Estate planning can be tricky even in the best of circumstances. If you happen to be married to a person who is not a U.S. citizen, then it becomes even more difficult.
Domestic trust
If a U.S. citizen dies before their non-citizen spouse, they do not get the marital property without paying an estate tax unless they take specific steps ahead of time. You could set up a qualified domestic trust under section 2056A of the IRS code. The trust must list the non-citizen spouse as the only beneficiary. Then, when the citizen spouse dies, the non-citizen gets the income from the trust.
In most cases, the non-U.S. citizen cannot touch the trust’s assets during their lifetime. Alternatively, if the non-citizen spouse dies first, there is no estate tax.
All assets must be in the trust
Keep in mind that all assets must be in the trust. If they are not, then the non-U.S. citizen will have to pay estate taxes on any assets not in the trust. Therefore, it may help if you review this document with an estate planning lawyer regularly. Additionally, keep in mind that the trust must have at least one trustee who is a U.S. citizen.
Limitation of a domestic trust
While the non-U.S. citizen will not have to pay estate taxes, the trust must pay them once that person dies. The way the government set up the law, the value of assets left after both spouses die may be significantly reduced.
Estate planning is more complicated when a U.S. citizen marries a person who is not a citizen. It may be beneficial if you work with an experienced lawyer to develop trusts and other estate planning tools.