I’m attorney Paul Bernstein of the Bernstein law group. Imagine that Warren Buffet died and left his entire wealth to his wife. As long as Mrs. Buffet is a U.S. citizen, there would be no taxes, even though there are billions of dollars going to her, and the tax we’re talking about is the estate tax.

The unlimited marital deduction

The reason there wouldn’t be a tax is that there’s a deduction in the estate tax world known as an unlimited marital deduction. So even at the level of wealth of a Warren Buffet, there’s no estate tax. Everything’s going to his wife and she’s a U.S. citizen. So the unlimited marital deduction just zeroes out that tax.

If the spouse is not a U.S. citizen

However, if Mrs. Buffett were not a U.S. citizen, there would be a significant tax. There is no unlimited marital deduction. The government’s concern is this: If Mrs. Buffet were a Canadian citizen, and she inherited all that wealth from her deceased husband and moved back to Canada and died in Canada, the U.S. government would never be able to levy the estate tax against her estate.

So she wouldn’t get the unlimited marital deduction. That’s true for anyone who’s married, and particularly here in Massachusetts, where we have a significant state estate tax as well. If a spouse passes away and the surviving spouse is not a U.S. citizen, there could be a significant estate tax that the surviving spouse would have to pay. Yet she wouldn’t have to pay it if she were a U.S. citizen.

There are solutions

There are solutions to this. It’s best to do advanced planning while you’re both alive to ensure that this tax doesn’t get levied on the widow or widower who’s a non-U.S. citizen. There are things we often do with clients because in the case of quite a few of our clients, one or both spouses are non-U.S. citizens.

So seek out proper legal advice from an estate planning specialist and a tax-planning specialist to ensure you’re not subject to this tax. I hope you found this information helpful. If you have any questions or you’re just not sure what to do, feel free to reach out to us.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Menu Title