My wife is not a US citizen — is the transfer to her taxable?
The unlimited transfer between spouses that US estate and gift tax appears to allow is conditional, and the condition is the recipient spouse's citizenship. Where the survivor is not a US citizen the deduction is not available in the ordinary way, so assets a couple expected to pass without tax can be taxed on the first death. There are routes — a qualifying trust holding the assets for the survivor, and a narrower route that depends on the survivor's own citizenship position — but each has to be set up and filed for, not assumed. Couples of mixed status should settle this while both are alive rather than leave it to an executor.
Is the Canadian spousal rollover the same as the US marital deduction?
No, and treating them as equivalents is a common cause of trouble. The Canadian mechanism defers a gain on death by transferring the asset to a spouse at cost, so the tax is on income and it comes later. The US mechanism removes a transfer from a tax on the estate itself. They are different taxes doing different things, and one of them carries a citizenship condition the other does not. A will drafted around the Canadian rollover can therefore be entirely sound in Canada and still leave a US exposure nobody costed, particularly where the couple hold US property.
Can a trust fix the marital deduction for a spouse who is not a citizen?
A trust is the usual route, and it works only if it is the right kind of trust and the election that goes with it is made. The survivor gets the benefit of the assets, the trust keeps them within reach of the tax, and the obligation does not end at funding — the trust carries continuing filing, and distributions of capital from it can be charged. So it is not a one-off fix. Before recommending one we look at what the assets are, whether the survivor is likely to become a citizen, and who will administer the trust for what may be decades.
Does the marital deduction cover gifts as well as transfers on death?
Both taxes have a spousal mechanism, and both are affected by the recipient spouse's citizenship, but they do not behave identically. On the gift side a transfer to a spouse who is not a US citizen is not simply exempt without limit; a narrower allowance applies instead, and the trust route used at death is not the answer to a lifetime gift. Couples who reorganise ownership between themselves — adding a spouse to a title, moving an account into joint names — are often making gifts without realising it, and that is where the difference bites.
We own our home jointly — does that avoid the problem?
Joint ownership changes who holds the asset, not which tax applies to it. For a couple of mixed citizenship it can create questions rather than remove them: whether putting the property into joint names was itself a transfer between spouses that needed reporting, and how much of the property is treated as the deceased's on the first death. US rules on that second question treat spouses of different status differently, and the answer can depend on who provided the money for the purchase. Keep the purchase records, because they are what the answer is built from.
Can my spouse become a US citizen to get the deduction?
There is a route that depends on the surviving spouse's citizenship position around the time the estate return is filed rather than at the date of death, and it is narrow — it turns on dates and on the survivor's circumstances in the period after the death. It is worth asking about early, because it competes with the trust route and the two want different things done in the same few months. What you should not do is assume the problem solves itself because an application has been started.
Do NRIs pay tax on money sent to India?
Sending your own funds to India is a transfer of capital, not income, so the remittance itself is not taxed. What is taxable is income the money then earns in India — interest, rent, capital gains — under the rules for the account type it sits in. Sending money out of India is the direction that needs certification before the bank will act. See NRE, NRO and FCNR accounts.
Can an accountant in one country file my return in another?
Yes, where they are authorised to represent you with that tax authority and the filing is done electronically. What matters is not where the adviser sits but whether they can lawfully act for you and are competent in both systems — a return prepared with no knowledge of the other country is where the relief gets missed. We file on both sides, from offices in India, the USA, Canada and the UAE. See how we work.
