I was speaking with a couple recently from Hendersonville, Tennessee and they had several concerns that they wanted to discuss. First, the last time that they did any estate planning was just a simple will and it was about 15 years ago. In addition, the husband mentioned that his wife was from Ireland and was not a U.S. citizen. This husband and wife couple asked whether this is something they need to be worried about?
I explained to this couple that when a non-U.S. citizen spouse is involved, you have very different estate planning concerns and strategies that you need to be aware of and plan for. First, I explained that normally, any assets that you leave to your spouse at death is not subject to the federal estate tax. I discussed with this couple that an estate tax exists for estates over $5.4 million in value on the date of death. In addition, for married spouses, there is an unlimited exemption and exclusion from the federal estate tax. However, I explained that when one of the spouses is a non-U.S. citizen, the unlimited exemption and exclusion does not exist. The exemption is $5.4 million from the federal estate tax. Therefore, if you leave over $5.4 million to you non-U.S. citizen spouse, the amount over $5.4 million will be subject to the federal estate tax.
Also, I explained to this couple that between married couples there is traditionally an unlimited annual exemption from the federal gift tax. What I mean is that you can give as much assets as you want to your spouse each year without any gift tax consequences. However, when a non-U.S. citizen spouse is involved, this exemption does not exist. Instead, I explained, there is an exemption of $145,000 from the federal gift tax. This means that you can give up to $145,000 each year to your non-U.S. citizen spouse, but if you give over this amount, you will have gift tax consequences.
I explained to this couple that there are several strategies that many of our clients in this situation would put in place to limit these tax consequences including revocable living trusts, irrevocable living trusts, irrevocable life insurance trusts, and qualified domestic trusts. However, we need to discuss your specific circumstances to determine which planning strategy would be best for you and your family.
If you have questions about estate planning, irrevocable and revocable living trusts, and avoiding nursing home expenses, please reach out to me before you go see any other lawyer or make any other decision on your estate planning so I can send you our free legal report “Estate Planning in Tennessee,” which goes over all the common questions about probate in Tennessee, Medicaid, nursing home expenses, and protecting your assets for your loved ones.
Also, if you would like to learn more about estate planning, avoiding nursing home poverty, and avoiding probate in an educational environment, please reserve a spot at one of our upcoming live educational events or webinars that we have scheduled this month.