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Multi-National Estate Planning

By Yulissa Zulaica

Estate planning can become more complex for U.S. persons who own property outside the U.S. or live outside of the U.S., or for non-resident persons (NRA) who own property in the U.S. Sometimes we have to make sure that the estate plan we establish in the U.S. is valid and recognized in the other country, or we may have to establish a separate plan in that other country and make sure that the two plans do not conflict. In addition, in establishing an estate plan, we must consider the tax implications that the proposed plan may cause and generally we must work with counsel in that country to determine what works best for you. If you are currently in this situation and are in need of assistance or have any questions, please feel free to contact our office and we would be happy to discuss your options with you.

Estate Planning for Non-Citizen Persons: The Basics
The estate and gift tax rules attributable to non-citizen persons are vastly diverse from those laws applicable to U.S. citizens and/or residents.  For example, federally recognized married persons in the U.S. can take advantage of the marital deduction, during life and at death. Married persons can transfer an unlimited amount of assets between themselves during life or at death without having to pay any estate or gift tax. In the case of a non-citizen spouse, however, the annual exclusion amount is $139,000.  Anything over that would be a taxable gift. In addition, in order to qualify for the marital deduction on transfers to the non-citizen surviving spouse and postpone any applicable estate tax, the assets transferred to the spouse in excess of the exemption amount must be transferred to a qualified domestic trust, or QDOT, which must satisfy very strict requirements. It becomes even more complex when we have same-sex married couples who cannot take advantage of the marital deduction in the U.S.  but may be able to take advantage of a similar law in their home country. Lastly, the estate tax exemption amount available to non-residents is $60,000 on U.S. situated assets, rather than the $5,250,000 available to U.S. citizens or lawful permanent residents on their worldwide assets. In sum, the laws applicable to U.S. citizens and non-residents are clearly distinct and should be considered when establishing an estate plan.

Estate and Gift Tax Exemptions- 2012
The estate tax exemption is $5,250,000.  The exemption for non-resident noncitizens is $60,000 for all US situs assets.

The annual gift exclusion remains $14,000.  The annual gift exclusion to noncitizen spouse is $139,000.

AFRs- 2012

  Short Term AFRs
(available for instruments with term of three (3) years or less)
Compounding Period
Annual Semi-Annual Quarterly Monthly
March
2012
0.19% 0.19% 0.19% 0.19%
February
2012
0.19% 0.19% 0.19% 0.19%
January
2012
0.19% 0.19% 0.19% 0.19%
December
2011
0.20% 0.20% 0.20% 0.20%
 Mid Term AFRs
(available for instruments with term of three (3) years or less)
Compounding Period
Annual Semi-Annual Quarterly Monthly
March
2012
1.08% 1.08% 1.08% 1.08%
February
2012
1.12% 1.12% 1.12% 1.12%%
January
2012
1.17% 1.17% 1.17% 1.17%
December
2011
1.27% 1.27% 1.27% 1.27%
Long Term AFRs
(available for instruments having a term in excess of nine (9) years)
Compounding Period
Annual Semi-Annual Quarterly Monthly
2.65% 2.63% 2.62% 2.62%
2.58% 2.56% 2.55% 2.55%
2.63% 2.61% 2.60% 2.60%
2.80% 2.78% 2.77% 2.76%
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