What’s status got to do with anything?

It is incumbent on all nonimmigrants to “maintain continuously a lawful status.” There are negative consequences to failure to do so. Just for example, with rare exceptions (such as discretion for late filing due to circumstances beyond the person’s control and an otherwise squeaky-clean record), a person cannot change his or her nonimmigrant status to another type of status (for example, B-2 visitor to F-1 student), or extend his or her nonimmigrant status, unless already maintaining status.

Furthermore, with only a few limited exceptions (e.g., Immediate Relative spouse, parent or child of a U.S. Citizen; employment-based immigrant with less than 180 days of combined lack of status and unauthorized employment since last valid entry; lucky beneficiary of “grandfathering” under Section 245(i) of the Immigration and Nationality Act; etc.), a person who has been “out of status” for even a single day, at any time, cannot adjust status to Lawful Permanent Resident (“Green Card”).

Going out of status can also have negative consequences on visa renewals outside the U.S., since being out of status is a “violation” of a nonimmigrant entry.

The Illegal Immigration Reform and Immigrant Responsibility Act of 1996, commonly referred to as “IIRAIRA” or “IIRIRA,” added an unnecessary and, for many, disastrous wrinkle by introducing the concept of “Unlawful Presence” or “ULP.” Under INA section 212(a)(9)(B)(ii), a person is considered to be “unlawfully present” if he or she is in the U.S. “after the expiration of the period of stay authorized by the Attorney General,” or is in the U.S. “without being admitted or paroled.”

For people who entered the U.S. legally (“with inspection,” followed by “admission” or “parole”), ULP in general starts on the day the period of admission or parole expires. Some people are not admitted for a specific period. For example, F-1 Students, M-1 Vocational Students, and J-1 Exchange Visitors are admitted “D/S” (ironically standing for “Duration of Status”) rather than to a “date certain.” Canadians admitted as visitors are also considered admitted “D/S.”

For those admitted “D/S,” ULP starts, not when status expires, but only when the USCIS, or an Immigration Judge, determines that they are “unlawfully present.” Thus, for example, it is possible for a student whose student status has long ago expired, still not to be in a period of ULP. Similarly, a person in, say, H-1B status, who has been let go by his or her employer, is immediately “out of status,” since being employed by the sponsoring employer is a condition of maintaining status. He or she is not, however, “unlawfully present” until the earlier of the day after the full period of his or her H-1B admission expires, or the date USCIS or an Immigration Judge declares the person to be “unlawfully present.”

(Children by statute cannot accrue even a day of “unlawful presence” until their 18th birthday. Asylum applicants do not start accruing ULP while their applications are pending, unless during that time they have been employed “without authorization.” There are a few other exceptions. See INA section212(a)(9)(B)(iii).)

Why does it matter and who cares? It matters because many people, including alas many lawyers who should know better, incorrectly believe that NOT being “unlawfully present” is somehow legally the equivalent of being “in status.” Under this erroneous belief, they may try to change nonimmigrant status, or extend status, or adjust to LPR, despite being out of status, or, as attorneys, counsel their clients to do so, with potentially dire consequences. Ironically, one of those dire consequences is that they may wind up with enough ULP to cause real problems!

If there is one thing everybody needs to know and remember, it is that being “in status” is not legally the same as “not being unlawfully present,” and mere lack of “unlawful presence” is not the same as “maintaining lawful status.”

Here’s another thing everyone should remember: status is not extended by the timely filing of an application for change or extension of nonimmigrant status, or even by the timely filing of an application to adjust status to LPR. The only thing that extends status is a subsequent approval of such an application, in which case status is deemed to have been continuously in force retroactive to the date the status “expired.”

So, for example, if a person files while in status, but the status (last date on person’s I-94 admission record) expires while the case is being processed, the person is not “in status” after that date. The person generally does not accrue ULP during the processing, but may easily go out of status if processing extends past the end-date on the current I-94. If the application is subsequently approved, then no problem. If the application is denied, however, the person has been out of status since the previous I-94 expired, but only starts accruing ULP as of the date of the denial!

