What you need to know when your spouse isn’t a U.S. citizen
One of the main goals of estate planning is making sure your loved ones are cared for after you’re gone. But if your spouse is not a U.S. citizen, some of the rules change—and if you’re not aware of them, those changes can lead to unexpected taxes and complications.
The unlimited marital deduction—and its exception
In most situations, when one spouse passes away, they can leave an unlimited amount of assets to the surviving spouse without triggering any federal estate tax. This is known as the unlimited marital deduction and is a foundational piece of many estate plans.
Here’s the catch: This deduction only applies if the surviving spouse is a U.S. citizen.
If your spouse is not a citizen—even if they have a green card or have lived in the U.S. for decades—this deduction is not automatically available. That means the estate could owe significant federal estate taxes after the first spouse dies, solely due to citizenship status.
Why non-citizen spouses are treated differently
The IRS’s reasoning is simple: they want to ensure they can collect taxes. A U.S. citizen spouse is more likely to remain in the country and follow U.S. tax laws. A non-citizen spouse might return to their home country, making future tax collection more difficult.
To address this concern, the IRS limits the tax-free transfer of assets at death—unless certain planning steps are taken.
The solution: Qualified Domestic Trust (QDOT)
A Qualified Domestic Trust (QDOT) is a special type of trust designed to preserve the tax benefits of the marital deduction for non-citizen spouses. It allows a surviving spouse to access assets without triggering immediate estate taxes.
How a QDOT works:
- Assets are placed into the QDOT instead of going directly to the surviving spouse.
- The trust must meet specific IRS requirements, including having a U.S. trustee.
- Income from the trust can be distributed to the surviving spouse.
- Principal can also be distributed, but under stricter conditions (and may be taxed).
- Estate taxes are delayed until the surviving spouse takes certain distributions or passes away.
This structure gives the surviving spouse financial access while giving the IRS assurance it can collect taxes later, if necessary.
Planning options beyond a QDOT
Early planning can open up additional strategies:
- Citizenship — In some cases, the non-citizen spouse may choose to become a U.S. citizen as part of the overall plan.
- Asset structuring — Couples may shift how assets are owned or gifted during life to reduce estate tax exposure.
- Lifetime gifting — Making strategic gifts during life can help lower the taxable estate.
Why this matters for international families
Estate planning is never one-size-fits-all—especially for couples with international ties. Without tools like a QDOT, you could unintentionally leave your family with a large tax bill at a difficult time.
Whether you’re just starting your plan or reviewing an existing one, it’s essential to make sure it reflects your family’s unique circumstances and protects your loved ones no matter where life takes them.
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