If you are preparing to relocate to the United States from your country of citizenship, there are an almost indefinite number of considerations that you need to keep in mind. From legal issues to practical considerations such as where you are going to live and how you are going to get to work every day, moving to the US (or any country, for that matter) is a huge leap that requires careful planning and preparation.
One important issue that is unfortunately too often overlooked is the issue of your estate plan. As a general rule, people tend to put off planning their estate for too long anyway, and with all of the other steps involved in immigrating to the US, it is easy to let estate planning fall to the bottom of your list of priorities. However, doing so would be a mistake – a mistake that could lead to significant tax burdens and other undesirable consequences down the line.
Why You Need to Address Your Estate Plan Before Seeking Lawful Permanent Resident Status
Why Have an Estate Plan?
First, let’s take a look at some of the main reasons why you have (or should have) an estate plan in place. The three primary goals of a comprehensive estate plan are:
- Succession planning – This is what most people think of when they think about estate planning—when you die, who will take possession of your belongings? This includes any personal and real property you own in your country of citizenship and the US, as well as any assets (such as gold) that you may have stored offshore.
- Tax planning – Tax planning is (or should be) a major aspect of the overall estate planning process, as well. The US and other countries around the globe have estate and gift tax laws that can deprive your heirs and beneficiaries of substantial portions of your estate if you do not implement a thorough tax-avoidance strategy.
- Healthcare and end-of-life planning – The third, and another often-overlooked, aspect of estate planning is planning for your end-of-life care. Who will make medical decisions on your behalf if you are no longer able to do so? Who will have access to your accounts in case a mental illness or disability prevents you from managing your own affairs? These are critical questions that should be thoughtfully considered during the estate planning process.
With this in mind, perhaps you can already begin to see why it is so important to address your estate plan before you move overseas.
Key Considerations for Cross-Border Estate Planning for Non-US Citizens
But, when we get into the details, the reasons for planning your estate before you immigrate to the United States become even clearer. Similar to your relocation preparations as a whole, these reasons are both legal and practical in nature. Here are some examples:
1. US Estate and Gift Taxes
Once you become a “resident” of the United States, with only limited exceptions, you are subject to taxation by the US Internal Revenue Service (IRS) on a worldwide basis. This includes both (i) taxes on your income, and (ii) taxes on your estate.
For estate tax purposes, you will be deemed to be a US “resident” (and your assets will be subject to US taxation) when you relocate to the US with an “intent to remain” in the country. This is a highly subjective test (who determines your intent?), but one that the IRS does not take lightly. If you are applying for a green card, you can generally expect to face US estate tax obligations. For non-US citizens, the estate tax rate is 40 percent, and for non-residents, there is only a relatively minimal exemption. However, some countries (such as Japan) have tax treaties that provide enhanced exemptions for US immigrants.
Fortunately, there are a number of estate planning methods that can be used to avoid much of the US estate tax burden for green card applicants and lawful permanent residents. In this context, estate planning largely focuses on re-titling assets out of your name and into a trust or legal entity that is not subject to estate and gift taxation. This often includes use of estate planning tools such as revocable living trusts and limited liability companies (LLCs).
2. Practical Considerations
Changing gears, let’s briefly look at some of the practical considerations that counsel in favor of preparing your estate plan in advance of applying for your green card.
Healthcare and Management of Your Affairs
No one likes to think about it, but it’s critically important: What happens if you get hurt? Or get sick? What if something happens and suddenly you are no longer able to make your own decisions or manage your own affairs?
When moving to a new country, planning ahead takes on an entirely new level of importance. Even assuming any powers of attorney or directives you signed in your home country will be legally enforceable in the US (which is by no means guaranteed), there is still the practical issue of whether a doctor or bank in the US will be comfortable relying on an a foreign document.
Enforcing (and Finding) Cross-Border Estate Plans
Similarly with the rest of your estate plan, whether it will be enforceable in the US is a threshold question, and one that requires thorough knowledge of the estate planning laws in your country of citizenship and in the United States. You may need new estate planning documents to cover your US assets; or, at the very least, you will likely need to modify your current estate plan to satisfy the state-specific requirements where you will be living in the US.
Key Questions to Ask When Planning Your Estate Prior to Applying for a US Green Card
These are by no means the only issues involved in cross-border estate planning for US immigrants. In order to properly plan your estate, you will want to work with an experienced international estate planning attorney who can help you make sure that your estate plan fully satisfies your wants and needs. Here are some questions for you to start thinking about while you prepare for your meeting with an international estate planning attorney:
- How long do you intend to remain in the United States?
- Will you live in one state on a long-term basis, or do you anticipate moving frequently?
- If you have children, where will they be living? Are any of your other relatives moving to the US?
- What assets do you have in your home country? In other countries around the globe?
- What assets will you bring with you to the US?
- What is the overall value of your estate?
- Do you have copies of your current estate planning documents?
Schedule an Initial Estate Planning Consultation at Jiah Kim & Associates
At Jiah Kim & Associates, we represent individuals, couples, and families worldwide in planning their estates and protecting their assets. If you are planning a move to the US, we encourage you to contact us to make sure that your estate plan provides adequate protection and minimizes your potential estate and gift tax liability. To get started with an initial consultation, call us at (646) 389-5065 or request an appointment online today.
This blog post is written for educational and general information purposes only, and does not constitute specific legal advice. You understand that there is no attorney-client relationship between you and the blog publisher. This blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.