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1)My wife and I were married in late January 2006 - should we be filing as married for the year? Or as married for part of it? If so, what are the benefits to filing separately? We both have 100k+ incomes so won't get any benefit from combining allowances I assume.


2) We're both Greencard holders, but not citizens. A financial advisor who is trying to sell me life insurance tells me that as non-citizens we get only a $13k exemption from estate tax, and that spouse to spouse transfers are taxable at the full rate on death. Can this be correct? It seems very mean. We bought our home as Tenants in the Entirety so that should be ok, but what can we do about the rest of our assets and potentially our life insurance policies?

TIA
Jon
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should we be filing as married for the year? Or as married for part of it? If so, what are the benefits to filing separately? We both have 100k+ incomes so won't get any benefit from combining allowances I assume.

Yes, you should file as married for the whole year. (There's no such thing as "married for part of the year" for tax purposes).

There are almost no benefits to filing separately unless you're in one of the few states with a huge marriage penalty. You lose more than you gain.

We bought our home as Tenants in the Entirety so that should be ok,

Nope; one's share in real property is included in one's taxable estate. Don't rely on your intuition when planning your estate; a lot of estate planning issues are surprisingly unintuitive.
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jrr is correct. Your marital status on Dec 31 controls your filing status for the year. In your case, your choices are married filing joint and married filing separate. With both of your working and making significant wages, the only way to tell which is better is to prepare your return both ways and see how things work out. And as jrr mentioned, check your state taxes as well.

On the estate tax issues, you've got some complications that (to steal a phrase from Phil) are out of my pay grade. You'll need to consult with an estate attorney who is familiar with the US taxation of non-citizens. My guess is that a competent person with the appropriate skills is not going to be cheap.

--Peter
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Thanks for the info on the filing status, it was something I've been wondering for a while.

You'll need to consult with an estate attorney who is familiar with the US taxation of non-citizens. My guess is that a competent person with the appropriate skills is not going to be cheap.



Poop.

Once I get around to talking to an attorney I'll let you guys know the outcome.

Jon
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JonBeer: "2) We're both Greencard holders, but not citizens. A financial advisor who is trying to sell me life insurance tells me that as non-citizens we get only a $13k exemption from estate tax, and that spouse to spouse transfers are taxable at the full rate on death."

I am out of my pay grade here, too, but I do not think that 13k is correct for FET purposes, but I do know that the unlimited marital exemption does not apply when the surviving spouse is an alien.

See: http://www.takatalaw.com/us/estguide/16.html

The US government does not want the surviving, alien spouse departing with all the funds and totally escaping the the FET.

When the surviving spouse is a US citizen, the US government knows that it will eventually receive either gift or estate taxes (unless all the money is spent).

See also:

http://www.advisortoday.com/archives/2001_december_feigenbaum.html

http://www.rowbotham.com/articles/International/qdots.htm

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=239892

If you both become US citizens, this issue would go away for you.

Regards, JAFO
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If your insurance policy was purchased in the US, ask you agent about proper handling of the insurance policies. Who owns the policy determines changes the treatment: owning your own policy or the spouse owns the policy (wife owns husbands policy, husband owns wifes policy).

Debra
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