Offit Kurman | Lost in Translation: Blunders in International Estate Planning #2

Welcome to “Lost in Translation: Blunders in International Estate Planning.” This blog series explores the rarified world of international estate planning, uncovering potential pitfalls and providing insights to navigate the complexities.

Blunder No. 2: Overlooking the Role of Cash as King

There are numerous proverbs and sayings regarding money:
You can’t take it with you.
Money makes the world go round.
Throwing good money after bad.
Money talks.
Time is money.
A penny for your thoughts.
A fool and his money are soon parted.
Money does not grow on trees.

In the realm of international estate planning, one adage takes precedence: “Cash is King.”

Understanding the U.S. Federal Estate Tax

The United States has a federal estate tax that is imposed on death. The top rate of estate tax is 40%. Fortunately for United States citizens and noncitizens who are domiciled in the U.S., there is a generous exclusion from the estate tax. For 2024, they have a $13.61 million exclusion for an individual and a $27.22 million exclusion for a married couple. By contrast, for a nonresident noncitizen of the U.S. who owns property in the U.S., the estate tax exclusion is only $60,000 and $120,000 for a married couple. An estate tax treaty between the United States and a client’s home country may occasionally expand that $60,000 exclusion.

Additional Estate Tax Exclusions for Nonresident Noncitizens of the United States

A few additional exclusions exist from the Federal estate tax for nonresident noncitizens of the U.S. For example, the death benefit from a life insurance policy that insures the life of a nonresident noncitizen is not subject to the Federal estate tax.

However, the most commonly used exclusion for nonresident noncitizens of the U.S. is cash on deposit with a United States bank. The cash that a nonresident noncitizen of the U.S. leaves in a checking account, savings account, or certificate of deposit with a United States bank is exempt from the Federal estate tax.

So, what is the blunder?

Cash that a noncitizen nonresident of the U.S. leaves in a mutual fund, money market fund, or brokerage account is Not Exempt from the Federal estate tax. Any sum of cash in a mutual fund, money market fund, or brokerage account over the $60,000 exclusion will be subject to Federal estate tax.

Conclusion: Protecting Assets Through Strategic Deposits

If you or one of your clients is a nonresident noncitizen of the United States, and either of you want to maintain a U.S. cash account, please consider depositing the cash in a checking account, savings account, or certificate of deposit with a United States bank to avoid the Federal estate tax. Cash held in a mutual fund, money market account, or brokerage account will be subject to the Federal estate tax.

For more information, please contact the author:
> Diane Roskies, Principal, OFFIT KURMAN

Compliments of Offit Kurman – a member of the EACCNY.