About Delta Trust Delta Trust News Archive

Wealth Transfer Planning for Foreign-Born Physicians
By Chad Carlson

Maximizing the transfer of wealth to the next generation is a universal objective that extends throughout the world.

If you're a foreign national and have begun planning for this goal, you are probably very aware of how complex estate planning can be. This is especially true for non-U.S. citizens, since you must also consider which of your assets may be subject to U.S. federal income, estate, and gift taxation and methods in which you might decrease that liability.

Besides protecting your family in the event of your untimely death, life insurance may provide opportunities not available in your own country. Life insurance in the U.S. is tax-advantaged, and a policy issued by a stable domestic insurer is an attractive option for nationals from countries outside of the United States who work in or visit the U.S. periodically.

The Internal Revenue Code of the United States specifically excludes life insurance that foreign nationals (who are non-resident aliens) purchase on their own lives from their U.S. gross estates.

As a result, you can (1) own a life insurance policy on your own life to provide liquidity through the death benefit for any U.S. or foreign estate taxes that may be due at your death (the result is your assets may not be diminished or depleted by these taxes and are instead passed on to your beneficiaries), (2) have access to the policy account values during your lifetime through loans and withdrawals; and (3) provide a death benefit to your family that is exempt from both U.S. Federal income and estate taxes.

Are there certain requirements to qualify for this program?

Coverage is typically available to nationals from many countries outside of the United States who work in or visit the U.S. periodically, are age 75 or younger, and who have at least $250,000 of assets in the United States. There are also coverage or premium requirements in addition to age, medical, and underwriting requirements among others.

Keep in mind that international treaties can affect overall liability and help determine the best way to reduce or avoid tax exposure. For more information on treaties, consult your tax advisor or Internal Revenue Service Publication 901, U.S. Treaties.

Are there fees or charges associated with life insurance?

Life insurance policies may have charges such as premium based loads, cost of insurance, administrative and issue charges and surrender charges. These charges are different for each product and some may vary by age, gender, face amount, underwriting class, premiums and policy durations. These charges will have a significant impact on policy account values.

Like their American counterparts, foreign-born physicians have financial planning needs and objectives, such as protecting their families and income and transferring as much of their wealth as possible to the next generation. If you are concerned about protecting your family and your income, making sure that your practice continues in the event of your death and/or transferring as much of your wealth as possible to the next generation, a structured life insurance program may be right for you.

Chad Carlson is a Financial Advisor with Delta Trust Investments, Inc. For more information, contact Chad at (501) 975-4010 or by email at ccarlson@delta-trust.com. Delta Trust does not offer tax or legal advice and recommends that you consult your tax or legal advisor.