In today's world, more U.S. citizens are marrying foreign-born spouses. According to the U.S. Census Bureau, approximately 10% of marriages in the U.S. involve a foreign-born spouse. For retired military personnel, especially those who married during or after service, these marriages often come with unique legal and financial challenges—especially when it comes to estate planning. If your spouse is not a U.S. citizen, estate planning becomes more complex, and understanding tools like Qualified Domestic Trusts (QDOTs) is essential to ensure your spouse's future is secure without excessive tax burdens.

A Brief History of Foreign Spouses

Marriage between a U.C. Citizen and a foreign spouse is not a new trend.   The War Brides Act of 1945 allowed those in the United States Armed Forces to bring their alien spouses and children to the United States without being subjected to the quota allowance. It is estimated that over 300,000 war brides entered the country with about 20,000 from Germany, 45,000 from Japan and 51,000 from the Philippines.  The War Bride Acts of 1945 and 46 led to the largest female immigration in the history of the United States.  Today, personnel in the US Armed Forces still bring home a foreign bride.  However, foreign spouses enter the United States in different avenues as well.

Marrying a foreigner requires following specific processes. [1]  Before marrying a foreigner, it is very important to seek legal help and advice from an Immigration attorney to keep you from taking the wrong steps and costing your spouse citizenship or you more money.  One option a U.S. citizen may choose is the Fiancé K-1 Visa.  The second option if to file a Form I-130 if marrying abroad.  Still another option may be that the person is already in the U.S. and files an I-130 and I-485.  To understand the process and to avoid fraud or appearance of fraud talk to the attorney.  One immigration attorney I personally know is David Cox https://coximmigration.com/

Currently there is an uptick in a booming industry: the bride brokerage business also known as the mail order bride.

Mail-Order Brides: A Growing Phenomenon

In addition to traditional marriages, the concept of mail-order brides has grown in popularity, largely due to the internet. Today, countries like Russia, Ukraine, Thailand, and the Philippines dominate the mail-order bride industry, with thousands of foreign spouses entering the U.S. each year.

Bride Broker companies is a profitable, booming business.  To protect women from abusive partners or being used in human-trafficking, Congress passed several laws to protect women and address some issues for foreign spouses.  One law is The Violence Against Women Act of 1994 (VAWA).  In 2018, under the Trump administration, The Violence Against Women Act lapsed.  To provide legal protection for women, President Biden signed the Reauthorization of VAWA in 2022.[2].

Other laws enacted to protect the potential foreign spouse are the Immigration Marriage Fraud Amendments of 1986, the Illegal Immigration Reform and Immigrant Responsibility Act of 1996, and the International Marriage Broker Regulation Act of 2005 (IMBRA), signed into law by President Bush to inform and to protect incoming foreign fiancés. [3]   These laws provide security to the foreign spouse coming to into a new language, culture, and laws.

For retired military men and others who marry foreign spouses through the mail-order bride route, understanding the legal and financial implications is crucial.  In addition, it's also important for the U.S. citizen to be protected against fraud and protect estate planning assets.

Why Estate Planning is Different with a Foreign Spouse

Federal tax laws in the U.S. offer an unlimited marital deduction for assets passed to a U.S. citizen spouse. However, for a foreign spouse, this deduction doesn't apply, making it imperative to explore other estate planning strategies. Without proper planning, your foreign spouse could face significant tax burdens upon inheriting your estate.

A Qualified Domestic Trust (QDOT) Planning

A Qualified Domestic Trust (QDOT) may solve many of the tax challenges arising in estate planning for a foreign spouse. By establishing a QDOT, you put a plan in place that allows your spouse  to receive income from the trust without immediately triggering large estate taxes. The principal is safeguarded, and taxes are deferred until certain conditions are met, such as your spouse becoming a U.S. citizen.

Creating the (QDOT)

1. Trust Structure: The QDOT allows your foreign spouse to benefit from your estate without paying estate taxes upfront. They can receive income from the trust, while the principal remains protected.
2. Trustee Requirements: The trust must have at least one U.S. citizen or a U.S. corporation serving as a trustee. This ensures that any distributions are made in compliance with U.S. tax laws.
3. Distributions and Taxes: Income distributions to your spouse are not subject to immediate estate taxes. However, if there is a distribution of the trust's principal, taxes may apply. This tax deferral feature is what makes QDOTs so valuable in estate planning for foreign spouses.
4. Becoming a U.S. Citizen: If your spouse becomes a U.S. citizen, the restrictions of the QDOT are lifted, and they can receive the assets free of the previous tax constraints.
5. The Resident Spouse:  If the Resident Spouse inherits and decided to leave the U.S., that spouse may end up paying a hefty exit tax on what is inherited. It's important to understand estate planning and taxes that may happen.

Steps to Implement the QDOT

1. First consult an estate planning attorney. It takes a team approach to make sure you and your foreign spouse are protected.  The immigration attorney helps with the path to citizenship.  Your Estate Planning attorney counsels on putting the right estate planning pieces in place for you and your foreign spouse.
2. Choose the Right Trustee: You'll need to carefully select a trustee who can manage the trust and ensure compliance with tax regulations.  Understand when you may have a U.S. Citizen or when you need a corporate trustee.
3. Coordinate with Financial Advisors: It's essential to integrate the QDOT into your overall financial plan to ensure it aligns with your goals for retirement and legacy. Your Financial Advisor helps you understand your 401k plans and tax consequences.  A CPA may provide tax advice to your foreign spouse. 

Conclusion

For retired military, current military, or other  U.S. Citizens married to foreign spouses, estate planning requires a different approach. The complexities of U.S. tax laws can create unexpected challenges, but with the right tools, like QDOTs, you can protect your spouse and ensure their financial security. Don't wait—start planning today to provide your spouse with the peace of mind they deserve. Book Now and Set up an appointment with Sheri Tucker today or call 314-332-0011.

 [3] https://travel.state.gov/content/travel/en/us-visas/visa-information-resources/imbra.html