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Author: pbal Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 120800  
Subject: Permanent Resident maried to US Citizen Tax Date: 9/9/2000 12:15 AM
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Is it true that, as a US Citizen, married to a Japanese (US Permanent Resident), my wife will have to pay taxes on ALL my assets, with NO exemptions, upon my death. This would include paying taxes on Personal and Rental properties held in Joint custody, joint saving and checking accounts.
I would appreciate it if someone could steer me in the right direction.
Is it better to consult a CPA or an Estate Lawyer?
Any litterature available on this subject?
TIA
Patrick
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Author: criser Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39733 of 120800
Subject: Re: Permanent Resident maried to US Citizen Tax Date: 9/9/2000 12:38 AM
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Is it true that, as a US Citizen, married to a Japanese (US Permanent Resident), my wife will have to pay taxes on ALL my assets, with NO exemptions, upon my death. This would include paying taxes on Personal and Rental properties held in Joint custody, joint saving and checking accounts.
I would appreciate it if someone could steer me in the right direction.
Is it better to consult a CPA or an Estate Lawyer?
Any litterature available on this subject?


That's not quite true. The truth is that your residence determines the amount of the estate tax exemption for your estate. Estates of U.S. citizens and resident aliens get the full $675,000 exemption (going up to $1 million by 2006).

The effect of having a non-citizen surviving spouse is that there is no unlimited marital estate and gift tax marital deduction. So, you can pass $675,000 to your non-citizen wife free of estate tax or you could pass it to someone else, but that $675,000 is all you get to pass free of estate tax.

In order to avoid tax on assets passing to her if your estate is over $675,000, you must make use of a "qualified domestic trust" ("QDOT"). Assets passing to the benefit of a non-citizen surviving spouse in a QDOT are not subject to estate tax in your estate unless and until they are taken out of the QDOT. The non-citizen surviving spouse receives all of the income of the QDOT without any estate tax consequences. However, if he or she withdraws principal from the QDOT, estate tax must be paid at the applicable marginal rate.

There are gift tax issues that must be considered with non-citizen spouses as well. Just as there is no unlimited estate tax marital deduction for property passing to a non-citizen surviving spouse, neither is there an unlimited gift tax marital deduction for transfers to a non-citizen spouse. If you've paid for assets such as real estate and stocks which you hold jointly with a non-citizen spouse, you may have some gift tax issues to resolve (maybe just the filing of some gift tax returns without the payment of any tax)

You definitely need a qualified estate planning attorney to help you with this. You've got to find one who has experience in estate and gift tax planning for couples one of which there is a non-citizen spouse. Not all estate planning attorneys are qualified in this regard.

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Author: jumpinjupiter One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 46111 of 120800
Subject: Re: Permanent Resident maried to US Citizen Tax Date: 2/10/2001 4:24 AM
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criser,

You cited a QDOT, Qualified Domestic Trust.

My RLT (revocable living trust) invokes three trusts upon death of my wife or I :-
Trust A (the Survivor's trust)
Trust B (the Decedent's trust)
Trust C (the Qualified Terminable Interest Trust)

So my Trust C above sounds the same as the QDOT that you reference. Is a QTIT the same as a QDOT?

OK, so classic reaction after a death might be for the surviving spouse to leave the USA and return home.

As the principal in the QDOT does attract estate tax upon withdrawal what is an intelligent set of instructions to leave with my wife for most effectively managing to grow principal and derive income from the QDOT. (eg. leave it in the USA and draw income from it even while abroad; cash it out and settle the taxes as part of departure clearance procedures; modify the RLT to have the QDOT assets eventually transfer to surviving children who are US citizens; etc.)


jumpinjupiter

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