This is an important distinction, because there is nonetheless a benefit to “not being unlawfully present.” The same statute that defines ULP, prescribes that a person who has more than 180 days but less than 1 year of ULP, who departs from the U.S. and seeks to reenter, is subject to a “bar” of 3 years before he or she can reenter. A person with 1 year or more of ULP, is subject under the same circumstances to a 10-year bar.

Waivers of this bar are possible, but they generally require a “qualifying relative” (U.S. Citizen or LPR parent or spouse, not available for everybody) and a showing of “exceptional hardship” to that qualifying relative before the person may be allowed to reenter the U.S. At the same time, a person who has been out of status for years, but has managed not to accrue 180 days of ULP, in theory can, even if not eligible to change, extend or adjust status in the U.S., still process for a visa at a U.S. Consulate abroad. There are all sorts of ways a Consulate can still penalize an overstay with less than 180 days of ULP – Consular officers have a great deal of discretion – but the ULP bar is not one of them.

It is therefore crucial to monitor how many days of ULP a person accrues, even if not being ULP is not the same as being “in status.” In this regard, beware of another myth that is unfortunately all too prevalent even inside the Immigration lawyer community: that if an application is denied, and the person seeks an appeal or reconsideration of the denial, the accrual of ULP is “tolled” during the time the appeal or reconsideration is pending. Nothing could be further from the truth. An appeal or motion to reconsider or reopen a denial does not stop the ULP “clock” from running.

It is true that if the appeal or the motion is sustained, the person will retroactively be deemed not to have accrued ULP during that period. But if the appeal or motion is denied, and processing has taken more than 180 days, the person will have accrued more than 180 days of ULP, and perhaps fatally have limited his or her options going forward.

The "takeaway":  analyze "status" and "ULP" separately and do not confuse or conflate the two.  And monitor days of ULP fastidiously.  

It’s All Relative: Pitfalls of PERM Labor Certifications for Family

It can be difficult for a U.S. Citizen or a Lawful Permanent Resident (“LPR” – commonly known as a “Green Card” Holder) to help a relative immigrate to the United States. 


In the first place, so-called “family-based” immigration limits the types and “degrees” of relatives for whom a citizen or LPR can even apply:

•  An LPR can only apply for his or her spouse, child (defined as unmarried and under 21), or unmarried son or daughter (defined as an adult child over age 21). 

•  Citizens have more options.  In addition to their spouses, children, and unmarried sons or daughters, they can also apply (if over 21) for their parents, as well as for their married sons or daughters (and for those individuals’’ spouses and offspring under age 21), and for their siblings (and their spouses and offspring under age 21).  Hundreds of thousands of people every year do just that.

Conspicuously absent from the list of relative categories, however, are grandparents, uncles, aunts, cousins, nieces, nephews, in-laws, etc., with whom the U.S. person may have a close relationship, but whom he or she simply can’t help via family-based immigration. 


There are other problems with this family-based “scheme,” even for relatives who can be sponsored. 

•  If an unmarried son or daughter of an LPR marries, any approval notice for that case becomes void. 

•  Some categories are so backed up that it can take years – literally even decades in some cases – before the relevant visa availability becomes “current.”   During that time, sponsors and beneficiaries alike can die; couples may get divorced; children can reach age 21 (this is called “aging out”) and lose eligibility to immigrate with their parents; and unmarried sons and daughters may marry. 


The problem of backed-up family-based immigrant visa availability applies across the board, but is particularly egregious for nationals of Mexico, the Philippines, and in some categories, India.  A discussion of the various categories, and charts showing what visa availability dates are current for what countries for the particular month, are found in the monthly Visa Bulletin published by the Department of State (but also applied by the USCIS), which can be accessed here.


One possible solution, if the U.S. person owns, controls or is an influential employee of a U.S. business, might be to try helping relatives who otherwise face a ridiculously long wait on the “family” track, or who don’t even fit into any family-based category, through the “parallel” track of employment-based immigration, also shown on the Visa Bulletin. 


