DC Inheritance Law for Non-Residents

Explore the intricacies of DC inheritance law for non-residents with Kevin C. Martin, Attorney at Law, PLLC. For more information, call us now.


Non-Residents and DC Inheritance Law Complications

Many individuals in Washington, DC, have family members who don’t live in the United States or aren’t U.S. residents. Estate planning for non-residents can be complicated since there may be certain restrictions.

According to 26 USC § 865(g)(1), a non-resident is any individual who primarily resides in one state or one country but has an interest in another. The IRS defines a non-resident alien as any individual who is:

  • Not a U.S. national or a U.S. citizen 

  • Not a green card holder or a lawful permanent resident 

  • Hasn’t passed the substantial presence test

Although the basic DC estate planning steps are the same, regardless of whether or not the individual is a resident, the complexity is in the details of the estate plan. Drafted documents have to be compliant with DC and federal law as well as with the non-resident’s home country laws.

Inheritance and inheritance laws are intricate, but being a non-resident adds a layer of complexity. Kevin C. Martin, Attorney at Law, PLLC, is a trusted and experienced estate planning law firm. With our guidance, you can understand and navigate these laws effectively.

Understanding DC Inheritance Law for Non-Residents

The Basics of Inheritance Law in DC

In the District of Columbia, if the decedent left a valid will, their assets will be distributed to those named as beneficiaries accordingly. The decedent will also appoint an executor of the will or personal representative to administer the distribution of assets and to close the estate.

If a person dies without a will, they die intestate. The probate court will use DC Intestate Succession laws to determine how the decedent’s assets will be distributed. Under these laws, the deceased’s blood relatives, such as their surviving spouse or children, are automatically considered beneficiaries. However, if the decedent had neither, whoever is next in line may be considered an heir, depending on how close they are to the decedent.

Probate Procedures in DC

The DC probate process includes certain steps, such as the following:

  • Filing a petition with the probate court

  • Appointing a personal representative

  • Submitting a will, if a will exists

  • Settling debts and taxes

  • Distributing assets to beneficiaries

  • Closing the estate

However, a non-resident or a non-citizen can’t be named as a personal representative in the District of Columbia. If the personal representative named in the will doesn’t qualify for that role, the probate court will have to appoint someone else.

If a beneficiary of a U.S. estate is a non-citizen, that may create certain problems. For example, an executor can be required to withhold a certain percentage of the funds before distribution, which can create additional administrative costs. Moreover, the non-resident beneficiary assets may be subject to double taxation if the U.S. doesn’t have an estate tax treaty with their country of origin.

Estate Planning Considerations for Non-Residents

There may be other complications when estate planning involves non-residents. For example, if a trustee you named is not a U.S. resident and their primary residence is outside the U.S., the IRS could treat that trust as foreign. That can result in adverse tax consequences. Furthermore, a trust’s assets may become subject to the foreign country’s laws, which can expose the trust to potential taxation. You may need a DC trusts lawyer to help you handle these issues.

Navigating Estate Taxes and Other Financial Implications

Understanding Estate Taxes in DC

In general, for estate tax purposes, it’s presumed that married individuals share assets. When one spouse dies, assets are transferred to the surviving spouse. The federal estate tax law, which is applicable in DC, allows for unlimited assets to be transferred to a spouse free of estate and gift tax.

This is called the unlimited marital deduction. But, the surviving spouse has to be a U.S. citizen. If it’s not, unlimited marital deduction doesn’t apply. Moreover, any estate tax has to be paid immediately.

When it comes to taxes, bear in mind that there is no inheritance tax or a gift tax in DC. If your spouse is a U.S. citizen, gifts you exchange during a lifetime are free of federal gift tax. But, if your spouse is not a U.S. citizen or a U.S. resident, the tax-free treatment is limited to $175,000 in 2023 for gifts you exchange.

Asset Management for Non-Residents

If one spouse is a non-resident or a non-citizen, a presumption that each spouse owns 50% of their jointly owned property doesn’t apply. For example, if the U.S. citizen spouse dies first, the entire worth of their jointly owned home will be included in the spouse’s taxable estate. A non-citizen spouse has to prove they contributed to the purchase of the joint property.

Owning an asset in the DC or anywhere in the U.S. by non-residents or non-citizens means they will have to file a DC estate tax return. The federal estate tax exemption for 2023 is $12.92 million, while the Washington DC estate tax exemption is $4.53 million for 2023.

If the country of the non-resident doesn’t have an estate tax treaty with the U.S., the tax imposed for assets could be doubled. In other words, assets could be taxed both in the country of citizenship or residency of the non-resident and the United States.

Creating a qualified domestic trust (QDOT) can be one strategy for asset protection. A U.S. citizen has to set up a trust, the non-citizen spouse can be a beneficiary of the trust for life, and the trustee has to be a U.S. citizen or U.S. corporation. That way, the non-citizen spouse can receive the income that the trust property generates and benefit from the unlimited marital deduction.

The Role of an Estate Planning Lawyer

There are several difficulties when it comes to DC estate planning for non-residents. However, an attorney experienced with international estate planning may be able to help. They can assist with selecting personal representatives that would be permitted under DC and federal law. Additionally, an attorney can review the potential tax consequences and how the assets would be treated.

Our estate planning attorneys at Kevin C. Martin, Attorney at Law, PLLC, can help develop a comprehensive strategy considering all applicable DC and federal laws. For example, we can create an international will that is recognized and enforced in multiple countries. We can advise you on the best estate planning tools to use to protect your assets in the U.S. and minimize tax liability.

More Questions on Inheritance Law for Non-Residents? Reach out Today!

Consulting a skilled estate planning attorney may be beneficial when it comes to estate planning for non-residents. You also need a qualified attorney to explain the inheritance laws that apply to you and inform you of tax treaties with your country of origin, if any.

Kevin C. Martin, Attorney at Law, PLLC, is a trusted estate planning law firm. He can work with you to create a comprehensive strategy considering all relevant laws while minimizing tax liabilities. Schedule a free consultation so we can get started.