Naturalization for Green Card Holders: Benefits of Becoming a U.S. Citizen

Now that we have a new President in the White House, you might be a permanent (green card) resident of the United States and considering applying for U.S. citizenship. You might be asking yourself: what are the benefits of becoming a naturalized U.S. citizen?

Though permanent (green card) residents are granted some of the same rights as U.S. citizens, permanent residents are disadvantaged by not having the more substantive rights that U.S. citizens hold invaluable. Many permanent residents have told me that, once becoming a citizen, it rids you of an emotional unsettling hollowness permanent residents carry inside themselves knowing they haven’t the same rights as citizens.  Once a citizen, they said, you experience an immediate sense of completeness; personal enrichment; drive to achieve bigger goals; and even increased self esteem.  It opens doors to greater opportunities, benefits and control over your personal life and assets for both you and your family. U.S. citizens can also travel to 165 countries around the world without a visa.

Family Benefits. One primary benefit U.S. citizens have over permanent residents is their priority to bring family members permanently to the United States. Citizenship enables you to petition for your spouse, parents, married or unmarried children, and siblings. Furthermore, children born abroad may gain citizenship without applying for a visa.

Government Benefits. Citizenship includes the right to vote, increasing participation in the prosperity of your community and country; convenience of traveling with a U.S. passport; assistance from the U.S. government when abroad; eligibility for Federal jobs or public office; financial advantages in estate planning, gift and estate tax exemptions; and eligibility for public benefits.

Dual Citizenship. Like most countries worldwide, the U.S accepts dual citizenship.  If you are trying to obtain U.S. citizenship and desire to maintain your citizenship of origin, it is possible. Like many green card holders, if you have another citizenship in addition to your native citizenship, contact your local consulate, embassy, or an immigration attorney for information or limitations regarding dual citizenship.

The Risk of Deportation is Eliminated After U.S. Citizenship. You may think that by having a green card your status in the United States is complete and that you no longer run a risk of losing status or being deported, but that is definitely not the case. A green card holder can lose his or her permanent residence status by traveling abroad for a longer period than 6 months or by being involved in a crime, this includes even "less serious" criminal offenses. Another recent example of how your green card status can be jeopardized is through fraud investigations performed by the U.S. Department of Homeland Security even after you become a permanent resident, to determine if the original basis you received your green card was obtained through a fraudulent marriage, L or H visa petition. Once becoming a U.S. citizen, that citizenship can only be taken away in very limited situations typically involving certain war crimes, espionage, and national security matters.

The Myth About Higher Taxes. Many green card holders decide not to apply for their U.S. citizenship because they are concerned with being responsible to pay the Internal Revenue Service (IRS) for tax on worldwide income, which U.S. citizens are required to report, thinking that keeping their green card status will avoid this additional tax liability. However, this is a common misunderstanding. Even if you are not a U.S. citizen, you may be required to pay taxes in the United States. Whether or not you must file a U.S. tax return depends upon whether the U.S. government considers you a "tax resident." Once you have a green card, you automatically become a U.S. tax resident and you must declare your entire income to the U.S. government. Even if you remain outside the U.S. for an entire year, you'll still need to report your entire worldwide income. Becoming a U.S. citizen will increase tax benefits and allow for higher gift and estate tax exemptions.

Choose Your Home. Once a citizen you are no longer required to return “every 6 months” to the U.S. in order to maintain your residency as it is recommended and vital for green card holders. If you decide to live abroad for months or years as a U.S. citizen, you won’t lose your U.S. citizenship.

There are currently no changes made by the Trump Administration to the naturalization process. The application for citizenship may look simple and easy to complete, however it can be complex, especially if you have been a green card holder for many years and are a frequent traveler. To apply, you must have been a resident for at least 5 years (in certain cases, 3 years). Avoid complexities and contact attorney Paula Ferreira Montoya at 407-906-9126 to assist you in the naturalization/citizenship application process.

Estate Planning for Non-U.S. Citizens: The Qualified Domestic Trust

If you own assets in the U.S. but you are not considered a U.S. citizen or permanent resident alien (with a green card), you are not given the same advantages when it comes to taxes as a regular U.S. citizen, and you could be subjected to very different and considerable estate taxes upon death.  As of 2017, the approximate exemption for the estate tax is $5.49 million, and instead of being given this large exemption, nonresidents are entitled to only $60,000 in exemptions.  What does this mean for you?  If you are not a U.S. Citizen or a permanent resident alien, you can only protect $60,000 worth of assets from potential estate taxes!  Anything that you leave to your heirs when you pass away that is above and beyond the $60,000 exemption is likely going to be to be taxed at about a 40% rate.

I am often asked, by current or potential clients, about what kind of tax advantages are afforded to a U.S. citizen versus those who only possess a green card?  Luckily, if you are a green card holder (and similarly to a U.S. citizen) you are eligible for the $5.49 million exemption for estate tax purposes.  Unfortunately, as a green card holder you are not given the unlimited marital deduction.  This deduction allows the transfer of unlimited wealth and assets from one spouse to the other upon the death of one.  There are no taxes levied on U.S. citizens' spouses when they pass away, but if you are a green card holder you can incur substantial tax liability if your spouse passes away without the proper planning in place. This is especially true for non-residents who own a vacation home or investment properties in the United States that are worth more than $60,000.

It is worth noting that the best situation to be in when a spouse passes away is for both individuals to be U.S. citizens.  There is much more protection and shelter from taxes given to married couples that are both citizens of this country.  Unfortunately, if you are part of a marriage that has one citizen and one that is not, you can be exposed to a lot more tax liability.  

However, not all hope is lost!  There is substantial planning that can be done to minimize the tax liability that this type of couple would otherwise be exposed to.  The first step is to learn about and put in place what is called a "QDOT" or Qualified Domestic Trust.  Establishing a QDOT will allow the spouse that is a US citizen to leave all assets to the non-citizen and will also allow non-resident spouses to transfer an unlimited amount to each other upon the death of the first spouse without paying the tax.  

Establishing a QDOT takes significant planning and there are special requirements that need to be met in order to set up this type of protection properly.  If your QDOT is established correctly, the surviving spouse will not owe the U.S. Government any form of estate tax.  However, the taxes that would be due without the QDOT in place would then be payable upon the death of the surviving spouse. It is important to keep in mind that the Qualified Domestic Trust is only available between spouses.

If you live here and are on a visa or have a green card and are not a U.S. citizen, it is imperative that you consult an experienced international estate planning and immigration attorney that has dealt with these types of scenarios in the past.  You have every right to minimize your estate tax upon death and to leave your descendants with the maximum amount of assets.  Give us a call today so that we can discuss your estate planning in more detail.