Taffyles

Can anyone advise please? I know that Life insurance death benefit if left to LPR spouse as a named beneficiary with the deceased being the owner of the policy is classed as part of deceased spouses estate. do LPRs have the same tax exemption on estates as citizens? i.e under 5 million would be tax free. I've been searching the net and have found conflicting information.

My husband (an LPR also) died last month and I'm expecting a payout from his life insurance which I want to avoid being taxed by Uncle Sam obviously. If it will be .. I have time (before filing taxes next year) to apply for citizenship, but I dont want to do that unless I really have to.

Ash UK/US

Sorry for the loss of your husband

I am curious to know too as I was not able to find a clear cut answer either.

Owen778

My understanding was that the difference between US citizens and other US persons (as per the tax rules) is that US citizens can leave an unlimited amount to their spouse, whereas the unlimited exemption does not apply for non-citizen spouses, so only estates under $5.45 million would be tax-free.
Estate Planning When You’re Married to a Noncitizen | Nolo.com

Taffyles

Thanks both. Owen that's what I'm hoping is the correct information, nolo and another tax lawyer site says this, but on two other legal sites it says that permanent residents have the same exemption as non resident aliens of only $60,000. Every tax person I've phoned to ask a question come back with the same stock answer "Life insurance is never taxed for spouses".. when I ask about permanent resident status I have to make an appointment ...and pay, of course. I did find out that the IRS gives you a 6 month extension on estate taxes if you have to apply for citizenship.

I just wondered if anyone on the forum had any experience of this. Or any tax lawyers about who know something about immigration?

Owen778

These are the instructions for estate tax filing for US citizens and residents. Page 2 says that you don't have to file unless your estate is above the $5.? million limit. The form and rules for non-resident aliens who have to file for estate taxes are different (form 706-A not 706).
https://www.irs.gov/pub/irs-pdf/i706.pdf

mrken30

There are estate taxes and inheritance taxes involved. Also there may be some State taxes that you have to pay. I always though LPR limit was $100k , but that was just hear say.

This site looks interesting

Estate Planning for Non US Citizens - Greencard Holder - Florida Lawyer & Attorney

bewildering

Sorry for your loss.

Life insurance is not taxable. It is not part of the estate.

https://www.irs.gov/Help-&-Resources...rance-Proceeds

mrken30

That link just states that it does not count as income. Does it count towards the total estate value?
Generally, if you receive the proceeds under a life insurance contract as a beneficiary due to the death of the insured person, the benefits are not includable in gross income and do not have to be reported.

This link says to include it for Oregon taxes
Include all property in your determination, including life insurance. (Note: A commonly held belief is that life insurance is "not taxed." This is only true in that it is not taxed as income to the beneficiary. It is included as an estate asset and taxed as part of your estate.)

LAW CHANGE ALERT: Oregon Inheritance Tax (Oregon Estate Planning Blog)

mrken30

Found another article you may want to read

http://www.jacksonmontoyalawfirm.com...S-Citizens.pdf

The marital deduction. All property left to a surviving spouse passes free of estate tax. (I.R.C. § 2056(a).) The marital deduction is not allowed for property left to noncitizen spouses, but the personal estate tax exemption can be used for property left to noncitizen spouses.

http://www.nolo.com/legal-encycloped...ave-29802.html

Taffyles

Thank you all for your help.. and mrken30 for the lawyers link.. I have just submitted a request to them for a free consultation. I will post their answer when I get one.

Looking at their website I think I will be okay and wont have to apply for citizenship.. just yet anyway

Florida has its benefits.. no State income tax, estate tax, or inheritance tax.. so wont have to worry about that anyway. Wow some States dont half clobber you.

Taffyles

bewildering.. Life insurance proceeds left to a named beneficiary is classed as part of the deceased's estate. To avoid this..own the policy for your spouse.. then as owner the proceeds come to you and will not be part of the spouse's estate. We should have done this, but I've learned.. I've cancelled my life insurance policy and my children are taking one out on me, as owners they will avoid being taxed on it.