What Happens to Your Estate If You're Not a U.S. Citizen?

What Happens to Your Estate If You're Not a U.S. Citizen?

If you're living in Texas but aren't a U.S. citizen, your estate plan needs extra attention. The rules that apply to citizens don't always apply to you—and the differences can cost your family hundreds of thousands of dollars if you don't plan ahead.

At Dickey Law Group, we work with non-citizen residents throughout The Woodlands and the Houston metro area to build estate plans that account for these unique challenges. Here's what you need to know.

The Marital Deduction Problem

For U.S. citizens, the unlimited marital deduction is one of the most powerful estate planning tools available. It lets a spouse inherit any amount—no matter how large—without triggering federal estate taxes. But if the surviving spouse is not a U.S. citizen, that deduction doesn't apply.

This catches many families off guard. A married couple with significant assets might assume everything passes tax-free to the surviving spouse, only to discover at the worst possible moment that a massive tax bill is due within nine months of the first spouse's death.

The IRS does allow an annual gift tax exclusion for non-citizen spouses that's higher than the standard exclusion—$185,000 in 2024—but that's a far cry from unlimited. If your estate exceeds the federal exemption amount and your spouse isn't a citizen, you need a plan.

Qualified Domestic Trusts (QDOTs)

The primary tool for protecting a non-citizen surviving spouse is a Qualified Domestic Trust, or QDOT. Here's how it works:

• Assets pass into the QDOT at the first spouse's death
• The surviving spouse receives income from the trust during their lifetime
• Estate taxes are deferred until the surviving spouse dies or takes principal distributions
• At least one trustee must be a U.S. citizen or a domestic corporation

A QDOT doesn't eliminate estate taxes—it delays them. But that delay can be the difference between your spouse keeping the family home and being forced to sell it to pay a tax bill.

Setting up a QDOT requires careful drafting. The trust must meet specific IRS requirements, and if your estate exceeds $2 million, additional rules kick in, including a requirement that a U.S. bank serve as trustee or that the trustee furnish a bond.

Immigration Status and Texas Probate

Your immigration status doesn't affect your right to own property in Texas or to have a valid will. Under the Texas Estates Code, any person of sound mind who is 18 or older can execute a will—regardless of citizenship. Non-citizens can also:

• Own real estate in Texas
• Hold bank and investment accounts
• Serve as executors of an estate
• Inherit property through a will or intestacy

However, if you hold assets in multiple countries, your estate plan gets more complicated. Different countries have different inheritance laws, and some don't recognize U.S. legal documents. You may need separate wills or trust arrangements for assets held abroad.

Cross-Border Considerations

If you have assets in your home country and in the United States, you need to think about:

• Conflicting inheritance laws. Some countries have forced heirship rules that require certain percentages to go to specific family members, regardless of what your will says.
• Double taxation risks. Without proper planning, the same assets could be taxed by both the U.S. and your home country. Estate tax treaties with certain nations can help, but not every country has one.
• Document recognition. A Texas will may not be recognized in your home country, and vice versa. Coordinating your documents across jurisdictions is essential.
• Situs rules. The U.S. taxes non-resident aliens only on U.S.-situs assets (real estate, tangible property, and certain securities), but the exemption for non-residents is just $60,000—far lower than the citizen exemption.

Steps to Protect Your Estate

Whether you're a permanent resident, a visa holder, or a non-resident with Texas property, here's what we recommend:

1. Don't assume the same rules apply to you. Get advice specific to your citizenship and residency status.
2. Consider a QDOT if your spouse is not a U.S. citizen and your combined estate is significant.
3. Review beneficiary designations on retirement accounts, life insurance, and bank accounts—these pass outside your will.
4. Coordinate international documents if you hold property in more than one country.
5. Update your plan whenever your immigration status changes—getting a green card or citizenship can change your tax situation dramatically.

Estate planning for non-citizens isn't something you should try to figure out on your own. The stakes are too high, and the rules are too specific.

Contact Dickey Law Group today to schedule a consultation. We serve families throughout The Woodlands, Spring, Conroe, and the Houston metro area. Call (832) 521-4414.