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Unlimited Marital Tax Deductions and Foreign-Born Spouses

According to the 2013 U.S. Census Bureau Report, “11.4 million married couple households, or 21 percent of all married-couple households in America in 2011, had at least one spouse born in another country.  About 13 percent (7.3 million) of households had two foreign –born spouses, and 7 percent (4.1 million) had one native-born and one native-born and one-foreign born spouse.” Census News Release, CB13-157, Sept. 5, 2013, Census Bureau Reports 21 Percent of Married-Couple Households Have at Least One Foreign-Born Spouse.

Foreign born spouses who are not U.S. citizens spouses face unique estate and tax planning issues.  If you are a U.S. citizen, the United States Federal Estate and Gift Tax Law provides an unlimited marital deduction that allows you to transfer an unrestricted amount of assets to your spouse free from tax at any time, including at your death. By postponing the transfer of taxes on property inherited from each other until the second spouse’s death, there may be some advantages for the surviving spouse, including:

  • The surviving spouse can spend or gift assets transferred under the unlimited marital deduction during his/her lifetime. In some situations, less taxes may be paid by the surviving spouse upon death through estate planning.
  • If the surviving spouse remarries, the unlimited marital deduction may allow the assets to pass to the new spouse without the application of estate and/or gift taxes.

However, if the spouse who is not a U.S. citizen dies, then the unlimited marital deduction does not apply.  The tax consequences upon death for a non-citizen spouse are different for citizen spouses.  Non-citizen spouses may face the burden of becoming eligible for the unlimited marital deduction which is not the case for married couples who are citizens.

When it comes to postponing taxes for married couples after the death of one spouse, our tax law does not treat couples equally.  Married couples who are U.S. citizens will get this benefit yet, a married couple with a non-USC needs to qualify.  Here are some options:

  1. The U.S. currently has treaties with other countries to provide a marital deduction or a credit in lieu of the deduction. See:  https://www.irs.gov/businesses/small-businesses-self-employed/estate-gift-tax-treaties-international.  This is often the first place to look to see if a non-citizen spouse can benefit from the unlimited marital deduction.
  2. Alternatively, couples with a non-citizen spouse can qualify if the surviving spouse can become a naturalized citizen before the estate tax return is due, both the deceased and surviving spouse will be citizens and the unlimited estate tax marital deduction should apply. This option requires advance planning.  It may take a year or more to complete the naturalization process under the current administration.  Furthermore, there is a separate set of requirements to become a naturalized U.S. citizen. The last step in the naturalization process is the taking of the Oath, which is required to become a U.S. citizen.
  3. The Qualified Domestic Trust (QDOT) provides another option for non-citizen spouses. QDOT allows the non-citizen surviving spouse to receive the deceased citizen spouse’s property for his or her benefit. Under a QDOT, the federal tax estate liability is deferred until distributions of principal are made to the non-citizen surviving spouse. Upon the death of the non-citizen surviving spouse, remaining assets of the surviving non-citizen spouse are subject to taxation. These distributions are subject to estate tax.

Non-citizen marital couples should be aware of how the unlimited marital deduction may affect them.  Our office also helps non-citizen spouses become eligible through naturalization and citizenship processes.

Protecting Expedited Naturalization Under INA 319(b)

INA 319(b) provides a faster naturalization option for Lawful Permanent Resident spouses who are married to U.S. citizens who work abroad. The physical and continuous residence requirements are waived, allowing applicants who meet the criteria to apply from abroad and without residing in the U.S. before filing the N-400.  If INA 319(b) did not apply, the N-400 physical presence requirements require at least ½ of 5 years (or ½ of 3 years if N-400 applicant is the spouse of a U.S. citizen).  The INA 319(b) benefit applies to lawful permanent residents in the following limited circumstances: their U.S. citizen spouse works abroad for the U.S. government, a public international organization if the U.S. participates by treaty or statute, an American research organization recognized by DHS, a religious organization doing missionary work, or an American firm developing foreign trade and U.S. commerce.  The INA 319(b) remains a very helpful benefit for eligible lawful permanent residents who are otherwise eligible to naturalize but would do not meet either the physical presence or continuous physical presence requirements, or both.

