A Guide to Estate Planning for Green Card Holders

Green card holders in the U.S. have a lot of rights: They can live and work here permanently. They can attend public schools. Perhaps most important for estate planning, they can own property. There are some limitations, however. As a green card holder, you can’t vote or hold public office. And when it comes to estate planning for green card holders, you’ll want to be aware of certain tax laws and how you may be able to minimize the effect of taxes on your estate.

Can Green Card Holders Make an Estate Plan?

Yes—not only can green card holders make an estate plan, it’s just as essential for them as it is for U.S. citizens. A thorough estate plan is the best way to make sure your assets go where you want them to go, both during your life and after you pass away.

Green card holders, also called permanent residents, enjoy many of the same estate planning benefits and abilities as U.S. citizens. Although there are some limitations, estate planning for green card holders should be a little less complicated than it is for non-resident aliens, which is anyone who doesn’t have a green card (officially called a Permanent Resident Card).

Tax Implications for Green Card Holders

Green card holders are considered permanent residents, which means they must pay taxes on their “worldwide income.” This includes income from foreign wages, investments, trusts, and real estate. Here are some places where the rules differ for green card holders:

The Gift Tax

When two spouses are U.S. citizens, they can give each other unlimited gifts that are exempt from the federal gift tax. But when one spouse is a green card holder, that spouse can only receive $185,000 a year in tax-free gifts (as of 2024).

This might not seem like a big deal, but it can come into play when purchasing vehicles or real estate together. When both spouses are U.S. citizens, they’ll split ownership 50/50. For example, on a $500,000 house, each spouse would own $250,000 of it. But when one spouse is a green card holder, that $250,000 is considered a gift, and could be subject to the gift tax.

The Estate Tax Exemption

Both U.S. citizens and foreign nationals who are “domiciled” in the U.S., which essentially means they live here and intend to stay here, get an estate tax exemption of $13.61 million per individual. Obtaining a green card is one way to establish your domicile in the U.S., which means this estate tax exemption does apply to you. (For those not domiciled here, the exemption is only $60,000.)

Just like U.S. citizens, you’ll have to pay estate tax on any assets above $13.61 million—and the tax can range from 18% to 40%. This is an important consideration in large estates.

The Marital Exemption

While the gift tax applies to spouses while they’re living, the marital exemption applies to passing assets on to a spouse after death. If the surviving spouse is a U.S. citizen, the marital exemption is unlimited—they can receive the entire estate with no taxes.

However, if the surviving spouse is a green card holder or another type of non-citizen, there is no marital exemption. Any assets they receive will be subject to estate taxes. However, you may be able to set up a trust to help mitigate these taxes.

The Exit Tax

Couldn’t a green card holder just leave the country to avoid all these taxes? The answer is: Probably not. If you’ve been a green card holder for 8 of the last 15 years, you could be subject to a hefty exit tax. Instead of leaving, it often makes more sense to create a smart estate plan.

What If I Have Assets in Multiple Countries?

Many green card holders have assets, like real estate, in multiple countries. If this is the case, you may need to create multiple estate plans—one for each country where you have assets.

These assets could also be subject to double taxation. However, the U.S. has estate tax treaties with 16 countries to avoid double taxation: Australia, Austria, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Netherlands, South Africa, Switzerland, and the United Kingdom.

How to Avoid Pitfalls in Estate Planning for Green Card Holders

The biggest pitfall in estate planning for any U.S. resident, whether they’re a citizen or green card holder, is the probate process. Probate is a legal process to determine how your assets will be distributed after your death—and it happens even if you have a will. It’s also when taxes are taken out of your estate. Luckily, green card holders can often avoid probate by creating certain types of trusts.

A trust is a legal entity where you can place your assets to avoid probate and ensure they’re distributed the way you want. Trusts can also help protect assets from creditors, lawsuits, and certain taxes. As permanent residents, green card holders can typically set up trusts for their U.S. assets just like a citizen.

Estate planning for green card holders has a few potential complications, but with the right expertise, you can still protect your legacy. From drafting wills and establishing trusts to creating durable powers of attorney, Plan Ahead Legal can help with every aspect of estate planning, whether you’re a green card holder, non-resident alien, or a U.S. citizen. Contact us today so you can be confident your assets are protected.