With the exception of India, China, and the Philippines, most of the visa numbers for those categories are either “current” right now, or are reasonably close to being “current,” which means that Immigrant Visa numbers are available, and the person can proceed with final processing. 

With the exception of India, even for backed-up categories, nationals of all, or most, countries can expect to see employment-based visa numbers become “current” much faster than numbers for most family-based alternatives.  The exception is for people lucky enough to be “Immediate Relatives” of U.S. Citizens – defined as parents (if U.S. Citizen is over 21), spouses, and children (unmarried and under age 21) – for whom there is no visa backlog.  But there are times when even the Immediate Relative category can be problematic, as the spouse and children of an Immediate Relative cannot be included on his or filing.


So why isn’t everybody trying to sponsor relatives via employment-based processing?  There are many reasons.  Just for instance:

•  Most U.S. Citizens or LPRs don’t own, run or control businesses, and aren’t in any position to sponsor (or to get anybody to sponsor) any employment-based immigrants.

•  Just because someone has a business, doesn’t mean that the business is suitable for sponsoring employment-based immigrants. 

•  Even if it is, the relative the business owner might like to sponsor might not be qualified by education, experience or training for whatever employment the business owner is capable of offering.


But let’s assume that the business owner has a business that could hire the relative, and the relative is qualified for the available position. There is still a major problem:  the requirements of the PERM Labor Certification process to conduct a “fair test” of the labor market to assure that qualified U.S. workers are not unfairly discouraged or disqualified from applying. 


What is PERM Labor Certification? 

In most cases, people who want to immigrate based on employment first have to go through a process called “Labor Certification” (under the acronym “PERM”) run, not by the U.S. Citizenship and Immigration Services ("USCIS"), but by the U.S. Department of Labor (“DOL”).   Labor Certification is in most employment-based cases a prerequisite to the ability to file for a “Green Card.” 

The regulation (20 C.F.R. § 656.1(a)) requires that the sponsoring employer must conduct certain prescribed types of recruitment aimed at determining that: 

            “(1)  There are not sufficient United States workers who are able, willing, qualified and available at the time of application for a visa and admission into the United States and at the place where the alien is to perform the work; and

            (2) The employment of the alien will not adversely affect the wages and working conditions of United States workers similarly employed.”

This is commonly referred to as the required “good faith test” of the labor market.  If the recruitment process is fair and open to all qualified workers, if no qualified and interested U.S. workers apply for the job, and if the foreign worker is himself or herself qualified, the employer proceeds to apply for a PERM Labor Certification.  Once the Labor Certification is “certified” – not by USCIS but by DOL – it is valid for only 180 days.  Before the end of that 180 days, the sponsoring employer must file with the USCIS a Form I-140 Petition for Alien Worker, to start the so-called “Green Card” process. 


So what’s the catch?

The catch?  The DOL and the USCIS believe that if the foreign worker is a relative of an owner of the business, or is him/herself a part owner of the business, there is a presumption that the recruitment might not really be fair and open, and that U.S. workers could be disadvantaged.  Establishing a fair and evenhanded recruitment process is of the utmost importance.  This presumption is rebuttable, but ever-present.

In fact, the ETA-9089 PERM application form (which ultimately is signed under penalty of perjury) specifically asks, in the infamous Question C(9):  “Is the employer a closely held corporation, partnership, or sole proprietorship in which the alien has an ownership interest, or is there a familial relationship between the owners, stockholders, partners, corporate officers, or incorporators, and the alien?” 

If the answer should be “Yes,” the employer answers “No” at its (and the foreign worker’s) peril.  It is not unusual for the USCIS, AFTER a PERM process in which the issue was never even raised, to spot an undisclosed familial relationship or an undisclosed ownership or control issue, and not only deny the PERM-based I-140 Petition, but send the PERM back to the Department of Labor for revocation or invalidation based on a finding of fraud.

