Texas and Arkansas Estate Planning Attorney Clarifies How a Non-U.S. Citizen Creates a Lasting Legacy
Everyone needs an estate plan, whether they were born in the United States or moved here later in life. Although details may differ, citizens and immigrants alike can benefit from the protections offered by proactive planning—protections that offset the perils of probate, minimize tax burdens, and ensure relatives living abroad receive their fair share of an inheritance.
Ross & Shoalmire have spent years helping families navigate uncertainty and establish legacies. Read more to find out how citizenship and immigration status could impact your plans, then send us a message online to schedule a consultation with our experienced team of Estate Planning Lawyers.
Essential Elements of a U.S. Estate Plan
Immigrants often come to the United States with different ideas and dreams. Some may hope to become citizens, while others plan to eventually return home. Regardless of your ambitions, an estate plan can provide peace of mind—ensuring your health, wealth, and loved ones remain protected from the uncertainties of everyday life.
Although each person has varying needs, most comprehensive estate plans include the following components.
Last Will and Testament
A will is a critical first step in creating an estate plan for most families. Although many people think this directive serves little purpose beyond nominating heirs and distributing assets, this foundational document can provide further protections. For example, it lets you:
- Choose an executor to initiate probate and administer your estate.
- Nominate heirs and other estate beneficiaries.
- Select a guardian for your minor children.
- Condition end-of-life care.
In both Texas and Arkansas, as well as most other states, a will is the only surefire way to minimize the chances your estate is subject to intestate succession—a rigid form of probate in which the court refers to a strict legal formula in deciding how inheritances should be divided among a deceased person’s surviving relatives.
Powers of Attorney
A power of attorney is a legal document that authorizes another person, termed an agent or attorney-in-fact, to make decisions on the principal’s behalf. Powers of attorney can be used to simplify certain transactions, or to ensure that your wishes are respected should you ever become incapacitated.
Many estate plans incorporate these two powers of attorney:
- Durable Power of Attorney. Sometimes referred to as the statutory power of attorney, this gives an agent the right to access bank accounts, authorize real estate transactions, and make other important financial decisions if you’re incapacitated or otherwise unable to make decisions.
- Medical Power of Attorney. Also known as the Health Care Power of Attorney, this lets a trusted representative—often a spouse, or another close family member—make medical decisions on your behalf.
Any person authorized to act as your agent-in-fact has a fiduciary duty, which means they have a legal obligation to act in accordance with your wishes and in your best interests.
Advance Health Care Directives
Advance health care directives or advance directives are legal instructions that detail your preferences for end-of-life care. It specifies the circumstances under which you should be removed from life support, or sets restrictions on the type of care that you should receive in an emergency.
Streamlined Beneficiary Designations
You likely have already authorized a good number of beneficiary designations—a type of arrangement that permits the transfer of certain accounts to a specified heir. Many banks, for instance, ask you to nominate beneficiaries when opening a new checking account or investing funds into an individual retirement account.
Since beneficiary designations take precedence over the terms of your will, they must be regularly reviewed to ensure that life events—such as marriage, divorce, or the birth of a child—reflect your current wishes.
Trust Formation
A trust is a type of legal entity that can receive, manage, and distribute estate assets. Trusts serve different purposes and offer different advantages. In Texas and Arkansas, the most common kinds of trusts include:
- Revocable Living Trusts, which provide a grantor—that’s you—with lifelong rights of access to trust assets. These trusts can be altered and adjusted until the grantor’s death.
- Irrevocable Living Trusts, which prohibit most changes, even by you, but could substantially reduce estate taxes for heirs and other beneficiaries.
- Special Needs Trusts, which provide maintenance for special-needs dependents without risking their eligibility for state and federal benefits programs.
Trusts typically allow inheritances to be conditioned, letting you—as the person who establishes and funds a trust—exercise increased control over the release and use of estate assets.