Recent USCIS changes to processing of INA 319(b) cases are making it more challenging to obtain timely expedited naturalization 319(b) approvals . The recent developments are (1) USCIS is phasing out Infopass appointments at local offices and (2) there are currently exceptionally long processing times for N-400 cases. The phase out of Infopass appointments limits the ability to communicate with USCIS about the case which may keep applicants and their attorneys from confirming that USCIS received an interfiled 319(b). When seeking to expedite a 319(b) case, the N-400 with 319(b) should be filed concurrently rather than as an interfiling.  If the 319(b) case is filed as an interfiling, USCIS will not send a Receipt Notice or have a different way to confirm receipt even if the 319(b) interfiling is later transferred to the local office.   And, perhaps most importantly, the case will not be expedited.  Instead, it be processed under the normal processing time at USCIS which can be very lengthy.  It is also important to request an expedited oath to strive to lessen the time span between the N-400 interview and oath, particularly if the applicant is regularly stationed abroad or has a fixed deadline to begin work for a qualifying employer abroad.

 

Opening Your First Estate Account

After you get your Letters of Administration as the Administrator or Executor of the Estate, you will need to set up a separate checking account for the estate with a banker.  When ordering checks, consider that the expenses will not be ongoing.  You’ll need enough checks to pay for funeral expenses, taxes, professional fees, reimbursements, other expenses associated with the winding up of the estate.  Ordering four books of checks should be plenty even for a large estate.

You have a lot of flexibility about which bank to open the account. To keep your learning curve to a minimum, however, you may want to consider using the bank branch you normally use for your personal banking.  Having already established a personal relationship with bankers and tellers can be an advantage to you when you have questions about your balance and when making transactions.

You should bring the following with you so the banker can set up the account:

EIN number. To apply online, click https://sa.www4.irs.gov/modiein/individual/index.jsp.  This is the fastest method.
Original Letter of Administration
Death Certificate
This account will need to stay open for the duration of the probate which means until taxes are paid and property is distributed.  You will use this account to pay bills for the estate and the statements generated by the bank will provide records for the estate taxes, if any, and for accounting to the beneficiaries.  You will also use this account to make any deposits such as cash, refunds, and bank transfers.  If you are considering investing the estate funds, you should contact a qualified financial planner and your estate attorney before doing so.

Trend Towards More Scrutiny at the Borders and at U.S. Consulates

Scrutiny at the border and consulates is tighter following Trump’s revised travel ban. Foreign travelers can expect detailed questions about their backgrounds. For those travelers who were present in an area when it was controlled by an Islamic State (ISIS), the traveler may have a social media check in addition to their consular interview in order to determine any possible ties to ISIS or other terrorist groups.

In particular, business travelers on U.S. work visas and persons traveling without a visa under the U.S. Electronic System for Travel Authorization (ESTA) can now expect increased scrutiny when entering the U.S. The increase in scrutiny on consular processing and border inspections has made it more difficult to get a visa and also to enter the U.S. as quickly as once possible.

Our firm provides robust services in assisting clients with both consular processing and border entry. Please contact us.

A New Legal Framework for the National Interest Waiver

Immigrant visas under the EB-2 category are available to qualified immigrants who are professionals holding advanced degrees or their equivalent or because of their exceptional ability in the sciences, arts, or business, will substantially benefit the national economy, cultural or educational interests or the United States. Unless waived, the foreign national must be employed by a U.S. employer and have a U.S. job offer and have met the labor certification requirement that demonstrates that the Department of Labor has determined that there are not sufficient workers who are willing, qualified, and available.

The decision in Matter of Dhanasar establishes a new legal framework for the National Interest Waiver. Under the new National Interest Waiver framework, USCIS may, in its discretion, grant a national interest waiver if the petitioner establishes by a preponderance of the evidence that

  • the foreign national’s proposed endeavor has both substantial merit and national importance;
  • that the foreign national is well positioned to advance the proposed endeavor; and
  • that it would be beneficial for the U.S. to waive the requirements of a job offer and labor certification

Under the first criteria, proposed endeavor has national importance, the Dhanasar Court decided to consider and assess endeavors in terms of “national importance” rather than “national in scope”. For the second criteria, the Court focused on whether the foreign national is well positioned to advance the proposed endeavor. Under the third criteria, the petitioner must demonstrate that it would be beneficial to the U.S. to waive the job offer and labor certification requirements.