Worse, in the past, one could at least argue that distant cousins, in-laws, etc., shouldn’t really be included in the (undefined) “familial relationship” rubric.  No longer.  The Department of Labor has clarified, as of July 28, 2014, that it defines “familial relationship” in the broadest and most inclusive possible terms, to include “any relationship established by blood, marriage, or adoption, even if distant [including] cousins of all degrees, aunts, uncles, grandparents and grandchildren . . . . [and] relationships established through marriage, such as in-laws and step-families.” 

Disclosing family relationships, or part ownership or control, does not guarantee a denial of a PERM.  It does, however, create a high hurdle to clear to establish that the job opportunity is bona fide, and “the job opportunity has been and is clearly open to qualified U.S. workers.”  It can also attract an “audit” of the filed PERM, delaying the process by a year or more. 

On the other hand, NOT disclosing such factors virtually guarantees a denial or a revocation if the true facts are discovered.  Other penalties can apply, including debarment from further PERM filings for a period of time.    


In our practice, we have been able in a number of cases to convince the Department of Labor that a job opportunity was bona fide, notwithstanding a “Yes” answer to the above question.  Regrettably, we have also seen a number of fraud findings and denials (luckily not in any of our cases) when USCIS has been convinced that the employer should have checked the relevant box “Yes” instead of “No.”


The “takeaway” is that in a system where family immigration quotas are seriously backed-up, or where there are relatives who can’t qualify in any family-based category, it may be worth considering an employment-based alternative.  But don’t commit fraud, even just by way of omission, in your eagerness to get your relative to the Promised Land, on the assumption that nobody will ever figure out the truth. That is a recipe for disaster.


© Paul D. Cass 2016






“Equitable Tolling” saves Immigrant Worker Petition

Our office last year helped a colleague save an I-140 Immigrant Worker Petition that was rejected by the U.S. Citizenship and Immigration  Services (“USCIS”) because it had been received too late.


Background:  In most cases, people who want to immigrate based on employment first have to go through a process called “Labor Certification.”  Labor Certification (under the acronym “PERM”) is in most employment-based cases a prerequisite to the ability to file for a “Green Card.”  In this process, the sponsoring employer conducts certain prescribed types of recruitment aimed at determining whether there are any qualified and interested U.S. workers available for the job.  If none apply, and if the foreign worker is himself or herself qualified, the employer proceeds to apply for a PERM Labor Certification.  Once the Labor Certification is “certified” – not by USCIS but by the U.S. Department of Labor (“DOL”) – it is valid for only 180 days.  Before the end of that 180 days, the sponsoring employer must file with the USCIS a Form I-140 Petition for Alien Worker, to start the so-called “Green Card” process. 

If the employer files the I-140 even a day after Day 180, the filing is rejected and the underlying Labor Certification becomes void.  In such cases, the employer has to again start and complete the Labor Certification process, which can take over a year in certain circumstances.  Worse, the so-called “Priority Date” – the date the case is placed into the Green Card queue – is irretrievably lost.  The difference can be a year or more, and the loss of the original Priority Date can, for a number of reasons, be disastrous to the foreign worker’s immigration status.

It is good practice to file the I-140 as soon as possible, and in any case early enough so that if the filing is rejected for any number of non-fatal deficiencies, there is enough time to refile before the dreaded 180 days has elapsed.  But sometimes things happen. 

In this case, the attorney sent the file to USCIS before the 180th day, and it was even received a few days before the 180th day.  However, it was inadvertently sent to the wrong USCIS location.  The USCIS has so many different filing addresses, depending on the nature of the filing, that it is easy to send files to the “wrong” location. 

In such cases, USCIS practice is usually to send the file on to the “correct” address; but the fees are not accepted, and the case is not actually “filed,” until the package is received at the “correct” address.  In this case, by the time the file reached the “correct” address, it was past the 180th day, and the filing was rejected as late.  Needless to say, potential disaster loomed.

Our office took over and sent the file for filing (to the “correct”) address, with a written detailed letter-brief arguing why USCIS should accept the file even though past the 180th day, and excuse the delay, under the principle of “equitable tolling.”  We were sucessful, in that the case was accepted, and expeditiously approved.


