International Marriage and the US Estate Tax

Globalization isn’t just a business catchphrase—it’s transcended into family life. In the United States, 20% of families include a foreign born spouse.¹ Nearly five million Americans were married to someone born in another country as of 2010, double the number 50 years ago.²

International marriage brings some additional complications, but one complication that many couples may not be aware of is the different treatment under the U.S. gift and estate tax laws. Simply stated, there is no unlimited marital deduction for transfers to a non-citizen spouse. Most planners are aware that there is not a U.S. estate tax on assets transferred to a surviving U.S. citizen spouse due to the unlimited marital estate tax deduction.³

For this reason, many do not think that there is any particular need for estate planning for couples with less than $10.86 million in assets. However, this can be an expensive oversight and a missed opportunity for those couples where one or both spouses are not U.S. citizens. The non-citizen spouse does not receive the benefit of the estate tax marital deduction for U.S. estate taxes due on a deceased spouse’s estate. Estate taxes are due after transfers of $5.43 million from a U.S. resident or citizen, unless they establish a qualified domestic trust (QDOT). Naturally, there are many more couples with more than $5.43 million than couples with $10.86 million.