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Trusts for Non-US Citizens

Ever thought about putting your assets in trusts for non-US citizens? Did you ever think that trusts may be important estate planning instruments? It’s like giving them a cozy, secure home where they’re well taken care of. Trusts come with some pretty cool benefits, too.

Trusts are spreading rapidly. These innovative estate planning tools are enthralling people worldwide. It’s all because trusts are the most flexible and simple way to protect your assets from probate. Hence, we give you the chance to protect your hard-earned riches for your loved ones. Trusts are the ultimate breakthrough for estate planning.

So, if you’re a non-US citizen wishing to govern your estate, consider trusts’ amazing potential by delving deep into this article.

If you want to invest as an expat or high-net-worth individual, you can email me (advice@adamfayed.com) or use these contact options.

What does non-citizen status imply?

In today’s era of global connection and accessible travel, more individuals are living and working in countries where they aren’t citizens. Estate planning can get pretty tricky in our globally connected world. With people moving around, the rules can get complex. Therefore, if you’re a person who came from another country, then you’re in the “non-citizen” category.

This can include locals, visitors, and those temporarily living abroad. When someone in this category passes away, it can impact how their estate is handled and who receives it. All these factors might make your head spin, showing just how crucial it is for non-citizens to approach their estate plans thoughtfully and with a good amount of research.

What are living trusts for non-US citizens?

Trusts may manage your assets and carry out your intentions differently. They are sought after by all walks of life, regardless of estate size. Domestic estate planning professionals advocate trusts as interesting alternatives to wills.

Living trusts may reduce the cost of probate, enable private asset transfers after death, and reduce executor costs. Savings may total tens of thousands of dollars in a typical million-dollar estate.

If the marriage deduction is fully taken advantage of, married couples may save a significant amount of money on taxes. Remember that everything going to a spouse is exempt from estate taxes up to the passing of the second spouse. But this must be handed out directly to the spouse. In this way, it will be eligible for the marital deduction.

Creating trust is the key here. While both partners are alive, the surviving spouse gets all the income and can tap into the main funds if needed. When the surviving spouse passes, the leftover assets go to the children. However, the estate tax authority ruled that in order for that arrangement to qualify for the marital deduction, the gift to the spouse had to be made explicitly and not via a trust.

trusts for non-us citizens
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What are the different trusts used for estate planning in the US?

There are four main categories in which estate planning trusts are categorized in the US. You have options when it comes to trusts: revocable or irrevocable, and there are also testamentary or living trusts.

  • Revocable Trust: Think of it like a flexible trust. The person who set it up (called the “settlor”) can change or cancel it anytime.
  • Irrevocable Trust: Once it’s set, it’s set. Unlike revocable trusts, you can’t change or cancel them.
  • Living Trust: A living trust, sometimes known as an “inter vivos” trust, is one that the settlor establishes while still alive.
  • Testamentary Trust: Upon the demise of the settlor, a testamentary trust takes effect.

What is a Revocable Living Trust?

In the United States, this type of trust takes the lead in estate planning. It was all because of its impressive perks. When you establish a revocable living trust, you transfer ownership of your assets to the trust itself. But here’s the kicker: you still maintain control over your assets as the superior.

Hence, to ensure you follow through, you need to achieve a few key goals:

  • Controlled Transfer: You ensure that your assets move to your chosen beneficiaries according to your terms.
  • Usability: You retain the ability to use and sell your assets as you wish during your lifetime.
  • Avoid Probate: Your loved ones can skip the probate process when it comes to trust assets, saving them time and hassle.

However, remember that revocable living trusts come with limitations. Since you maintain control, your assets could still be susceptible to creditor claims. That’s why some people opt for irrevocable trusts as part of their estate plans.

What is a qualified domestic trust?

Imagine a trust tailored to smoothly transfer assets from a US citizen to their non-citizen spouse upon their death. The QDOT is that trust. Its standout features? It enables the deferral of hefty estate taxes that can climb up to a staggering 40 percent for non-residents.

But remember, these taxes don’t disappear; they’re just postponed. They usually come due when the surviving spouse passes, and the assets go to the children or other beneficiaries.

Beyond QDOT, there are some good features of other irrevocable trusts in the US, each with their own unique perquisites:

  • Charitable Trusts: This is for those inclined to philanthropy.
  • Generation-Skipping Trusts: This is ideal for passing assets to grandchildren.
  • Life Insurance Trusts: This is custom-made for life insurance policies.
  • Special Needs Trusts: These are designed to care for loved ones with special needs.
  • Spendthrift Trusts: This shield assets from reckless spending.