What is Equitable Tolling?:   To understand equitable tolling, one must first understand the concept of a “statute of limitations” (“SOL”).  An SOL is a statute prescribing a maximum time for taking some kind of legal action.  Examples with which readers may be familiar are SOLs prescribing the time period in which a person may file a lawsuit for personal injury, breach of contract, fraud, etc.; or, in criminal law, a time period in which a prosecutor is allowed to charge someone with a particular type of crime.  It is generally a complete defense to a lawsuit filed or a criminal prosecution initiated after the SOL has “run.”  This means that even the best case may be lost, before any determination on its merits, on the technicality that it was filed too late.  The SOL for filing an I-140 Petition after a PERM certification is 180 days.

In some cases, however, an SOL can be “tolled,” meaning that the SOL is considered to have stopped, or ceased to run, for some period of time which can be added on to the SOL date.  For example, a minor’s time to file a personal injury lawsuit may be “tolled” until he or she reaches adulthood; an SOL for fraud may be “tolled” during the period in which the defrauded party could not reasonably have discovered the fraud; and so forth.

The U.S. Supreme Court has declared that there is a presumption, “read into every federal statute of limitation,” that the Equitable Tolling doctrine may apply.  Holmberg v. Armbrecht, 327 U.S. 392, 397 (1946).  All Federal Circuits, including our own Ninth Circuit, are in agreement.


There are two problems with this potentially generous exception.

(1)        It is not applied just because a party failed to comply with the SOL and now  wants relief.  The applicant who wants “equitable tolling” to apply still has to show “due diligence” (i.e., “I tried”), and in general circumstances beyond his or  her control, and to convince USCIS of the likelihood of severe prejudice by a refusal to process the matter on its merits.

(2)        It applies only to what USCIS regards as a true SOL.  It DOES NOT apply to what USCIS considers a “statute of repose.”


What the heck is a “Statute of Repose”?:   A statute of repose (“SOR”) is an ironclad, no-exceptions SOL which imposes a strict deadline regardless of whether or when an affected party has been injured, has discovered injury, or even could have discovered injury, or has any kind of excuse for acting later than the date set by the statute of repose. 

One of the best-known SORs in Immigration Law is INA section 245(i), which allows certain people who were the beneficiaries of certain types of immigration-related filings to apply for immigration benefits even if not “legally” in the U.S.  For a person to enjoy the benefit, the underlying filing has to have been filed not later than April 30, 2001. 

Another well-known example is the two-year deadline for a spouse or child of a U.S. Citizen or Lawful Permanent Resident, “who has been battered or has been the subject of extreme cruelty” perpetrated  by that spouse, to self-petition for adjustment of status under the Violence Against Women Act (“VAWA”). 

Unless some kind of tolling is actually written into an SOR, no excuse, however heart-breaking, be it ignorance, incompetence of a lawyer, or even natural disaster preventing filing, is accepted for a late filing after the “drop-dead” date of the SOR. 

There are a number of other SORs in Immigration Law.  Unfortunately, there is no handbook that tells practitioners or applicants what is an SOR and what is just an everyday SOL.  Research into case law and commentary is necessary to determine whether Courts have ruled on the “statute of repose” issue anytime a party seeks to invoke equitable tolling.  Fortunately, USCIS did not raise the SOR issue in this case, and simply accepted the check for the filing fee without comment.    


The lesson to be learned is that if there are definite dates by which Immigration-related documents must be filed, they must be calendared and complied with.  The Immigration practitioner or the DIY applicant must always check to see that documents are being sent to the correct address, and that if filing fees are required, those fees are in the precisely correct amount (as USCIS will reject filings with payments that are too little OR too much).  But if the deadline is missed for some reason beyond the applicant’s control, always at least explore the possibility of “equitable tolling” before throwing in the towel!    


© Paul D. Cass 2016



Why bother becoming a citizen? Or, what’s in it for me? (Part 2 of 2)

In Part 1 of this blog post, we explored 5 reasons why a Green Card holder should seriously consider becoming a U.S. Citizen, in addition to the right to vote in elections (and despite the necessity of having to perform jury duty, which is not required of or possible for Green Card holders).


