Reproduced by permission. ©2007 Colorado Bar Association, 36 The Colorado Lawyer 101 (August 2007). All rights reserved. TRUST AND ESTATE LAW

Estate Planning Considerations When One Spouse is a Resident Alien

by M. Anthony Vaida

This article addresses estate planning for a resident alien-U.S. citizen couple, provides an analysis of the applica-ble law, and makes recommendations for drafting the couple’s estate plan.

olorado is home to a diverse population that includes manyindividuals who are not U.S.citizens.Thus,it is not unex-pected that an estate planner (planner) may be asked toprepare an estate plan for a married couple, one of whom is U.S.citizen (USC) and the other a resident alien (RA).When faced with such a request, the planner’s first inquiryshould focus on the circumstances under which the RA became a resident of the United States. Without integrating family history,citizenship, residence, and domicile information into the tax-sensi-tive provisions of the plan, the plan may have significant adversetax consequences at the death of the USC spouse.The planner alsomust have a thorough understanding of Colorado law regardingresidency and domicile, as well as federal transfer tax rules applica-ble to an RA.1

This article focuses on the basic information a planner shouldaccumulate during or after the initial meeting with a USC-RAcouple. It also discusses Internal Revenue Code (Code) provisionsapplicable to USC-RA couples regarding lifetime and testamen-tary gifts.

Gathering the Information

In addition to the usual family history, the planner should ob-tain sufficient information to determine the country of citizenshipand the residence and domicile of the USC and RA spouses. Thefollowing is a nonexclusive list of information to be gathered:

1) family history, such as the citizenship of the RA’s parents, the

RA’s parents’ country of residence at the RA’s birth, and all

countries in which the RA has lived since birth;

2) location of current and past residences;

3) current visa, passport, or residency permitand any other infor

mation the RA has regarding the RA’s immigration status;

4) the RA’s property, both real and personal, owned either indi

vidually or jointly with anyone, and the property’s physical lo

cation, whether in the United States or elsewhere;

5) country of citizenship of both spouses; and

6) homes not owned, but maintained and sometimes occupied,

by the RA spouse outside the United States.

Clients should be made aware that USCs and RAs generally aretreated the same for transfer tax purposes, except when applyingthe marital deduction provisions of the Code. For instance, as is thecase for a USC, the entire estate of an RA is subject to U.S. transfertax rules, no matter where located worldwide. This is not the casefor nonresident alien spouses.2

The planner should explain the meaning of the terms “residen-cy”and “domicile”under Colorado law and the Code.This is par-ticularly important because those terms may have a different mean-ing under the law of the RA’s home country. Under CRS § 1-2-102,residence essentially is synonymous with domicile.The Codeprovides that a “resident”of the United States is subject to transfertaxes, but it does not define the term “resident.” The Code doesprovide a definition of the term “domicile,” which generally is inaccordance with the common law definition.These definitions are discussed in more detail below.

It should be noted that residence for federal income tax purpos-es is not necessarily residence for transfer tax purposes. A “greencard” holder who is temporarily in the United States is subject tofederal income tax, but may not be subject to federal transfer taxes.Residency for transfer tax purposes results only if the individual is a“domiciliary” of the United States. As explained below, for federaltransfer tax purposes, the term U.S. “residence” is defined by theCode as U.S.“domicile.”3

The planner also should explain the concept of property titleownership under Colorado law; a similar real property ownership

Article Editors:

David W. Kirch, of David W. Kirch, P.C., Aurora—(303) 671-7726, dkirch@qwest.net; Constance D. Smith, of Rothgerber Johnson & Lyons LLP—(303) 623-9000, csmith@ rothgerber.com

About the Author:

M. Anthony Vaida, Steamboat Springs and Denver, is Of Counsel with McElroy, Deutsch, Mulvaney & Carpenter, LLP—(303) 293-8800, tvaida@ mdmlawco.com. The author thanks Julia Stamsky, an associate with McElroy, Deutsch, Mulvaney & Carpenter, LLP, for her research and input on Colorado law issues.

Trust and Estate articles are sponsored by the CBA Trust and Estate Section. Topics include trust and estate planning and administration, probate litigation, guardianships and conservatorships, and tax planning.

scenario may not exist in the RA’s home country. If the RA doesnot have an understanding of the U.S. system of property owner-ship, the information the planner receives from the RA regardingproperty matters may not be accurate. This could lead to the de-sign of a plan that will result in unintended consequences, such asadverse transfer tax consequences when the plan is later imple-mented.

Citizenship

In the initial interview, the planner should review the somewhatcomplex rules that apply to the determination of whether the RAis a USC.4 It is not unusual for an RA to have misunderstandingsregarding U.S. citizenship. Depending on where and when the RAwas born and the citizenship status of the RA’s parents, the RAmay be a USC and not know it. For example, the RA may notknow that a child born in the United States, to noncitizen parentswho were residing temporarily in the United States at the time, isconsidered a USC.5 Also, as a general rule, if the RA was born toUSC parents while the parents were residents of a foreign country,the RA will be a USC, even if the RA never resided in the UnitedStates before marrying the USC spouse.6

Another common misassumption is that marriage to a USC,whether native-born or naturalized, automatically confers citizen-ship on the RA spouse. Although the naturalization process for anRA spouse is not as challenging as it is for other aliens, the RAspouse is required to complete the naturalization process to obtain

U.S.citizenship.

