There are two circumstances that we will address in this article:
- I Am A Foreign National, And My Spouse Is A U.S. Citizen
- I Am A U.S. Citizen, And My Wife Is Not
We will review the implications of both of these cases for life insurance.
A few things that we need to state, it is much harder to get life insurance on a foreign spouse than it is on a U.S. citizen. It doesn’t mean you can’t get insurance, but there are specific requirements, documents, and rules you will need to follow. There are A-Rated companies that give life insurance to foreign nationals from many different countries.
Should I Get Life Insurance?
In reality, it is essential to consider getting life insurance when you have a non-U.S. Citizen spouse. The main reason for this is estate taxes. At death, you can pass an unlimited amount of money to a U.S. citizen spouse. However, the same is not valid if he or she is a non-U.S. Citizen.
Please speak to a CPA to find out if you or your spouse are considered foreign nationals for estate taxes. If this is the case, then anything above $5.45 million (in 2016), you could pay up to 40% of your assets in taxes at death.
So many people chose to protect themselves with life insurance because it’s affordable a simple. Life insurance is not the only solution.
You Can Get A QDOT
Another common way of protecting your assets is with a Qualified Domestic Trust or QDOT. Please speak to an attorney to see if a QDOT is right for you. Here is a good article to understand estate planning with foreign spouses.
I Am A Foreign Citizen, And My Spouse Is A U.S. Citizen
The good news for you is that at death, your U.S. citizen spouse will not have to pay estate taxes. You can utilize an unlimited spousal exception. However, it is still a good idea to protect your debts and income with life insurance.
Life Insurance companies do not care so much where you are from, but they do care where you reside. If you live in the U.S. and have been here for a few years, then getting life insurance will be much easier.
However, if you mainly reside outside of the United States, then your country of citizenship will determine what type of insurance you can get, and how cheap it will be. Most 1st world countries will are low risk, and 3rd world countries will have a higher risk. This risk determines the price of your policy.
What Do I Need To Get Life Insurance?
It would be best if you had strong financial ties to the United States. One of the best things you could have is a U.S. property. With property, the process of getting life insurance will be more straightforward, and A+ rated companies will want your business.
If you do not have a property, then you will need to have substantial assets in the United States.
I am a U.S. Citizen, and My Wife Is Not
Speak to an accountant or tax attorney about your particular case.
In the case where your spouse is not a U.S. citizen, then he or she will be subject to estate taxes. The amount they can exclude from taxes will depend if they live in the U.S. or not. This means that anything above $5.45 million could be taxed up to 40%.
Souse Lives In This U.S.
So let’s say your net worth is $10 million. At death, your wife will not pay taxes on the first $5.45 million. However, $4.55 million will be taxable by up to 40%. That means your spouse will inherit approximately $8.18 million, and $1.82 million goes to the IRS. $10 million -> Spouse gets $8.18 million
Spouse Lives Outside Of The U.S.
In this case, the estate taxes are even worse. Your spouse will not have a $5.45 million exemption. That means she would get approximately: $10 million -> Spouse receives a little over $6 million
Life Insurance Non-Citizen Spouse
As we already mentioned, there are many variables to consider, but the most important are:
- Country of Residency
- Country of Citizenship
- Assets In The U.S.
All of the previous affect how easily you can get life insurance, what rates, and what companies will approve of you. If you want a quote, click below.
Life Insurance Beneficiary Foreign Spouse
You may already have Life Insurance, and the beneficiary of your life insurance is a foreign spouse. Then consider all the things we already mentioned. You may be the perfect candidate for a QDOT, so speak to an attorney to find out if it makes sense for you.
As you can see, your money can disappear in estate taxes if you do not plan correctly. Please speak to an attorney and or CPA and also protect yourself with life insurance! It’s a very affordable solution that may help you pay for estate taxes.