Noncitizen spouses are treated differently from U.S. citizen spouses for estate and gift tax purposes.1
They do not get unlimited marital deduction. Married US citizen spouses can generally transfer unlimited amounts of money between each other during life or upon death in various qualifying ways with no gift or estate tax concerns. This unlimited marital deduction delays any estate taxes until after the survivor dies. However, lifetime gifts to a noncitizen spouse and inheritance upon a citizen spouse’s death for a surviving noncitizen spouse are not eligible for the unlimited marital deduction.
Instead, a US citizen spouse should set up a qualified domestic trust (QDOT), which allows their noncitizen spouse to benefit from the unlimited marital deduction while ensuring that any taxes due are paid after the noncitizen spouse's death. Special rules govern QDOTs. For example, the noncitizen spouse must generally be the trust’s sole beneficiary during the spouse's lifetime, and the trust must have a US trustee. The noncitizen spouse generally receives all the income that the trust property generates during the remainder of the survivor’s lifetime but can rarely receive principal without incurring an estate tax penalty.
Jointly owned property is treated differently. If a married couple jointly owns a home, it is generally assumed to belong to both spouses equally when both are US citizens, with each spouse owning a 50% share. Therefore, when either spouse dies, only 50 percent of the value of the shared asset is included in the deceased spouse’s estate for estate tax purposes. However, if one spouse is a noncitizen, this presumption may not apply. For example, if the US citizen spouse dies first and the jointly owned home is worth $200,000, the entire $200,000—instead of $100,000—will be included in the deceased spouse’s taxable estate unless the noncitizen spouse proves they have contributed a certain amount toward the home.
There is no unlimited gifting. Generally, US citizen spouses can make unlimited gifts to each other during life without paying the federal gift tax if the gifts qualify for the unlimited marital deduction. However, if a US citizen spouse makes a gift to their noncitizen spouse that exceeds the annual limit ($194,000 for 2026), the gifting citizen spouse may need to either use a portion of their lifetime exemption to cover the amount in excess or incur a gift tax liability.
Remember state estate and inheritance taxes. Depending on where a couple lives, state estate or inheritance taxes may apply even if no federal tax is due, because state thresholds may be lower than the federal threshold.
Regardless of the citizenship status of your family members or loved ones, it is crucial to create a well-thought-out estate plan to provide for them in the way you intend and to minimize your potential tax liability. Contact the lawyers at Altman & Associates at 301-468-3220 or via the website at altmanassociates.net today to design an estate plan that addresses your unique circumstances and needs.
