Estate Planning when spouse holds a green card

[haydee]

Would all this be avoided if all our accounts were in my husbands name instead of joint. It might be tricky with the new accounts, but should bea easy to save all new money under his name. Since I should be able to inherit him easily. I trust him completely. I am assuming at some point I will need to get this looked at by a professional, but we are young now. I am in a community property state, so I am not sure if that would work.

[Tigam]

I want to thank everyone for their replies and links. This is really boggling my brain. My children are dual US/Danish citizens now.

Texas Proud, concerning the "estate size," do IRAs, 401k.s life insurance, pensions, and mortgages count? How do you value pensions in an estate? A very rough total figure is 2.5 million for my wife and myself outside of life insurance.

My understanding from this information is that I have a $2m unified credit which can be passed free of federal estate taxes to my resident alien spouse, but it is the excess over this that does not qualify for the unlimited marital deduction. Does this mean our 2.5 million is split in half to get 1.25 million as an estate I am giving her on my death (i.e am I under the 2 million exemption if i pass away now, or do they use the whole estate at 2 million, in which case I am over the 2 million?)

If I am under the 2 million, Should I still consider a QDOT, as my estate may be larger when I pass on (hopefully in 30-40 years from now)? It would be very difficult for my wife to set this up if I died, as she has little familiarity with US laws. The monetary qualifications for a QDOT trustee seems very high, as these articles imply they basically have to guarentee the money won't flee the country. It seems the best logical choice for a trustee would be a banker, not a friend, but this sounds quite expensive to set up. I'm kind of a do-it-yourselfer, but I realize I am way out of my comfort zone here. What happens to a QDOT if both parents die? Can I create an A/B trust that satisfies QDOT criteria?

Firedreamer, thanks for your articles. The article on "estate planning" is quite scary. The solution of three trusts, however also sounds scary and quite expensive (800,000$ of costs? Yikes!!). What do you think about this solution of three trusts?

Elsbeth, how do you find an attorney whom is really familiar with and good at resident alien spouse estate planning issues?

Masterblaster, is this true that IRAs will be imediately taxed when they transfer to the primary beneficiary, my alien resident wife? If so, can you put IRAs and 401 k's and pensions inside a trust? If not, is there any way to tax-protect them?

Sarah in SC, how much should I expect to pay for creation of the trust?

Thanks agian to all reading this!

[ladelfina]

I am as much up a creek as anyone else.. certainly under the estate tax limits now, but who knows in 30-40 years...

Don't have much to add except to respond to haydee:
I don't believe it is the creation of the joint tenancy for accounts/house, etc. that triggers the "transfer" of assets for IRS purposes; apparently this is triggered at the dissolution of the jt. tenancy (for death or other reasons). Wish I had investigated this further before co-mingling our $/€.

[Sarah in SC]

Go to the trust department of a decent sized bank in your town and talk to them about this. They can provide referrals to good estate attorneys and can give you an idea of costs. The trustee can be a US citizen or US corporation, so you could have a qualified trustee that isn't a bank, but for peace of mind that may be your best course of action.
When all of your assets are included (your gross estate includes all assets, including retirement, life insurance policies and personal property) it is easy to see how quickly your estate can become taxable.
Good that you are working on this now!
Sarah

[MasterBlaster]

Masterblaster, is this true that IRAs will be imediately taxed when they transfer to the primary beneficiary, my alien resident wife? If so, can you put IRAs and 401 k's and pensions inside a trust? If not, is there any way to tax-protect them?

Yes there are trusts that can hold IRA and other qualified assets for a non -US citizen or for others. The pension being a payment stream would pass to the benefiaciary. If you want the payment stream to flow to the trust to allow it to accumulate then that may be possible. There are also some things that you may be able to do in a trust that you can't do in a beneficiary designation such as have exact dollar amounts or different percentages flow to different individuals.

Again it is my understanding that these qualified assets are treated differently upon your death than after tax assets. Also it is my understanding that your after tax trust cannot hold qualified assets.

These are some pretty tricky areas. I don't think that the do-it-yourself route is not the way to go. You should find and talk to a good estate planning attorney.

[Lusitan]

Thanks for bringing up this topic, Tigam. This issue also affects our family and frankly I had no idea about the different treatment of non-citizen permanent resident spouses. I see now that I have a lot of homework to do.

Citizenship may be a more attractive option, after all. I have to look into this in detail.

[kcowan]

Last time I looked at this, the $2 million worldwide exemption was tied to a $60,000 exemption for US-based assets of the green-card holder. So if the home is held in joint tenancy and is worth $300k, then estate taxes would apply to 300/2-60=90k plus on any other jointly-held assets. Although these taxes are being phased out by 2010, currently they revert to original rates in 2011. The QDOT seems to be the preferred way to deal with this.

Although the $2 million would apply to the greencard holders share only, high inflation could make this an issue. IIRC the $60k exemption is $600k for a citizen. Citizenship might be the cheapest way.

[Elspeth]

Originally Posted by Tigam

Elsbeth, how do you find an attorney whom is really familiar with and good at resident alien spouse estate planning issues?

Thanks agian to all reading this!

We went to an attorney who was recommended by a British friend who had already been through the process of setting up a QDOT trust. We've moved out of that state in the meantime, and I think things are somewhat different on the East Coast compared with the community-property state where we started the process, but the lawyer says he can deal with that.

I assume you have some friends who are also Danish and are long-term residents in the USA, so you might just want to ask around and see if anyone can recommend a good attorney. I think it's important to find a lawyer who's familiar with this particular issue; it may not be safe to assume that any lawyer dealing with estate planning will know enough about the foreign-national issue to be helpful. When we moved to the east coast and started working with a financial guy out here, we said something about being in the middle of setting up one of these trusts. First he tried to get us to abandon our attorney in California and use one of his company's estate attorneys. A few days later he was on the phone with the helpful suggestion, "you guys ever thought of taking US citizenship?" which suggests that those estate attorneys of his didn't really know how to handle this sort of trust. So we're sticking with the one who does.