional must assist with the documentation, timing, and nature of the gift from the U.S. citizen spouse to the non-citizen spouse.
If you’re looking for an estate planning lawyer in the NYC area, we can help. Benjamin Kats Esq. P.C. is an experienced, knowledgeable lawyer with a reputation for providing a comforting experience. Contact us today to make an appointment for a free estate planning consultation.