If non-citizens own property in the US or have US-born children, an appropriate estate plan is the most efficient way to preserve assets and protect non-citizen families living in the US.
Legal or illegal residency status does not affect the ability to create legally enforceable estate planning documents. However, the federal gift and estate tax laws do apply differently depending on US residency or citizenship status.
Failing to understand the applicable laws and to plan for contingencies can be punishingly expensive and result in outcomes that could be devastating for non-citizens and their families. At Plan Forward Legal, our Chicago estate planning attorney cares about protecting immigrant families, regardless of their legal residency status.
Why Non-Citizen Immigrants Need an Estate Plan
Estate planning is not just for transferring assets on death, and it’s not just for people who own a lot of assets. Estate planning, if you are a non-US citizen residing in the US – regardless of legal status – is about protecting your family’s future, avoiding unnecessary government intervention, and ensuring your wishes are respected.
A basic estate plan includes a will and/or trust, powers of attorney, and a medical directive (or living will). Having these documents in place minimizes the need for court involvement and a lot of unnecessary hassle if you should die, become disabled, or have to leave the country.
Guardians for minor children can be appointed in a will or trust (in the event of death) or by power of attorney (for short-term absences or disability), so children can remain with a trusted adult and avoid the foster care system.
A healthcare power of attorney and medical directive allow you to appoint someone to make healthcare decisions for you if you become disabled, and they let everyone know your wishes in advance if certain medical situations should occur.
Important Estate Planning Considerations for Non-Citizen Immigrants
When non-citizens living in the US create estate plans, specific rules may apply depending on residency status, and particular estate planning tools may be necessary to preserve wealth and minimize tax exposure.
Key estate planning considerations for non-citizen immigrants include:
Residency vs. Non-Residency
The federal estate tax applies to assets owned worldwide by legal residents and persons considered to be ‘domiciled’ in the US. The estate tax applies only to US-based assets for non-residents who are not considered domiciled in the US.
Estate Tax Exemption
Legal residents and non-residents domiciled in the US can exempt up to $15 million from estate tax in 2026. Non-residents not domiciled in the US can exempt only $60,000 of US-based asset value.
Assets Passing to Non-citizen Spouse
When estate assets pass to a US citizen surviving spouse, the estate of the deceased spouse gets an ‘unlimited marital deduction’ which defers estate tax until the survivor dies. When the surviving spouse is not a US citizen, the deduction applies only if a Qualified Domestic Trust (QDOT) is used.
Assuming all required qualifications are met, QDOTs can provide income and defer estate tax until the trust property is distributed or the surviving spouse dies.
Asset Distribution with Trust or Will
A US will must typically be admitted to a probate court, which will oversee the enforcement of its terms and the distribution of assets. The provisions in a will become part of the public record. A trust, on the other hand, does not require court intervention, and the trust terms remain private. Trusts are also useful for protecting assets from creditors and managing property situated in multiple locations.
Double Taxation
Non-citizens need to be aware of the potential for double taxation if their home country does not have a treaty with the US or does not allow a tax credit for foreign taxes paid.
International Recognition of Estate Planning Documents
Non-citizens with property in other countries must be aware of and comply with the laws of each country. Some countries may not recognize estate planning documents created elsewhere, or the process of legally recognizing foreign documents may be complex and costly.
It may be advisable to execute estate planning documents in both the US and the home country to avoid unnecessary expense and delay.
How US Residency Status Affects the Application of Federal Tax Laws
US residency status determines how federal gift and estate tax laws will apply. If non-citizens are in the country legally or ‘domiciled’ in the US, federal tax laws apply equally to citizens and non-citizens.
Immigrants who are not otherwise legally in the country will be recognized as domiciled if they live in the US, even for a short period of time, and their behavior demonstrates no “definite present intention” of leaving. In other words, if a person’s behavior suggests an “intention to remain indefinitely”, they will be considered domiciled in the US for estate tax purposes.
Determining domicile is based on an evaluation of relevant facts and circumstances, including:
- Duration and frequency of time spent in the US
- Property ownership
- Location of family
- Community ties
- Financial and business connections
- Documentation and legal ties to the US
All of the circumstances, when taken together, must indicate a clear intention to remain in the US.
Estate and Gift Tax if You’re a Non-Citizen Resident
If you are a non-citizen resident, the federal estate and gift tax provisions apply the same as they do for US citizens. Estate tax is levied on assets owned worldwide at the time of death. Depending on the tax laws applicable in other countries, a non-citizen resident may face double taxation if proper planning is not done to minimize the risk.