Here are 5 more significant reasons, again in no special order of importance.


 •       Automatic citizenship for your children born abroad, under certain circumstances

We all know that under the 14th Amendment, your children born in the U.S. are automatically U.S. Citizens.  But what about your children born abroad?  Under certain circumstances, if you are already a U.S. Citizen, they can be U.S. Citizens at birth; and if you become a citizen, they can naturalize automatically (“by operation of law”).

If you are a U.S. Citizen who, before your child’s birth resided in the U.S. for a total of at least 5 years, at least 2 of which were after age 14, AND child was born “in wedlock,” your child is a U.S. Citizen by birth, even if born abroad.  (There are special requirements for children born out of wedlock, beyond the scope of this post.)  Not so with children of LPRs.

Similarly, if you are a U.S. Citizen and obtain a “Green Card” for a child under age 18, who lives in your “legal and physical custody” after getting the Green Card, the child automatically becomes a U.S. citizen “by operation of law,” under the terms of the Child Citizenship Act, codified at Sections 320 and 322 of the Immigration and Nationality Act ("INA")

If you are not yet a citizen when your child is under age 18, but become a citizen before the child’s 18th birthday, the child, if living in your “legal and physical custody,” likewise becomes a U.S. citizen automatically “by operation of law,” under the terms of the Child Citizenship Act.

None of the above works unless you are or become a U.S. Citizen.

The provisions of the Child Citizenship Act apply to your adopted as well as your natural-born children, as long as the adoption was completed before the child’s 16th birthday, and complied with applicable laws pertaining to adoption-related immigration.  Unfortunately, they do not apply to your stepchildren because of the way “child” is defined in Section 101(c) of the Immigration and Nationality Act.


•        Certain jobs and benefits are available only to U.S. Citizens

Green Card holders are allowed to work in the U.S.  But that doesn’t mean that they are eligible to work in every occupation or position.  In many cases, the so-called “equal protection” Clause of the Fourteenth Amendment (which provides that no State shall “deny to any person within its jurisdiction the equal protection of the laws”) prevents discrimination against non-Citizens. However, there are important exceptions, especially for government employers, which allow government employers to insist that only U.S. Citizens may perform certain jobs, as long as they can show “some rational relationship between the interest sought to be protected and the limiting classification.” 

The Supreme Court has heard many challenges to such restrictions and in some cases has sided with the governmental body that has imposed that restriction.  It may surprise you to learn that the Supreme Court has upheld a New York requirement that public school teachers must be citizens or “[have] manifested an intention to apply for citizenship” (Ambach v. Norwick, 441 U.S. 68 (1979)) and another New York state requirement that its state troopers must be citizens (Foley v. Connelie, 435 U.S. 291 (1978)).  There are other such holdings.  (Surprisingly, a Connecticut requirement that lawyers must be citizens was shot down!  In re Griffiths, 413 U.S. 717 (1973).)

Such restrictions are few, but education and law enforcement, and government employment in general, are popular occupations. And remember that this exception applies not just to the Federal government, but also many state and local governments.

In addition, certain coveted jobs, or consulting contracts, that entail access to classified information, may require high-level security clearance which is available only to U.S. Citizens. 

Finally, although Green Card holders are eligible for many Federal grants, scholarships and student loans, there are still many financial aid grants, including college scholarships and funds given by the Federal government for specific purposes, which are available only to U.S. citizens. 


•        Some government benefits are available only to Citizens

Nobody wants to go on welfare or other forms of public assistance, but sometimes it’s unavoidable and necessary.  Many welfare or other so-called “means-tested” public benefits programs may be made available to Green Card holders as well as Citizens.  But if a Green Card holder becomes what is called a “public charge” for receiving such benefits, his or her status can be jeopardized, and the Green Card holder or any person who “sponsored” the Green Card holder for the Green Card, might be compelled to repay the benefit.  There is no such restriction or requirement for U.S. Citizens.