The old National Interest Waiver framework was issued in the 1998 decision Matter of New York State Department of Transportation (NYSDOT). Under NYSDOT framework, a petitioner must show that the area of employment is of “substantial intrinsic merit”, any proposed benefit of the individual’s endeavors will be national in scope and the petitioner must demonstrate that the national interest would be adversely affected if a labor certification were required for the foreign national.

Matter of Dhanasar has modernized the National Interest Waiver framework under NYSDOT. I think we will see that the new National Interest Waiver is more applicable for the foreign national professionals, industries and technology of today.

Lawful Permanent Residents Living Abroad

Helping families, couples and individuals with U.S. visa solutions and naturalization

The recent Executive Orders issued by President Trump have created very high levels uncertainty for so many immigrants, even those not from the seven countries subject to the current travel ban. The term “lawful permanent resident” seems like a permanent status but it now it is more important than ever for lawful permanent residents (LPR) to understand when they may be subject to removal from the U.S. for abandonment and how it may be avoided when traveling abroad.

For purposes of naturalization eligibility, temporary or brief travel usually does not affect permanent resident status; however, if Customs and Border Protection (CBP) determines that there is a need for further questioning upon re-entry, a secondary inspection at the port of entry is required. As a guideline, CBP is accustomed to asking for evidence of the lawful permanent resident’s status and ties to the U.S. from the traveler. This information can be hard for the returning lawful permanent resident to provide if not prepared ahead of time. Lawful permanent residents may find it helpful to travel with the following documentation: proof of family ties in the U.S., current employment in the U.S., recent income tax return (if filing as a U.S. resident), club memberships, property and/or lease. CBP’s consideration does not need to be limited to these factors and no one factor is necessarily more important than any other.

Although only a judge may make an abandonment finding, CBP may have a separate belief that the lawful permanent resident has abandoned his or her residence and try to have the lawful permanent resident sign a statement to relinquish permanent residence, Form I-407, and leave the U.S. CBP may consider any length of absence from the United States, even if less than 180 days. Please consult with your attorney if you believe you will be living and/or working outside the United States for any period of time.

If you are a lawful permanent resident, you may need to apply for a reentry permit prior to your departure so that the length of your absence abroad cannot be used as a factor in your abandonment. A re-entry permit does not preclude a finding of abandonment. If a lawful permanent resident visa is outside the U.S. for one year, a re-entry permit or returning visa will be needed for entry. A re-entry permit is valid for two years. There is no limit on the number of times an applicant can apply for a re-entry permit.

When re-entering the U.S. after brief international travel, a valid, unexpired “green card” (Form I-551, Permanent Resident Card) is needed. If a green card is not available, the lawful permanent resident must have a I-551 or CR-1 stamp in his/her passport to show proof of lawful permanent residence. For information pertaining to entry into the United States, see U.S. Customs and Border Protection’s web page at www.cbp.gov.

L-1 can be useful for Francise Business Owners

Dreaming of starting a franchise business in the U.S. but not from a country with a treaty with the U.S.? Here are a few ideas:

Besides the E-2 Treaty Investor category, other options for franchises are currently the EB-5 investor visa and employment-based immigration options including the EB-1 for extraordinary ability, outstanding professor or manager, or multinational executives or managers. Of the three subcategories, multinational executives or managers may apply to a greater percentage of your franchisee investors. For investors to establish their businesses in the U.S., the B-1/B-2 which may be used for limited start-up activities (but no-hands on work until work authorization is approved).

Every case is unique. Franchisees, like other immigration clients, need to know their immigration options and determine if they are eligible for the immigrant visa and status. There may be risks in any foreign investment option and advice on how to address, should be provided by experienced business immigration counsel.

Disclaimer

The information contained on this page is not legal advice and should not be taken, as legal advice on any particular set of facts or circumstances.