How Should I Leave Assets to a Beneficiary in Another Country?

 In Non-US Citizens

Question:

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.

Florida-Domican-Republic-probate-estate-planning-attorney-Wellesley-MA

Photo by Justin Aikin on Unsplash

Response:

The fact that your estate is under the federal tax threshold, now of $11.58 million (as of 2020) 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.

 

Related Articles:

Can Non-US Citizens be Beneficiaries of a Trust?

Problems with Non-US Owners of US Investment Accounts

Showing 6 comments
  • stela jhane berayon
    Reply

    i have a US friend from Tampa Florida who was died recently last February 7,2020 but before he died he ask my sss number wich is (SOCIAL SECURITY SYSTEM) in Philippines and added me as his beneficiary .i dont know what to do now or i dont know where to reach out yes he know my full name and address but i dont know who will contant me and whom to reach out. i dont even know the name of the company

    should i wait here that someone in the company will reaching me out? or does the company make an action to reach me if im really the beneficiary?

      • Harry Margolis
        Reply

        Dear Ms. Berayon,
        I’m sorry, but I am unaware of any Social Security benefit that can be assigned to a beneficiary other than a dependent or disabled child or a surviving spouse. Are you sure your friend was talking about Social Security and not something else?

      • charles dizon
        Reply

        We are a retired couple having two adult kids. we have assigned our inheritance to them, but can i add a beneficiary who is not a US citizen; non resident but is a philippine citizen living in the philippines

          • Harry Margolis
            Reply

            Dear Mr. Dizon,
            Probably yes, but it can get a bit complicated. By “assigning our inheritance,” I’m going to assume you’re naming them as beneficiaries on your accounts. That’s fine legally, but some financial institutions make it very difficult for non-U.S. residents (citizenship doesn’t seem to matter) to get access to the accounts. It might make more sense to use a revocable trust with a U.S.-based trustee. But I’d check with the financial institution to be certain.

          • William
            Reply

            I currently reside in the country of Guatemala,my mother lives in the United States,and wants to place me as the sole beneficiary to her bank accounts.how would that work. I have a bank account here will those funds just be transferred to me automatically?

              • Harry Margolis
                Reply

                Dear William,
                My answer to your question is the same as my answer to Mr. Dizon above. That should work, but I’d check with the bank to be sure. Some of them can be very difficult, but others not. Our experience is that banks are often easier to work with then large financial institutions, such as Fidelity.

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