Dear Quentin,
My daughter passed away without a will. She lived in California with her undocumented husband. Her estate is now required to go through probate, but she left money in another bank account, which her husband refuses to access due to his current immigrant status. As a mother and mother-in-law, I am trying to keep my late daughter’s money from being lost to the state. How do I collect it as her next-of-kin if her husband is refusing to collect his inheritance?
The Mother-in-Law
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Dear Mother-in-Law,
My condolences on the loss of your daughter. No parent should have to go through that and there is nothing that can prepare a parent for the loss of a child, even one who has grown into adulthood. I hope her life was a happy and fulfilling one. The weeks and months that have followed must have been made all the more challenging by the issues surrounding her husband’s immigration status, and the money that languishes in a bank account.
First of all, the good news is that your son-in-law can inherit his late wife’s estate. The bad news is that, as a non-U.S. resident under the law, he will have to pay federal taxes on the inheritance. In this case, the unlimited-marital-transfer deduction rule would not apply, says Calamos Wealth Management. “The federal government does not want someone who isn’t a citizen to inherit assets and pay no estate tax for fear that those assets would leave the country untaxed.”
Ordinarily, spouses benefit from the unlimited-marital-transfer exemption under Internal Revenue Service rules, regardless of whether the money is held in the U.S. or overseas, Calamos Wealth adds. The IRS permits a U.S. citizen to give away up to $13.61 million in assets or property during their lifetime without incurring a gift or estate tax. They can also give each family member $18,000 a year without having to note it on their tax returns.
Avoiding probate
Many families don’t have awkward conversations around money. Less than half of U.S. adults have a will (48%), according to the polling service Gallup. Perhaps more surprising is the figure has barely budged over the last 30 years. Your daughter and son-in-law represent a cautionary tale in terms of estate planning. Individuals can avoid certain assets going through probate if they hold accounts jointly or name a beneficiary for those accounts.
Similarly, someone could set up a qualified domestic trust and name their spouse as the beneficiary. This gives people a range of options for how to structure their estate and can even leave an income for beneficiaries. But critically it allows people to avail of the unlimited marital exemption when leaving money to a non-citizen, although they must still pay estate taxes.
More than 11 million undocumented people are living in the U.S. — so his predicament, while difficult, is not as unusual as you might think. Undocumented immigrants can buy a house in the U.S., although acquiring financing will obviously be more tricky. With the help of an attorney, your son-in-law can hopefully overcome his own fears about claiming his wife’s estate as an undocumented immigrant.
Finally, if your son-in-law does not claim this inheritance, your daughter’s next-in-line — that’s you, if your daughter did not have children — would inherit her estate. But that should be a last resort, and I hope you can convince your son-in-law to claim the estate. Bottom line: It is highly unlikely that your late daughter’s assets will be lost to the state. That would only happen if all other avenues failed.
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