Why International Couples Can’t Afford to Overlook Their Estate Plans

Our NY Attorneys Discuss Estate Planning When One Spouse Is a Non-U.S. Citizen

Although New York City has always been a beacon of diversity—current estimates suggest that nearly 40% of all residents were born outside of the United States—more American citizens than ever before are moving, working, and living abroad. Inevitably, no matter where they may be, people meet and fall in love. According to some of the Census Bureau’s most recent statistics, roughly one out of every 10 marriages nationwide involves partners from two different countries and with two different citizenships.

Your marriage will likely prove as full of shared adventure and joy as any other, but tying the knot with a foreign-born spouse means you’ll likely face some unique estate planning challenges. Here, the experienced estate planning attorneys at Landskind & Ricaforte Law Group, P.C. explain what you should do when creating an estate plan if you’re married to someone from another country.  

Cross-Border Marriage Planning

If you’re still in the early stages of planning a cross-border marriage, you may already have an idea of the sorts of challenges you’ll likely face. Depending on your spouse’s nationality and your current country of residence, you may need to prepare for the possibility that:

• Your spouse may not receive all of the same immigration-related privileges as somebody from another country.
• Legal arrangements you’ve executed abroad may not be valid in the United States.
• Certain documents, like prenuptial agreements and wills, won’t be recognized unless they meet a difficult-to-define standard.

Your approach to a cross-border marriage, much like your approach to an estate plan, should be long-term. This is because seemingly minor changes in circumstance can have major repercussions when it comes to your family’s rights.

The Importance of Establishing a New York Estate Plan

Your estate plan is much more than a way to transfer wealth to another generation. It is a means to shield your family from uncertainty, to protect yourself if you become incapacitated, and to ensure that your decisions are respected in life and in death.

But getting started creating an estate plan can be a challenge. Aside from the difficulty of putting together wedding plans and the headache of negotiating the United States immigration system, few people like to spend time thinking about their mortality. Allocating inheritances can be tedious, and it can raise uncomfortable questions about how best to divide assets between the people you love the most.

However, if you wait to create an estate plan, you face a big risk. In New York, people who die without a will, a trust, or other estate plan are said to have died “intestate.” During an intestate succession, a surrogate’s court will refer to a very rigid formula to determine how to divide and redistribute your assets. Barring a few exceptions, this formula almost always privileges close living relatives at the expense of everyone else.

The rigidity of intestate succession can present big complications even when everyone involved is a U.S. citizen, but it can be much more problematic if a spouse needs to pay estate taxes in two different countries or transfer inherited accounts abroad. 

The Foundation of an Estate Plan

Estate plans may differ in their details, but they work best when they’re configured to protect your health, your wealth, and your family’s rights to a fair inheritance. Every estate plan should, at minimum, include the following:

A Last Will and Testament

Your last will and testament is a set of instructions informing your executor, your family, and the surrogate’s court how your estate should be dissolved. In writing and executing a will, you can do the following:

• Name an executor for your estate
• Nominate a guardian for your minor child or children
• Direct the distribution of assets to friends, family members, and charities, both in the United States and overseas

Although a will cannot keep your estate out of probate, it is the simplest and most cost-effective way to eliminate the possibility of an intestate succession.

An Advance Care Directive

An advance care directive is a legal document that details your preferences for end-of-life care.

It lets you set conditions on what sort of treatments you’re willing to accept, and it can help provide your family with clarity on when life-saving measures should be stopped.

Powers of Attorney

A power of attorney is the delegation of certain authorities to a trusted person, termed your “agent” or your “attorney-in-fact.” Different powers of attorney serve different purposes. For example:

• The health care power of attorney can be used to enforce the provisions of your advance care directive, letting your attorney-in-fact make decisions about the course of your medical treatment.
• The financial power of attorney lets your agent pay your rent, manage investments, or send remittances to an overseas relative in the event that you are ever seriously injured or otherwise incapacitated.
• The general power of attorney lets your attorney-in-fact act on your behalf in all situations authorized by law.

Powers of attorney typically take either one of two forms: the durable power of attorney, which is effective upon signing and does not expire, and the springing power of attorney, which takes effect only once certain conditions have been met.

Anticipating Citizenship and Residency Obstacles

You don’t need to be an American citizen to execute an estate plan in New York City.

However, even though most foreign nationals can write a will or delegate powers of attorney, they can’t always reconcile their U.S.-based interests with laws (both foreign and domestic).

Some of the most common challenges for international couples include the following:

Inheritance Problems

If you’re a U.S. citizen, you have every right to leave your spouse an inheritance.

However, many other countries restrict who can and cannot own assets within their borders. If your spouse relinquishes their citizenship to become a U.S. national, they may not be entitled to inherit certain types of assets in their home country.

The Federal Estate Tax

If you’re married to a U.S. citizen, they can inherit assets without incurring tax liability.

However, this “unlimited marital deduction” cannot be transferred to a non-citizen spouse, even if the spouse is a lawful permanent resident.

Limitations on Lifetime Gifts

You’re entitled to give an unlimited number of tax-free gifts to your spouse, so long as both you and your partner are U.S. citizens. However, if your spouse is a foreign national, you can only claim an annual gift tax exemption of $185,000.

Overcoming Obstacles to an Inheritance

Although U.S. citizens and non-U.S.-citizen residents are subject to many of the same protections and responsibilities, marriages involving a foreign spouse can incur a much greater risk of tax-related liabilities. You may be able to minimize these risks by:

• Applying for citizenship. If your partner becomes a U.S. citizen by the time that they’d have to file a federal estate tax return, they will qualify for the unlimited marital deduction. However, citizenship applications can take more than a year to process, making this option impractical for wealthy couples concerned about taxation.
• Establishing a QDOT. Your non-citizen spouse can receive a tax-free inheritance through a “qualified domestic trust” (QDOT). In establishing a QDOT, you retitle your spouse’s intended inheritance to the trust and its trustee. During your spouse’s lifetime, they will be entitled to receive any interest or income generated by the trust. However, the federal estate tax may still be applied to the assets used to fund the trust.