How Does Having a Noncitizen Spouse Affect Estate Planning?
A person who is not a United States citizen can inherit property from a spouse who is a U.S. citizen. However, citizenship can affect how federal estate and gift tax rules apply to transfers between spouses.
Citizenship, residency, and immigration status are separate legal concepts. A spouse’s immigration status does not prevent that person from inheriting property, but U.S. citizenship can determine whether certain estate and gift tax benefits are available.
There are three important ways estate planning may be different when one spouse is not a U.S. citizen:
- The unlimited estate tax marital deduction may not be available.
- Jointly owned property may receive different estate tax treatment.
- Lifetime gifts to the noncitizen spouse are subject to an annual limit.
These rules can make estate planning more complicated, particularly for couples with substantial assets or property in more than one country.
Can a Noncitizen Spouse Inherit Property?
Yes. A noncitizen spouse can inherit money and property from a U.S. citizen spouse.
There is no general law prohibiting a noncitizen spouse from being named as a beneficiary in a will, trust, life insurance policy, retirement account, or other beneficiary designation.
The important difference concerns how the transfer may be treated for federal estate and gift tax purposes.
A green card does not make someone a U.S. citizen. Likewise, living in the United States or being treated as a U.S. resident for income tax purposes does not necessarily provide the same estate tax treatment as citizenship.
1. The Unlimited Marital Deduction May Not Apply
When both spouses are U.S. citizens, assets can generally pass from one spouse to the other without federal estate tax because of the unlimited marital deduction.
The deduction ordinarily defers estate tax until the surviving spouse later dies. This does not mean the property will never be subject to estate tax. It means the tax is generally postponed while the surviving spouse is alive.
What Happens When the Surviving Spouse Is Not a U.S. Citizen?
If a U.S. citizen dies and leaves property to a surviving spouse who is not a U.S. citizen, the unlimited marital deduction generally is not available for an outright transfer.
This does not automatically mean that estate tax will be due. The deceased spouse’s available federal estate tax exemption and other deductions may eliminate or reduce the tax.
For people who die in 2026, the federal basic exclusion amount is $15 million. The IRS lists the current federal estate tax exclusion and other inflation-adjusted amounts.
When an estate exceeds the available exemption, however, losing the unlimited marital deduction can create a significant tax liability at the first spouse’s death.
One reason for this rule is that a noncitizen surviving spouse could move property outside the United States, making it more difficult for the federal government to collect estate tax when that spouse later dies.
Can a Qualified Domestic Trust Preserve the Marital Deduction?
A qualified domestic trust, commonly called a QDOT, may allow property passing to a noncitizen spouse to qualify for the estate tax marital deduction.
Instead of paying estate tax immediately on qualifying property, the tax can generally be deferred while the property remains in the QDOT.
A QDOT must satisfy detailed federal requirements. Among other requirements:
- The surviving spouse generally must be entitled to the trust income.
- At least one trustee must be a U.S. citizen or a domestic corporation.
- The trustee must be able to withhold estate tax from certain principal distributions.
- The executor must make the QDOT election on a timely filed federal estate tax return.
- Additional security requirements may apply to larger trusts.
Can the Surviving Spouse Receive Money From a QDOT?
The noncitizen surviving spouse can generally receive income produced by the QDOT without triggering the special QDOT estate tax.
Distributions of principal are treated differently. A principal distribution will generally trigger estate tax unless an exception applies.
A hardship distribution may qualify for an exception when the surviving spouse has an immediate and substantial financial need involving health, maintenance, education, or support and does not have other reasonably available resources.
When the surviving spouse dies, property remaining in the QDOT is generally subject to estate tax. The tax treatment may also change if the surviving spouse later becomes a U.S. citizen and satisfies the applicable requirements.
Because QDOT rules are highly technical, the trust should be drafted and administered with the assistance of qualified estate planning and tax professionals.
2. Jointly Owned Property May Be Treated Differently
Citizenship can also affect how jointly owned property is included in a deceased spouse’s taxable estate.
When spouses who are both U.S. citizens hold property as a qualifying joint interest, the federal estate tax rules generally treat each spouse as owning one-half.
That 50 percent presumption may not apply in the same way when the surviving spouse is not a U.S. citizen.
How Is the Taxable Share Determined?
When a U.S. citizen spouse and a noncitizen spouse own property jointly, the contribution rule may apply.
Under this rule, the deceased spouse’s estate may need to show how much each spouse contributed toward the property’s purchase. The portion included in the deceased spouse’s estate may depend on the source of the funds rather than simply how the property is titled.
Consider a jointly owned home worth $200,000.
If the U.S. citizen spouse provided the full purchase price and dies first, the entire value could potentially be included in that spouse’s gross estate. If the noncitizen spouse can establish that they contributed $50,000 toward the purchase, the amount included may be reduced accordingly.
