14th Apr 2014

Deciding how to divide one’s estate is difficult enough under perfect circumstances, but some aspects of the process become much more complicated when the surviving spouse in a marriage is not a United States citizen.

The issue here lies with tax penalties and the limits of gifts to a spouse or children that will be sheltered from federal tax. If your spouse is an American citizen, there is no limit to the amount of your estate that can be gifted to him or her upon your passing. However, a limit does exist if your spouse is not an American citizen, a limit which also carries with it a burdensome federal tax penalty of 40 percent for some estates.

This tax limit will only apply to well-off families since it currently applies to estates worth more than $5.34 million. For those with estates worth more than this limit, large gifts to your spouse will be liable to be taxed.

Luckily, there are a few ways around this heavy tax penalty. First, your non-citizen spouse can become a citizen. This can be done at any time before your passing, of course, but if he or she becomes a citizen before the next tax filing period after your passing, the final gift will not be subject to federal tax.

Another way to avoid this penalty is to gift smaller, non-taxable amounts to your spouse over a longer period of time. It may take several years before the gifts add up to the total amount that would have been gifted on your passing, but it will be worth the trouble in most cases to avoid the tax.

Estate planning is often a complicated and difficult issue, but the estate planning attorneys at The Roberts Law Firm, P.C. in Chesterfield, MO will take the stress and confusion out of the process for you and your family. Contact us today by filling out our online form or by calling 636-530-9199 to find out how we can help.

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