Financial Implications of U.S. Residency and Overseas Citizenship
Citizenship and immigration status have significant financial implications. When Ross & Shoalmire’s Estate Planning Attorneys advise non-U.S. citizens in this process, we often encourage paying special attention to the potential impact of the following aspects.
Gift Exemption
In the United States, gifts given to anyone other than a spouse or dependent could be subject to a gift tax. The amount of this tax typically ranges between 18 percent and 40 percent of the gift’s estimated and inflation-adjusted value. In most cases, this tax is paid by the donor rather than the recipient.
Many people try to circumnavigate gift taxes by leveraging exemptions. For example:
- A U.S. citizen transferring money or other assets to their U.S. citizen spouse can claim an unlimited marital deduction, which removes any tax penalties from gifts given during the donor spouse’s lifetime or through the terms of the donor spouse’s estate plan.
- As of 2024, a U.S. citizen can exempt gifts to other parties of up to $18,000 per recipient per year, whereas two married U.S. citizen spouses can gift other parties up to $36,000 per recipient per year.
However, these rules change somewhat if a donor isn’t a U.S. citizen, or if one spouse is a U.S. citizen but the other spouse is not. Any transfer to a non-U.S. citizen spouse, for instance, could be tax-free—but such transfers are not “unlimited” and could incur significant tax penalties if the total amount of such transfers exceeds $148,000.
Federal Estate and Inheritance Tax
Non-U.S. citizens who are permanent residents or otherwise domiciled in America—meaning that they’re present in the U.S. for most of the year, and have no apparent intent to return to their home country in the foreseeable future—are typically subject to federal estate taxes.
Domiciled immigrants have the same rights—and the same tax obligations—as their U.S.-citizen counterparts. In most cases, federal estate taxes only apply to estates worth more than $13.61 million. However, non-citizens not domiciled in the U.S. must still pay taxes on any assets within the country. And for non-domiciled immigrants, the estate tax exemption is only $60,000.
Abandoning Residency and the Risk of an Exit Tax
Some non-citizens may have plans to eventually leave the country, whether to unite with family overseas or to retire in the comfort of a familiar culture. Unfortunately, even some permanent residents risk triggering an exit tax if they abandon their U.S. domicile while owing income taxes.
How Ross & Shoalmire Helps Protect Your Family—Here and Abroad—With an Estate Plan
The details of an immigrant’s estate plan may closely mirror that of a native-born or naturalized citizen. However, U.S. residents with family and assets overseas may need to consider other needs.
Arranging an Overseas Burial
A non-U.S. citizen with parents or children overseas may prefer their remains be sent to another country for funerary rites, burial, or cremation. An estate plan can accommodate these preferences by ensuring both that these wishes are clearly communicated and that an executor or other trusted party is given the authority to quickly claim your remains and arrange for transportation overseas.
Reconciling U.S. and International Law
Although a thoughtful estate plan can ease the pains of probate and help immigrants minimize the risks of their heirs being subject to heavy taxation, an Arkansas or Texas estate plan cannot necessarily protect assets located in other states—let alone assets owned and titled in foreign countries.
For example, some countries have legal systems that don’t recognize trusts as distinct legal entities. And while others may recognize foreign trusts, there’s often a limitation as to who can and cannot act as a trustee when administering the deceased person’s overseas assets.
An experienced Estate Planning attorney can help you protect the integrity of your U.S. estate with these considerations:
- Writing multiple wills.
- Drafting an international will recognized in countries party to certain treaties.
- Coordinating with an overseas attorney or law firm to ensure that the terms of your U.S. and foreign estate plans don’t conflict or cause any unexpected complications.
Selecting Guardians for Minor Children
Your Texas or Arkansas will give you the right to nominate a guardian for your minor children and other dependents. However, many non-U.S. citizens don’t have immediate relatives or other close family within this country—and may therefore prefer nominating guardians outside America. This sometimes necessitates the appointment of a temporary guardian or guardians who can provide care to your dependents while the court approves the transfer of care to somebody living abroad.
