It’s said that there are only two guarantees in life: death and taxes. With the estate tax law, life deals you both in a single blow. Estate tax is the tax collected on your estate if you die, before it transfers to your heirs. It’s been around in its modern form since 1916, but because it’s rare outside of the United States, many non-citizens aren’t familiar with it. That’s where we come in. As Orlando’s premier foreign buyer’s agents, the Authentic Real Estate Team has helped countless foreign clients gain a better understanding of this law, and of how they can protect their assets against it.
The estate tax law states that for American citizens, any asset worth over 5 million dollars is taxable at a rate of between 35 and 40% of the home’s net value. For non-U.S. citizens, the cutoff for exemption is only $60,000, though on the bright side, rates are fixed at a flat 35%. But even if your asset is appraised above the cutoff—and if you’re a foreigner, it likely will be—there are ways to protect your assets, and your heirs, from this ruthless piece of legislation.
How To Protect Your Assets Against Estate Tax
For American couples with estates valued above 5 million dollars, bypass trusts are their best option for protecting their assets from exorbitant estate taxes. If you want to learn more about bypass trusts, check out our article, Estate Tax For U.S. Citizens, on our Buyers’ Resources page. However, if you’re a foreigner, the two best ways to protect your estate are to take titleship as a business entity, or to take it with right of survivorship. We’ve outlined both of these options below.
For foreign, unmarried co-title holders not partnered in an LLC, the best strategy to mitigate estate tax is to take title as “joint tenants with right of survivorship.” In this case, each titleholder owns an equal percentage of the estate. Like tenancy by the entirety, when one titleholder passes away, their interest in the estate passes automatically to the survivor(s) without entering probate. But unlike tenancy by the entirety, joint tenancy with right of survivorship can be severed by one owner without a signature from the other.
As Orlando’s premier foreign buyer’s agents, the Authentic Real Estate Team knows how hard you work for your investments, and how frustrating it can be to forfeit the fruits of your labor to the IRS. We’ve helped countless clients protect their assets and heirs from exorbitant estate tax for non-citizens, and we can help you too!