How Should I Leave Assets to a Beneficiary in Another Country?
My question relates to Non-Resident Aliens (not a spouse). I am 71 years old, a US citizen, and a resident of Florida. I am and always have been single. I have approximately one million dollars in assets: $160,000 bank $840,000 in stocks and mutual funds, 50% in TOD, 40% in Roth IRA, 10% in Trad. IRA and no debts. I would like to leave 50% of my assets to siblings and their children who live in Massachusetts and 50% to my friend in the Dominican Republic, who has no association with the U.S. whatsoever. Please assess my personal situation, especially regarding the NRA and tax liabilities which may (or may not) exist in a trust, which I intend to establish.
The fact that your estate is under the federal tax threshold, now of $11.7 million (as of 2021) and that there’s no estate tax in Florida, means that there’s no estate tax issues, even though half of your estate will go to a non-U.S. citizen. I would, however, not make your friend a beneficiary of your traditional IRA in order to keep her out of the U.S. tax system. The Roth IRA should not be a problem since withdrawals are not taxable.
The problem may be how investment houses deal with non-residents, whether or not they are U.S. citizens. As it happens, I’m trustee of a trust, the beneficiary of which now lives in the Dominican Republic. Fidelity, which holds the trust assets, will no longer permit me to change the investments in her trust. They must stay as they are. While we often urge clients to use trusts to avoid probate and for ease of management, it may work better in your case for your estate to go through probate and simply have half the proceeds distributed to your friend. I would check with the company or companies where you have your investments to see what their policies are. Of course, even this is not foolproof, because they could always change their policies, as has been our experience with Fidelity.