NCPA - National Center for Policy Analysis

Estate Tax Trap For Surviving Noncitizen Spouses

March 13, 2002

If the estate tax is rough on American citizens, it's brutal on noncitizen survivors. In 1988, Congress denied surviving spouses who aren't U.S. citizens the unlimited marital exemption enjoyed by American citizens. An estate left to a foreign spouse is taxed as if it had been left to a nonspouse.

  • Today, some five million American citizens or residents are married to aliens.
  • This year, assets above $1 million left to a noncitizen spouse are subject to estate tax at rates up to 50 percent.
  • Transfer of assets before death is not a panacea -- since a citizen can give only $110,000 in property to a noncitizen spouse each year without paying gift tax.
  • Holding property jointly doesn't help either -- since if the survivor is a noncitizen, the law presumes the couple's joint property belonged solely to the deceased, unless it can be proven that the survivor paid for it.

Couples where neither partner is a U.S. citizen owe estate taxes if they are deemed to reside here permanently.

Source: Bridgid McMenamin, "Aliens Under Attack," Forbes, March 18, 2002.

For text


Browse more articles on Tax and Spending Issues