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Foreign Spouse, Non Citizen, Social Security/House taxed upon death?

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jankun

Junior Member
What is the name of your state? Washington

I am married 10 years to a foreign citizen who has a green card. We are being told by her friends that upon my death, she is not eligble to collect my Social Security benefits unless she is a US Citizen? Is this true. This doesn't feel correct.

Also, we are told that since we both own a house together, if I die first, she does get the entire house, but since she is NOT a US Citizen, she has to pay tax on the half of mine that goes to her upon my death. Is this true? Again it does not feel correct.

Thank you for help.
 


LdiJ

Senior Member
jankun said:
What is the name of your state? Washington

I am married 10 years to a foreign citizen who has a green card. We are being told by her friends that upon my death, she is not eligble to collect my Social Security benefits unless she is a US Citizen? Is this true. This doesn't feel correct.

Also, we are told that since we both own a house together, if I die first, she does get the entire house, but since she is NOT a US Citizen, she has to pay tax on the half of mine that goes to her upon my death. Is this true? Again it does not feel correct.

Thank you for help.
Ok...on the house, its definitely not correct. The house passes to her outside of any estate as a joint owner of the home. There would be no tax consequences to her.

My initial reaction on the issue of social security is that its not correct either, but I haven't actually run into that so I am not certain. Try searching for an answer to that at www.ssa.gov

However, if you have been married 10 years its probably time to file the paperwork for her to become a citizen. That would eliminate your concerns.
 

abezon

Senior Member
Actually, there are tax consequences for her inheriting your estate. When the heir is a non-citizen, the *state* estate tax credit is much smaller, which can trigger estate taxes. A properly worded will with a spousal trust can take care of this. See an estate lawyer with experience in handling international issues. You should be able to find a number of them in Washington. Do not expect this to be cheap.

I believe she can collect your social security if she's been filing joint returns with you.
 

LdiJ

Senior Member
abezon said:
Actually, there are tax consequences for her inheriting your estate. When the heir is a non-citizen, the *state* estate tax credit is much smaller, which can trigger estate taxes. A properly worded will with a spousal trust can take care of this. See an estate lawyer with experience in handling international issues. You should be able to find a number of them in Washington. Do not expect this to be cheap.

I believe she can collect your social security if she's been filing joint returns with you.
In this case however, the house will never go into his estate, and is passing outside of the estate. Therefore its not an inheritance. Neither are any other joint assets.
 

abezon

Senior Member
LdiJ said:
In this case however, the house will never go into his estate, and is passing outside of the estate. Therefore its not an inheritance. Neither are any other joint assets.

????? I think you may be confusing the probate process with estate tax calculations. A house owned in JTROS does not need to go through probate for title to pass to the surviving tenant, but the value of the house IS included in the decedent's gross estate for estate tax purposes & it is inherited by the surviving tenant. Same thing for IRAs or pay on death bank accounts -- title passes automatically but the asset is included when figuring if estate (death) taxes are owed. Life insurance often must be included in the gross estate also.

If this were not the case, a surviving joint tenant would not get any step up in basis. The basis step up is a result of the federal estate tax laws & the unified credit (no estate taxes until the estate + taxable gifts exceeds $1.5M). Even if every single asset is held in a grantor trust so that nothing has to go through probate, the trust assets are part of the decedent's gross estate & they are inherited by the beneficiaries.

The estate tax laws say that the maximum "spousal deduction" when the spouse is not a citizen is $60,000. It's unlimited for a citizen-spouse. You get around this by setting up a QDOT trust to hold the assets for the benefit of the spouse until the contingent beneficiaries inherit. The usual spousal A-B trust is not sufficient.

US citizens married to non-citizens should always consult an estate attorney who is familiar with these issues. The 'simple wills' you can get in self-help books won't cut it.
 

LdiJ

Senior Member
abezon said:
????? I think you may be confusing the probate process with estate tax calculations. A house owned in JTROS does not need to go through probate for title to pass to the surviving tenant, but the value of the house IS included in the decedent's gross estate for estate tax purposes & it is inherited by the surviving tenant. Same thing for IRAs or pay on death bank accounts -- title passes automatically but the asset is included when figuring if estate (death) taxes are owed. Life insurance often must be included in the gross estate also.

If this were not the case, a surviving joint tenant would not get any step up in basis. The basis step up is a result of the federal estate tax laws & the unified credit (no estate taxes until the estate + taxable gifts exceeds $1.5M). Even if every single asset is held in a grantor trust so that nothing has to go through probate, the trust assets are part of the decedent's gross estate & they are inherited by the beneficiaries.

The estate tax laws say that the maximum "spousal deduction" when the spouse is not a citizen is $60,000. It's unlimited for a citizen-spouse. You get around this by setting up a QDOT trust to hold the assets for the benefit of the spouse until the contingent beneficiaries inherit. The usual spousal A-B trust is not sufficient.

US citizens married to non-citizens should always consult an estate attorney who is familiar with these issues. The 'simple wills' you can get in self-help books won't cut it.
Ok...I admit to having limited experience with estate tax calculations. Its not my particular area.

However, I thought that a house fell into the same catagory as joint bank accounts, unless it wasn't titled JTROS. I agree about other pay on death issues such as IRAs, life insurance if the beneficiary is not the owner of the policy, non-joint accounts with a beneficiary etc.....but I was almost certain that the marital residence did not fall in that catagory.

If I am wrong...then I have learned something.
 

jankun

Junior Member
Citizen Spouse vs. Non-Citizen Spouse

Am I to understand that when it comes to House (dont know how it is held, we are both on the title), Simple IRA, Roth IRA, Joint Bank Accounts************** a NON-Citizen spouse is taxed at a differnet rate than a Citizen? Anyone know anyone in the Portland, OR area where I can buy some time to get questions answered?

Thanks to all for your advise.
 

abezon

Senior Member
At the federal level, non-citizen spice are not taxed at different rates; the estate simply can't take advantage of the unlimited marital deduction to defer estate taxes on large estates. However, many *states* have different laws from the federal laws. For example, Washington allows only $60,000 to pass to a non-citizen, non-green-card spouse before imposing estate taxes.

You need a Washington lawyer who knows international estate tax implications. The ideal candidate would be someone licensed in both states. (I assume you live in WA & work in OR? The worst of both worlds! You're paying income taxes to OR AND sales taxes to WA. Ouch.) You might try estate planners practicing neat Intel (Tiggard?) or up in Bellevue (Microsoft). Many tech firms have lots of non-citizen workers, so lawyers in that area may be more familiar with this particular wrinkle.
 
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