The result can depend on several factors, including:
- How the property is titled
- When the property was purchased
- How much each spouse contributed
- Whether either spouse received an ownership interest as a gift
- Whether state marital property rules apply
- Whether an estate or gift tax treaty applies
Couples should keep reliable records showing where the purchase funds, mortgage payments, and improvement expenses came from.
Joint Ownership Can Also Create a Lifetime Gift
Adding a noncitizen spouse to the title of property can have gift tax consequences.
For example, if the U.S. citizen spouse purchases property using only their own funds and gives the noncitizen spouse an equal ownership interest, part of the transaction may be treated as a gift.
The type of property and form of ownership can affect when the gift occurs and how it is valued. Couples should obtain advice before changing a deed or transferring ownership of a valuable asset.
3. Lifetime Gifts Are Subject to a Special Annual Limit
Spouses who are both U.S. citizens can generally make unlimited lifetime gifts to each other without federal gift tax because of the marital deduction.
That unlimited gift tax marital deduction generally is not available when the recipient spouse is not a U.S. citizen.
Instead, federal law provides a special annual exclusion for qualifying gifts to a noncitizen spouse.
How Much Can You Give a Noncitizen Spouse in 2026?
For 2026, a spouse may generally give up to $194,000 to a noncitizen spouse without using the donor’s lifetime gift and estate tax exemption.
The IRS confirms that the 2026 annual exclusion for qualifying gifts to a noncitizen spouse is $194,000.
This amount is adjusted periodically for inflation, so it should be verified in the year the gift is made.
The special exclusion generally applies only to gifts of a present interest. A present-interest gift gives the receiving spouse an immediate right to use, possess, or enjoy the property.
A gift above the annual exclusion does not necessarily mean that gift tax must be paid immediately. The excess may use part of the donor’s available lifetime gift and estate tax exemption. However, the donor may need to file a federal gift tax return.
Does Buying Property Together Count as a Gift?
It can.
If a married couple purchases property together and the U.S. citizen spouse provides the entire purchase price, the ownership interest transferred to the noncitizen spouse may be treated as a gift.
For example, if both spouses receive equal ownership of an asset but only one spouse paid for it, the other spouse may have received a gift equal to part of the property’s value.
The timing and amount of the gift depend on the type of property and how ownership is structured.
Does a Noncitizen Spouse Need a Different Estate Plan?
Not necessarily an entirely different plan, but the plan should account for citizenship and international issues from the beginning.
A carefully designed plan may need to address:
- Whether a QDOT is appropriate
- How jointly owned property was acquired
- Whether lifetime transfers constitute taxable gifts
- The source of each spouse’s contributions
- Life insurance and retirement account beneficiary designations
- Property located outside the United States
- The citizenship and residency of trustees and beneficiaries
- Foreign tax or estate laws
- Applicable estate and gift tax treaties
- The possibility that the surviving spouse may later become a U.S. citizen
These issues should be coordinated with the couple’s will, trusts, powers of attorney, and beneficiary designations.
Should You Use a QDOT?
A QDOT is not necessary for every couple with a noncitizen spouse.
If the deceased spouse’s estate is well below the available federal estate tax exemption, the estate may not need the marital deduction to avoid federal estate tax. Other planning goals may still support using a trust, but a QDOT may add unnecessary complexity in some cases.
A QDOT may be more important when:
- The U.S. citizen spouse has a potentially taxable estate
- The couple owns rapidly appreciating assets
- The surviving spouse is unlikely to become a U.S. citizen
- The estate includes significant business or investment interests
- The family wants to defer estate tax while supporting the surviving spouse
The decision should be based on the couple’s complete financial and family circumstances.
Review the Plan If Citizenship Changes
A change in citizenship may significantly affect the estate plan.
If the noncitizen spouse becomes a U.S. citizen, the couple should review any QDOT, marital trust, beneficiary designation, and gifting strategy. Citizenship can change the tax treatment of future transfers and may affect how an existing QDOT is administered.
The plan should also be reviewed if either spouse moves to another country, acquires foreign property, or gives up U.S. citizenship or residency.
Contact an Experienced Estate Planning Attorney
Estate planning with a noncitizen spouse can be more complicated than planning for two U.S. citizen spouses.
Regardless of your family members’ citizenship or immigration status, a well-thought-out estate plan can help provide for the people you care about and reduce unnecessary estate and gift tax exposure.
McDonald Law Firm can help you develop an estate plan that addresses your family’s particular circumstances.
To schedule a meeting, contact us:
- Howard County: 443-741-1088
- Montgomery County: 301-941-7809
- District of Columbia: 202-640-2133
DISCLAIMER: THE INFORMATION POSTED ON THIS BLOG IS INTENDED FOR EDUCATIONAL PURPOSES ONLY AND IS NOT INTENDED TO CONVEY LEGAL, INSURANCE, OR TAX ADVICE.
