The failure of wealthy married individuals to properly plan for U.S. transfer taxes, when one spouse is not a U.S. citizen or when one or both are resident or non-resident aliens with assets or investments in the United States, may mean unnecessarily high gift or estate taxes.

If you are an estate planner who’s concerned that your potential client base has been eroded by the recent exemption changes, consider the planning needs of foreign nationals. Recognizing the expanding global economy, and that 12.4 percent of the U.S. population is foreign born, according to the U.S. Census Bureau, you might conclude that the effects of U.S transfer taxes have made foreign nationals a great market for financial professionals.

The leap from estate planning for U.S. citizens to estate planning for foreign nationals does not necessarily mean learning a new language, but rather learning a dialect of the estate planning language you already speak.

Some questions to ask and some reasons why they matter include:

1. Is the foreign national a resident or non-resident alien?

a. The estate tax exemption for a non-resident alien is $60,000 – the same as a U.S. citizen or a resident alien

b. The assets subject to U.S. estate taxes for non-resident aliens include U.S.-sitused properties, including most intangible properties; for resident aliens, they include all worldwide assets

2. Is planning required to minimize the effects of U.S. estate and gift taxes?

a. The unified gift tax exemption for non-resident aliens is $0; for resident aliens, it is $1 million

b. U.S. intangible personal property and ownership interest in a U.S. life insurance policy on the life of another is not subject to U.S. gift tax, but is subject to U.S. estate tax

3. Is there a projected estate tax liability, and if so, is there adequate liquidity to pay the estate tax?

a. Life insurance may be able to provide the funds

Hopefully, these bits of information underscore that U.S. citizens and foreign nationals face the same fundamental planning issues. To be successful in the foreign national estate planning marketplace, you need to learn the additional set of rules

Finally, if you need more data to be convinced that the market is extensive enough to be profitable and warrant the additional effort, check out the results of a survey of recent U.S. immigrants with a net worth of at least $10 million, published in the December 2003 Trusts and Estates article, “Clueless”:

34.5 percent sought advice regarding the consequences of acquiring a U.S. residence for U.S. gift and estate taxes before they emigrated

  • 10.5 percent sought advice for making gifts of non-U.S. property prior to coming to the United States
  • 49.6 percent sought tax advice after emigrating to the United States
  • 6.8 percent of the above group sought advice on U.S. estate planning that could minimize estate taxes

Convinced? Good – now go out and prospect.

Alan Protzel is director of agency development for The Marketing Alliance. He can be reached at 314-275-8758 or aprotzel@themarketingalliance.com.

For more exclusive life insurance coverage, visit ASJ’s Life Insurance Resource Center.

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