Estate if one spouse is a non-citizen.
An unlimited marital deduction is generally available for transfers of property to a spouse if that spouse is a US citizen. That means that spouses who are US citizens can transfer property to each other either during life or at death without any estate or gift tax liability. However, that same unlimited marital deduction isn’t available for transfers of property to a non-citizen spouse.
If one spouse is a US citizen and the other spouse is not, it’s important to take into account special rules that apply to transfers to and from a non-citizen spouses to avoid the estate and gift tax or the inadvertent use of the US citizen spouse’s estate and gift tax lifetime exclusion amount.
The US transfer tax rules applicable to gifts made during life and at death depend on whether the transferor and transferee are:
• US citizens.
• US resident non-citizens (resident aliens).
• Non-residents and non-citizens of the US.
Keep in mind that there is a difference between a non-citizen’s residence for transfer tax purposes and the determination of residence for income tax purposes.
Residence for Income Tax Purposes
Residence is determined for income tax purposes as follows:
• Permanent residence as a green card holder.
• Chooses to be treated as a permanent resident.
• Has a substantial presence in the US in a given year.
Residence for Transfer Tax Purposes
For the transfer tax, residence means domicile. A person acquires domicile in a place by living there, for even a brief period of time, with the intent to stay, or not leave. There is big difference between the application of the transfer tax rules depending on each spouse’s citizenship and residency status, and whether the transferor spouse makes a transfer during life or at death.
Get informed by calling The Miami Law Firm today at 897.454.2411.