The main issue is that if you are an Israeli citizen with assets in the U.S., you could end up paying 40% in Estate Taxes when you pass away. The IRS will want that money quickly and in cash. However, the rules are very different if you are a resident or a U.S. citizen. While U.S. residents have a $5.45 million exclusion (in 2016) from Estate Taxes, for a Israeli foreign national the exclusion is only $60,000!
That means that anything above $60,000 will be taxes at death.
What solution’s do you have?
Proper Estate Tax planning is very important, so make sure you consult an estate attorney, and one that specializes in foreign nationals. In addition, life Insurance is utilized as a common strategy to pay for Estate Taxes for foreign nationals. As a matter of fact, life insurance can work perfectly to pay for Estate Taxes, it works even better than if you were a U.S. resident.
What’s the purpose of life insurance?
The purpose of life insurance is to protect a life and transfer money to the beneficiaries on a tax-free basis. A common purpose of life insurance is to pay estate taxes.
As a non U.S. citizen you will need to meet certain special requirements to get life insurance. In addition you will need to do a medical in the U.S. And sign all the paperwork while you are in the United States.
Who needs life insurance?
In reality everyone should have life insurance. Even the ultra rich need life insurance, actually more so than the average person. It is especially important for people with a high net-worth to have life insurance to pay for estate taxes. As we already mentioned, Israeli citizens that are foreign nationals could pay up to 40% of their investments in the U.S. to the I.R.S.
Who is considered a foreign national?
People that have assets in the United States and don’t spend more than 183 days of the year in the U.S. could be considered foreign nationals. The rules are a lot more complex than this and you should speak to your tax attorney to determine your status.
What are estate taxes for foreign nationals?
The amount you pay in estate taxes is based on brackets, and it could be very complex. But if you are a foreign national you will not pay taxes on $60,000, the rest will be subject to estate taxes. These taxes could add up to 40% of your investment.
What types of investments are subject to Estate Taxes?
All of the following are investments you would have to pay estate taxes.
- Business ownership interest
- Real Estate Investments
- Mutual Funds
And many more assets that are held in the United States.
I am a citizen of Israel can I buy life insurance in the U.S.?
Yes you may be able to buy insurance in the United States if you have assets, business or income in the U.S. Life insurance companies will want to make sure that there is a need for life insurance.
Please note that if your primary residence is on the West Bank, it will be much harder to get you approved for life insurance.
What kind of life insurance should I get?
There are two types of life insurance for a citizen of Israel that may make sense.
It will cover you for a period of time defined by the term (10, 20 or 30 years), but after that period the life insurance disappears. This makes sense when you might sell your investment within the term time frame and move you assets away from the U.S.
This type of life insurance will cover you forever, so if you are looking to protect your investment a long time, this will be the best option. In addition, there are two types of permanent life insurance Universal and Whole Life.
One of the easiest ways to meet all requirements to get life insurance for an Israeli citizen in the U.S. is to have real estate in the United States.
As you can see, life insurance can be a great way to protect all of your assets from very high Estate Taxes. Don’t let the I.R.S. take 40% of your investment!
We specialize in working with non-U.S. citizens to protect their assets through Life Insurance. Please contact us with your questions, and if you would like a quote.