flags of nations

Foreign Citizens in the USA

Estate Planning Issues for Resident Aliens

Introduction

If you're wealthy and planning to apply for resident alien status, some experts would tell you to think twice about the estate and income tax implications of your new domicile. You may discover that your assets are taxed at a higher rate in the United States than in your native country. In fact, the United States imposes federal estate taxes on property that a taxpayer holds anywhere in the world, not just in the United States. The question of estate planning is very complex and even more complicated when you own property in more than one country.

Your estate will be taxed on all assets, even those in another country

Whether you're a U.S. citizen or resident alien, the federal government is going to be basing your taxes on your entire estate, no matter where it is located. In fact, your estate will have to pay the same rate as if you were a U.S. citizen. If your spouse is not a U.S. citizen, your ability to pass property tax free to your spouse will be substantially restricted.

You won't escape these taxes even if you're not a permanent resident

If you die and you're not a permanent resident, you'll still have to pay taxes on any assets that you have in the United States at the time of your death. This means that your estate will include that Manhattan condo you only visit during Christmas. For purposes of estate and gift tax laws, a nonresident is a person who is not domiciled in the United States But the question of residence and domicile is very complicated. What counts is that if you are a nonresident alien, only your property within the United States is taxed at your death. But if you are domiciled in the United States, everything you own everywhere will be included in your gross estate for U.S. tax purposes.

Questions to consider before applying for permanent residency

Click a topic to learn more:
 

If you aren't a resident alien and can avoid becoming a resident for tax purposes, you need to pay attention to where your money "lives." U.S. corporate stock "lives" in the United States, but foreign stock "lives" in the foreign country, even if you keep it in your Wall Street safe. If you keep cash in the same safe, however, the IRS can pursue it upon your death.

A federal transfer tax may be imposed on property transfers to U.S. persons from long-term U.S. residents who terminated their U.S. residency, or from their estates.

FOREIGN NATIONAL AND IMMIGRANT RESIDENCY POLICY

An individual with a valid Permanent Resident Card (also known in layman’s term as a “Green Card” or Alien Registration Receipt Card) may be eligible to apply for life and/or health insurance coverage. Such permanent resident will only be considered if the individual meets all four requirements listed below:

  1. Has in his/her possession his/her valid Permanent Resident Card.
  2. Lives in the United States for a minimum of 12 continuous months to apply for life insurance and 36 continuous months to apply for health products.
  3. Has a minimum annual income of $20,000 from U.S.-based assets or entitlement benefits (i.e.) social security or pension benefits) or U.S.-based employment. Income from government assistance programs, supplemental security income (SSI) or social security disability income (SSDI), cannot be included.
  4. Completes the Foreign National and Foreign Travel Questionnaire and submit with application.

Individuals who have the following valid temporary work visas may be considered for life insurance coverage (not health insurance coverage):

  • E-1
  • E-2 (Spouse and children under age 21 can also qualify for an E2 visa)
  • H-1B
  • H-4 (for spouse and children under age 21 of H-1B visa holders)
  • L-1
  • L-2 (for spouse and children under age 21 of L-1 visa holders)

Those individuals who do not hold current valid acceptable visas as listed above will not be eligible for coverage.

We will consider residents of foreign countries on a case by case basis. Foreign residents should have substantial financial ties to the US including well documented personal and/or business assets and taxable income or employees of US or multinational companies to be considered.

Business should be written in the US, medical records must be obtainable and translated, premiums paid in US dollars and financially justified. “Offshore” ownership trusts are not acceptable. In addition, the face amount of the policy applied for must be equal to or less than the companies’ retention limit.

The producer or sales manager must contact the appropriate Life Underwriting manager to obtain pre-approval prior to submitting an application. If pre-approval is given and an application is submitted, the appropriate manager in Life Underwriting will make the final determination of whether the proposed insured’s visa or residence status is acceptable.