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Estate planning important for foreigners who own Florida property

Many people of other countries purchase real estate in the United States. Reportedly, for the year ending in March 2013, foreigners spent $68.2 billion on home sales. Out of all places that foreign nationals buy property, Florida is the most common, accounting for 23% of the purchases made in the United States.

Whether because of the climate or favorable tax policies, a large number of foreigners own real estate in Florida, and while owning property in the U.S. has many advantages, there are also some pitfalls of which people who own property need to be aware, especially when it comes to estate planning. For example, if a person is not a citizen or legal permanent resident of the U.S., the current federal estate tax exemption of $5.3 million does not apply. Instead, these individuals can generally expect to be hit with an estate tax on assets worth about $60,000. As almost all property purchased in Florida will have a value exceeding this amount, a foreign national's estate could be facing up to a 40% tax on the value of the property.

Because of this, and other issues, estate planning is imperative for those who own property in Florida but are not citizens or "green card" holders. Tax liabilities, for example, need to be taken into consideration when planning for the future. One possible solution to the estate tax dilemma is to take out a life insurance policy in an amount at least equal to the estimated estate tax liability. This way, because life insurance proceeds on foreigners are generally not subject to the estate tax, a deceased's heirs will hopefully receive the full amount of the estate's worth.

There are other considerations to take into account when estate planning and individuals of all nationalities should consider exploring the legal options available to safeguard not only their monetary assets, but also to prepare for unexpected life events. Powers of attorney, living wills, trusts and medical proxies are among the legalities that can be discussed with an estate planning professional. Knowing the legal requirements and ramifications of these actions is essential to developing a solid estate plan.

Source: wealthmanagement.com, "Foreign Nationals Owning U.S. Property," John Greenwell, Jan. 22, 2014

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