Estate Planning for Non-US Citizens

Estate planning for non-US citizens depends on the whether the person in question is a US domiciliary or not, regardless of the visa status.

US domiciliaries’ estate has the same US estate tax exemption amount as US citizens (currently $11.2 million). Non-US domiciliaries’ estate, on the other hand, only has a US estate tax exemption amount of $60.000.

A US domiciliary is a person who lives in the United States with no present concrete intent to move abroad. It is a subjective determination. A permanent resident status (“green card”) does not automatically confer US domicile.

Employees of many international organizations, such as the World Bank, may be US domiciliaries even if they are not US residents for income tax purposes.

Subject to transfer taxation are all assets located in the United States. This exemption amount may be increased based on bilateral tax treaties between the United States and a few select countries.

Often overlooked is the fact that bank accounts not connected to a trade or business are not considered to be assets located in the United States.

The exposure to US estate taxes can be reduced by gifting or selling the intangible US situs assets.

Non-US domiciliaries do not pay US gift tax on intangible assets (for example stocks or bonds) given away as gifts. This is not limited to charitable donations.

Equally, non-US residents do not pay US capital gains taxes on the sale of intangible US assets (stocks, bonds). Of course, these gains may be taxable in their home country.