Planning for Non-Citizen Spouses
An important planning tool for married couples is the unlimited marital deduction for estate and gift taxes. This deduction allows for the tax-free transfer of assets between spouses during life and defers any estate taxes that would otherwise be due at the death of the first spouse. While the unlimited marital deduction is available for transfers to spouses who are citizens of the United States, it is not available for transfers to non-citizen spouses even if they are permanent residents of this country.
Special rules apply for spouses who are non-citizens. There are limits on how much can be transferred to a non-citizen spouse tax-free, both on an annual basis and at death. For maximum flexibility, we encourage those of our clients who are married to non-citizens to establish qualified domestic trusts through their revocable living trusts.