Aside from the fact that Supplemental Security Income (“SSI”) is a “means-tested public benefit” as discussed above, not all LPRs are “qualified aliens” eligible to get SSI in any case.  In general, only an LPR with at least 5 years of residence after obtaining Green Card AND 40 qualifying quarters of earnings (in which may be counted work done by your spouse or parent(s)) is eligible for SSI.  There are some exceptions generally not germane here; and there is some limited (7-year) SSI eligibility for refugees, asylees, a few other limited categories; but in general, SSI is for citizens. 

Another important limitation of benefits for Green Card holders involves Medicare Part A.  A person who has been an LPR for less than 5 years is not eligible for Part A.  Even thereafter, the LPR may have to pay a premium.  Since Part A covers such benefits as hospital care, skilled nursing facility care, nursing home care, hospice and home health services, this is an important benefit.


•        Ability to obtain U.S. passport, and to seek protection of the U.S. Government abroad

Only a U.S. Citizen can obtain a U.S. passport.  Having a U.S. passport usually makes return to the U.S. easier.   A U.S. passport may also make travel to many (not all) foreign countries easier, since many foreign countries have easier visa processes for U.S. Citizens, and sometimes even waive visa requirements for U.S. Citizens. 

If you get into trouble while abroad, every U.S. Consulate has a Citizenship Services section devoted to helping U.S. Citizens abroad.  The Consulates cannot always solve the problems of the U.S. Citizen who seeks their help, but frequently they can.


•        A surprise benefit in estate planning

One little-known benefit of citizenship is in estate planning.  The government imposes pretty high taxes on estates valued over a certain amount.  As most people know, each spouse gets a large “exemption” before estate taxes kick in ($5.45 million per spouse in 2016), and in general, when one spouse dies, the deceased spouse’s “exemption” is “portable” to the estate of the surviving spouse, meaning that a married couple gets a total exemption of $10.90 million before any estate tax kicks in.  This portability is coupled with what is known as the “unlimited marital deduction,” which allows the first spouse to die to leave any amount of money to the survivor, completely free of estate tax.  This at a minimum allows for deferral of estate taxes.  It applies, however, only when both spouses are U.S. Citizens.

This estate tax exemption is “unified” with the so-called “gift” tax, for which there is a similar large exemption, but all gifts to anybody over $14,000 per year can count against the exemption, meaning that a person’s estate may be more likely to have to pay taxes in certain circumstances.  There is a big “hole” in this system:  one U.S. Citizen spouse may give his or her U.S. Citizen spouse unlimited gifts every year, without any gift tax concerns.  However, if the spouse getting the gift is not a U.S. Citizen, the amount that can be given without gift tax consequences is only $148,000 a year (in 2016, indexed for inflation).   This is not a problem a lot of people have.  But for those who do, it can be a big deal.

Estate taxes on an individual exemption of $5.45 million also are, in general, not due until the second spouse dies.  However, if the surviving spouse is not a U.S. Citizen, estate taxes, if applicable, may be due upon the death of the first-to-die spouse.  There are only two ways around this problem:  either the surviving non-citizen spouse must become a U.S. Citizen within a comparatively short time prescribed by law; or the surviving non-citizen spouse must set up a special kind of trust known as a Qualified Domestic Trust or “QDOT.”

With a QDOT, the first spouse’s assets go to the trust instead of to the surviving non-citizen, who can receive some benefits from the QDOT, but can’t own the assets.  When the non-citizen spouse dies, the assets in the QDOT, which are not part of the estate of that non-citizen spouse, pass to the other beneficiaries named in that trust.  Note that at least one of the trustees of the QDOT must be a U.S. Citizen; and if the QDOT’s assets are over $2 Million, at least one trustee must be a U.S. bank, or the trustee must pay the expense of a bond to protect the value of the QDOT.

The actual mechanics of the QDOT requirements are complex and severe, and beyond the scope of this discussion.  The “takeaway” however is that estate planning for a married couple is much easier, and the couple will almost certainly enjoy more tax-exempt or at least tax-deferred benefits, if both spouses are U.S. Citizens. 


© Paul D. Cass 2016