Navigating the world of trusts and estate planning involves understanding these options. This can easily be conveyed when crafted into a strategy that best suits your individual circumstances.

What is the importance of navigating uncertainty in estate planning for non-citizens?

Due to the possibilities and problems specific to their position, estate planning is especially important for non-citizens. When moving their money across borders, non-citizens sometimes run into more difficulties than their citizen counterparts. Divergent legal systems, complicated tax laws, and the likely absence of close family members in the host nation are just a few of the variables that contribute to this complexity.

Making a thorough estate plan becomes quite important in this situation. You can make it easier for your family to deal with the advantages of another country. All they have to do is be communicative about their preferences. They should also have control over how your assets are split.

If we fail to attain this, it could trigger family misunderstandings, which would affect the bigger picture, including business.

What are the legal and tax considerations when getting around the complex environment?

trusts for non-us citizens
Image by 8photo on Freepik

The complex patchwork of laws and tax rules that vary greatly across various jurisdictions is one of the most difficult obstacles non-citizens face when attempting to prepare their inheritance. Non-citizens could be subject to a different set of regulations depending on their nation of residence regarding beneficiary rights, estate taxes, and inheritance laws.

The subject of estate taxes may be quite intimidating. When compared to citizens, non-citizens may have different estate tax rates, exemptions, and thresholds. When it comes to making a best-fitting estate plan for you, there are a lot about these tricky laws and financial details that you should over-analyze.

An in-depth understanding of these factors enables non-citizens to align their estate planning objectives with the requirements of the relevant jurisdictions, reducing the possible tax costs that their beneficiaries may experience.

It is not only advised, but absolutely necessary, to obtain advice from experts with knowledge of foreign estate planning in order to navigate this complex legal and tax maze.

When should a person from outside the US think about setting up a trust in the US?

Here are some things you might consider before establishing a trust fund in the US:

  • You must consider having a property in the US. Setting up a trust in the US is an idea if you’ve got your hands on any kind of property in the US. These properties can either be real estate, personal belongings, or any sort of account. You don’t have to worry because it actually doesn’t matter where you’re living right now. So yes, you could have it, even if you’re already in the US, your homeland, or even some other country.
  • You must execute the following plans upon moving to the US. If you’re currently living in a different country but are also considering moving to the US for good, you have to make sure you have realistic plans for this endeavor. Before you make moves for that green card, give your future some thought. Sorting out your US estate plan before becoming a resident is wise, and trust options are something to keep on your radar as you make this transition.
  • You can tie a knot with an American. If you’re married to a US citizen, it’s time to consider a QDOT. Also, if your partner has assets in the US, it’s a smart move to collaboratively plan your estate. This ensures your wishes are fulfilled with as little estate tax as possible, and that might mean turning to different types of trusts.
  • Living in the US on a Visa or Green Card. Lastly, if you’re living in the US, whether temporarily or as a lawful permanent resident, making a US estate plan is a pretty good idea. Especially if you’ve got substantial US assets, setting up a trust could help your assets bypass the complexities of the US inheritance process.

Here’s the catch, though: these are options that you can consider, and it’s going to be backbreaking to fulfill them for sure. They don’t mean that setting up a trust in the US is a win-win in every case.

You have to think in advance about whether it might make more sense to use tools available in your home country. This implies that you have to assess the most convenient one if you’re living outside the US and considering different US estate planning tools, depending on where you’re based. This is eventually about what’s best for you.

Final Thoughts

Over all, estate planning for non-citizens can be really tough. There are a lot of things to arrange, accomplish and to process so you could proceed successfully. However, trusts step in as real lifesavers. It’s here to give you control over keeping your assets safe. But you need to understand that there’s no one-size-fits-all kind of answer.

Everyone’s situation will always have distinct aspects compared to others. So, getting advice from the experts should be suggested. It’s like having a personalized map that takes you through all the borders and keeps your legacy in good hands. So, remember, tapping into the power of trust and getting professional advice lets non-citizens navigate this complex terrain with a sense of confidence and a clear direction.

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Adam is an internationally recognised author on financial matters, with over 760.2 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.

This website is not designed for American resident readers, or for people from any country where buying investments or distributing such information is illegal. This website is not a solicitation to invest, nor tax, legal, financial or investment advice. We only deal with investors who are expats or high-net-worth/self-certified  individuals, on a non-solicitation basis. Not for the retail market.



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