~ Immigration Tax Planning ~
Estate Tax
A person who is domiciled in the United States is subject to estate tax on all of their worldwide assets. Once the unified credit amount (currently $650,000) is exceeded, the estate is subject to tax at rates that range currently from 37% to 55%. On the other hand, non-domiciliaries are subject to U.S. estate tax only on assets located in the United States.
Obviously, the difference between the amount of tax due based on having U.S. domicile or not can be an enormous amount for high net worth individuals who have substantial assets located outside the United States. Moreover, unless an estate tax treaty applies (and there are few of these when compared to the number of income tax treaties to which the United States is a party), a recent immigrant may find the former home country looking to impose its own death taxes as well. This can generate a risk of double tax at rates in excess of 100%. For this reason, an important aspect of immigration tax planning is to avoid having the new resident treated as a domiciliary for estate and gift tax purposes.