Dec 1, 2005 12:00 PM

By Jane Tse, special counsel, Cadwalader, Wickersham & Taft LLP, and Dina Kapur Sanna, partner, Day,

The gross estate of a nonresident alien¹ (NRA) is determined in the same manner as the gross estate of a U.S. resident or citizen, although it's generally limited to property situated, or deemed to be situated in the United States at the time of the decedent's death (U.S. situs assets).² Therefore, the primary focus of estate planning for an NRA is to structure his holdings to ensure that he does not hold any U.S. situs assets when he dies. But converting U.S. situs assets into foreign situs assets is not always practical and may have adverse U.S. federal income tax consequences. If that's the case, focus must shift to maximizing the applicable estate tax deductions. Estate tax deductions are particularly valuable to an NRA's estate because the maximum credit allowed is $13,000, which translates into an estate tax exemption of only $60,000.³

If an NRA wants to hold U.S.-denominated investments due to currency risk in his own country, he has a wide array of choices. Many U.S.-denominated investments are treated as foreign situs assets because of American policy seeking to encourage foreign investments in the United States, especially U.S. debt obligations. Examples of U.S.-denominated investments that are not treated as having a U.S. situs include:

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Topics of Interest

Estate Tax	Donor Advised Funds
GSTs	Family Offices
Private Foundations	Life Insurance
2010 Tax Act News	Industry Trends Surveys

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2011 Trust Glossary

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50 Years Ago This Month

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50 years ago, in May 1962, we featured articles such as: "Future of Canadian Trusteeship" by Arthur H. Mingay", "Training Trust Employees" by Ian M. Marr, "What is a Trust Officer?" by Eric J. Brown, and "Selling Services" by Donald I. Webb.

Conrad Teitell's Guide to Tax Benefits For Charitable Gifts

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