Estate Planning For Non-residents of the United States
What happens to your property located in the United States upon your death if you are a Canadian citizen? That is the situation with quite a few Canadians who have homes here in Florida that they live in during the winter months. Prior to this year, a non-resident had an estate tax exemption of only $60,000. Meaning upon their death, all they could pass tax free to a beneficiary was $60,000. After that, they were subject to a tax rate of 45% (for 2009).
If your surviving spouse is a non-resident, then you can defer the estate tax with the use of a qualified domestic trust, also known as a QDOT. However, the trustee for a QDOT must be a U.S. trustee with the power to withhold taxes as withdrawals are made for the benefit of the surviving spouse. The purpose of thise requirement is to ensure the non-resident spouse pays the taxes on the assets and does not just leave the U.S. without paying the tax.
However, this year specifically, there is no estate tax...even for a non-resident. That being said, there are specific basis rules in play this year since the full step-up in basis is not available. The basis rule specifically relating to non-residents is that they may only step-up $60,000 worth of assets this year. If Congress does nothing to change the estate tax in its current form, the pre-2010 rules will again be in place on January 1, 2011 with a limited amount of $60,000 available to be passed tax-free to your beneficiaries.
For more information on estate planning for non-residents, please consult with an estate planning attorney.