- Lifetime estate and gift tax exemption of $15 million per individual in 2026
- Annual gift tax exemption is $19,000 per recipient in 2026
- Unlimited marital deduction applies (no estate tax on assets transferred to a surviving spouse) if the spouse is a US citizen or a QDOT is used
- Exemption portability (surviving spouse may use unused estate tax exemption)
Though the federal estate and gift tax lifetime exemption is fairly high, about a quarter of US states impose their own estate tax that kicks in at much lower estate values, and the portability of unused exemption amounts varies by state. For estates that pay estate tax at the state level, federal law allows a deduction for the state taxes paid from the gross value of the federal taxable estate.
Estate and Gift Tax if You’re a Non-Citizen Non-Resident
Non-citizen non-residents in the US are only required to pay estate tax on US assets, but the tax exemption amount is very low. With tax rates as high as 40%, non-citizen non-residents could face extremely high tax burdens without careful estate planning.
Gift tax works differently depending on who the gift recipient is. A non-citizen non-resident may make tax-free gifts of tangible US property to anyone up to the standard annual exclusion amount. Generally, no tax is imposed on gifts of intangible property, such as stocks, certain bank deposits, and digital assets.
Typically, gifts made between married US citizens are tax-free regardless of the amount. However, if a citizen or non-citizen spouse makes the gift to a spouse who is not a US citizen, the exemption amount is limited to $194,000 for 2026.
- Estate tax exemption of $60,000
- Annual gift tax exemption is $19,000 to any individual or $194,000 if made to a non-citizen spouse
- Unlimited estate tax marital deduction if the surviving spouse is a US citizen or QDOT used
- No portability
QDOTs only qualify for the unlimited estate tax marital deduction if they are properly elected and created before a decedent’s estate tax return is filed.
Our Immigrant Population Strengthens Illinois
Almost 2 million immigrants live in Illinois and make up about 16% of the state’s population. The greater Chicago area is home to the vast majority of the state’s immigrant population.
About 44% of the immigrants in Illinois are US citizens. Another 23% are lawful permanent residents, and 8% are visa holders. About 25% of the immigrants living in Illinois are undocumented. The following are approximate numbers regarding the undocumented immigrant population in Illinois:
- 148,000 US citizen children live with an undocumented parent
- 40,000 US citizens are married to undocumented spouses
- 258,000 undocumented individuals have lived in the state for more than 10 years
- 189,000 undocumented immigrants have lived in the state for more than 20 years
Our immigrant population is working alongside us across every industry to strengthen the economy and contribute billions of dollars in federal, state, and local taxes. They own assets here, and they have families here. They have spent years building lives in this country.
Illinois State Estate Tax: A Lower Threshold Could Mean Estate Tax Liability
Illinois is one of several states that impose an estate tax in addition to the federal estate tax. Under current law, the Illinois estate tax applies to estates that exceed $4 million. The tax rate is progressive, starting at 0.8% and increasing to a maximum of 16%.
Unlike the federal estate tax, if the value of an Illinois estate exceeds the exemption amount, it is subject to tax on the entire estate, not just amounts exceeding $4 million. And the exemption is not portable. Any unused exemption amount cannot be transferred to a surviving spouse.
There is currently a big push to reform the Illinois estate tax. The $4 million threshold has been static for more than 20 years and is not adjusted for inflation. Reformers have argued that the tax has had a punitive effect on those inheriting small businesses and family farms, and has discouraged investment and growth within the state.
Several active bills under consideration during the 104th General Assembly propose increasing the threshold exemption amount, restructuring graduated tax rates, and allowing portability. The following three bills represent the reform efforts legislators are considering in the current session.
- HB 1457 – Proposes to increase the estate tax exemption to $12,060,000 effective January 1, 2026.
- SB 3847 – Proposes to increase the estate tax exemption to $8,000,000 effective January 1, 2027, with annual adjustments for inflation and authorizing portability of unused exemption amounts.
- HB 1731 – Proposes that the estate tax exemption be tied to the Consumer Price Index (CPI) beginning in 2026, with an exemption amount of $5,300,000, and allows portability of any unused exemption amount.
While estate tax relief could be on the horizon for Illinois residents, there are no guarantees, and individuals with estates valued above the $4 million tax threshold should consider potential tax liability when preparing estate plans. An experienced estate planning attorney can advise you of the appropriate strategy for minimizing estate tax liability and ensure compliance with state and federal laws.
Plan Forward Legal Protects Immigrant Families with Discretion
There is a lot of crazy stuff going on in the world right now, and many people are understandably concerned about what the future holds. Fortunately, Illinois has some of the strongest state-level legal protections for immigrants in the US. Nevertheless, favorable legal protection often requires some action to obtain the benefits.
Plan Forward Legal is committed to ensuring immigrants have executed the necessary legal documents to protect their assets and families to the full extent of US laws. Communications are always confidential, and planning is done to avoid or minimize interactions with governmental agencies. Don’t jeopardize the future you’re working hard to build. Call Plan Forward Legal, and let’s plan together.
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