Estate Tax Planning for Permanent Residents (Green Card Holders)

Persons who are not United States citizens, such as nonresident aliens and greencard holders, face a difficult United States estate tax planning environment when they invest in United States assets. Instead of the $5,250,000 (exemption amount for 2013 that is indexed to inflation), to which United States citizens and permanent residents are entitled, a nonresident alien is entitled to an exemption of only $60,000 for their United States property.

Permanent residents of the United States, while entitled to the entire estate tax exemption for the United States estate tax (which is indexed for inflation and is $5.25 million for 2013), are subject to United States estate tax on their worldwide assets, including assets held in their country of origin. Both nonresident aliens and greencard holders may also be subject to estate tax in their country of citizenship.

The United States has entered into an estate and/or gift tax treaty with a select number of countries, including Australia, Austria, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Netherlands, Norway, South Africa, Sweden, Switzerland, and the United Kingdom. These treaties, in general, allow a citizen of one of the treaty countries who owns property to avoid the possibility of both countries taxing the same asset at the time of death.

Prior to immigration to the United States, any person should consider the use of specialized pre-immigration estate planning techniques. Because the United States will apply its estate tax to the worldwide assets of persons domiciled in the United States, the goal should be to remove non-United States assets from the "ownership" of the person about to immigrate. The most used technique is to transfer assets to an irrevocable trust prior to immigration. The trust must not have any United States persons as trustees for the technique to work, nor should the trust hold any assets located within the United States.

For persons who are simply going to purchase United States assets without becoming a permanent resident, there are several techniques to avoid the punitive estate tax consequence of owning property in the United States. Those techniques include purchasing the assets through a company in the country of residence, or using offshore debt sources to fully encumber the United States assets, leaving no equity in the United States.

Jeffrey Skatoff, who holds a Master of Laws in Taxation from Georgetown University, is available to assist clients with their tax-related immigration issues. (561) 842-4868. Clark Skatoff

Authored by Jeffrey Skatoff

by Michelle Gee