Estate Planning Guide for Non-Citizens

Florida is a prime destination for foreign nationals to invest in real estate, whether as a vacation home, or rental property. However, non-citizens who own Florida property must be particularly proactive in their estate planning. Without careful planning, their estates may face unexpected tax liabilities, legal hurdles, and restrictions. This article outlines key considerations for non-citizens to protect their Florida assets and ensure their wishes are honored.

1. Federal Estate Tax Exposure for Non-Citizens

One of the most critical issues for non-U.S. citizens owning U.S.-situs assets (including Florida real estate) is the federal estate tax. While U.S. citizens and domiciliaries currently enjoy an estate tax exemption of $13.61 million (as of 2024), non-resident aliens (NRAs) are only entitled to a $60,000 exemption (see 26 U.S.C. Section 2102(b)(1)).

This means that, if a non-citizen owns a $1.5 million condominium in Miami at the time of death, the estate could be subject to federal estate tax on $1.44 million. This tax could be as high as 40% without proper planning.

Here are some planning options:

A. Irrevocable Trusts: Transferring property to an irrevocable trust while alive can remove it from the individual's taxable estate. However, such transfers must be carefully structured to avoid gift tax and to ensure the trust is treated as a non-grantor trust.

B. Use of Holding Entities: Some foreign nationals use offshore corporations or foreign trusts to hold U.S. real estate. These structures may provide enhanced privacy and asset protection compared to domestic entities. But they must be carefully evaluated under both U.S. tax law and the laws of the owner's home country.

C. Annuities or Life Insurance: In some cases, converting real property into structured annuities or using life insurance to offset potential estate taxes may be appropriate.

2. Coordination with Estate Plan in Home Country

Foreign nationals must ensure that their Florida estate planning aligns with their home country's estate plan. In many cases, there are competing systems of law (e.g., civil law vs. common law) that can complicate matters. Here are tips to coordinate your estate plans:

• Ensure there is a valid and enforceable will or trust in the home country.
• Consider a separate U.S. will dealing only with U.S. situs assets to avoid conflicts.
• Designate a trusted executor or personal representative in the home country who can cooperate with legal processes in Florida.
• Confirm that asset ownership and titles are clearly documented to avoid probate delays.

3. Restrictions on Property Ownership by Foreign Nationals

Recent Florida legislation restricts the acquisition of real estate by citizens of certain "foreign countries of concern," including the People's Republic of China, unless specific conditions are met.

SB 264 (2023) restricts ownership of agricultural and certain other types of property by foreign principals from China, Russia, Iran, North Korea, Cuba, Venezuela, and Syria.

Chinese citizens are generally prohibited from acquiring additional real property in Florida unless they have non-tourist visas and meet strict requirements.

Pre-existing ownership is not prohibited, but foreign nationals who own property through trusts or entities may need to register their ownership with the Florida Department of Economic Opportunity.

4. Florida Ancillary Probate Administration

Non-citizens who die owning property in Florida may trigger an ancillary probate administration, even if the main estate is probated in another country.

To streamline this process:

• Consider titling Florida property in a Florida revocable trust.
• Name a local Florida resident or trust company as successor trustee or co-trustee.
• Keep property records, trust documents, and powers of attorney up to date and accessible.

Estate planning for non-citizens who own Florida property can be complex. With the right legal strategy, including tax mitigation tools like irrevocable trusts and coordination with foreign estate plans, foreign nationals can enact a successful and cost-effective plan. It is essential to consult with an experienced estate planning attorney familiar with cross-border issues and Florida-specific property and tax laws.

---

If you need assistance with estate planning, contact experienced florida attorney John Clarke Esq. at (954) 556-8952 for a free consultation!