Residence

After determining that the RA client is not a USC, the ques-tion of residency for transfer tax purposes becomes relevant. TheTreasury Regulations (Regulations) do not provide a precise defi-nition of residence; they define “residence” as the RA’s domicile at the time of death.7 Therefore, local law likely will be a factor in de-termining whether an RA is a resident or nonresident alien for transfer tax purposes. Under Colorado law,8 “residence” is defined as the principal or primary home or place of abode and the placewhere the person “habitates” and to which that person, wheneverabsent, has the present intention of returning after a departure orabsence.9 Further, Colorado law provides:

A person shall not be considered to have gained a residence in

this state, or in any county or municipality in this state while re

taining a home or domicile elsewhere.10

Thus, residence and domicile essentially are synonymous underColorado law.These terms should be applied to determine whethera person has the requisite intent to designate Colorado as his orher domicile for federal transfer tax purposes. If the RA is a U.S.domiciliary, he or she is considered a resident and the transfer taxprovision of the Code applies to any of the RA’s property wherever located anywhere in the world.

Domicile

As noted above, the Regulations define “residence” as the RA’s domicile at the time of death. The Code provides “a tax is herebyimposed on the transfer of the taxable estate of every decedent whois a citizen or resident of the United States.”11The Regulations direct the planner to apply the term “domicile”when making this assessment.12 The Regulations then provide that an RA:

acquires a domicile in a place by living there, for even a brief pe

riod of time, with no definite present intention of later removing

therefrom. Residence without the requisite intention to remain

indefinitely will not suffice to constitute domicile, nor will in

tention to change domicile effect such a change unless accom

panied by actual removal.13 No other guidance is given; thus, local law is used to determinewhether the RA’s evidence of domestic habitation in the United States and present intention to make the United States his or herhome are sufficient to establish domicile under the Code. It should be noted that a similar definition of residency can be found in thegift tax Regulations.14 Specific guidance is provided by Colorado

statute, which lists factors for consideration in

determining whether a person has demon

strated the requisite intent to reside in a par

ticular home as his or her domicile.15

Applying the Estate and Gift TaxRules

Many transfer tax rules that apply to a USCalso apply to an RA. For instance, an RA’s es-tate is eligible for the same unified gift and es-tate tax credit as the USC’s estate.16 As with other lifetime gifts to a nonspouse, a USCspouse may use his or her available lifetimegift tax exemption17 to make gifts to the RAspouse and avoid generating a gift tax.18 Gifts from an RA to his or her USC spouse qualifyfor the unlimited marital deduction. The re-verse is not the case. A gift to an RA spouse bythe USC spouse is governed by special annualgift tax exclusion rules that will be discussedbelow.19

Though the unlimited marital deductionrules are not available for a bequest to a surviv

102 The Colorado Lawyer | August 2007 | Vol. 36, No. 8

ing RA spouse, the estate tax applicable exclusion amount, cur-rently the first $2 million of an estate’s net taxable assets, is availablefor a bequest by a USC to the surviving RA spouse.20 Deductions for debts, expenses, and charitable transfers are treated the same inthe estate of an RA as they are in the estate of the USC spouse,and the same tax rates apply.

For lifetime or testamentary gifts from the USC spouse to theRA spouse, the Code contains special rules that qualify, reduce, oreliminate the unlimited marital deduction. Additionally, lifetimeor testamentary interspousal gifts and transfers between a USC-RA couple and third parties also are subject to special rules that donot apply to couples where both spouses are U.S. Citizens (USCcouples).

TAMRA

The Technical and Miscellaneous Revenue Act of 1988 (TAMRA)21 qualifies and restricts the estate and gift tax maritaldeduction for gifts to an RA spouse. Although TAMRA providesthat testamentary and lifetime gifts between USC spouses are ful-ly covered by the unlimited marital deduction provisions and notransfer tax is incurred for a lifetime or testamentary gift betweenUSC spouses, those provisions do not apply to gifts from a USCto an RA spouse.

Among the provisions intended to offer some relief from theloss of the unlimited marital deduction,TAMRA provides for in-creased annual gift tax exemption for gifts by a USC to an RAspouse. Currently, a USC spouse can gift assets having a value not exceeding $125,000 annually to the RA spouse without incurring agift tax.22

When designing a plan for USC couples, the availability of theunlimited marital deduction frequently is used to make estate taxfree testamentary gifts to the surviving USC spouse. A bequest to aUSC spouse is not included in the estate of the first USC spouse todie, but is deducted from the amount on which an estate tax is as-sessed. If still owned by the surviving USC spouse at death, theproperty is included in the surviving USC spouse’s estate.

Regarding transfers at death to an RA spouse,TAMRA requiresthat the property be passed to a Qualified Domestic Trust(QDOT)23 if the property is to qualify for some of the advantagesof the marital deduction. However, the QDOT election for a be-quest to a surviving RA spouse is not an unlimited marital deduc-tion vehicle, as will be explained below.

Using a QDOT

A QDOT can be included in a plan for the USC-RA couple todefer estate taxes if the USC spouse dies first. For purposes of thisdiscussion, it is assumed that the assets left to the surviving RAspouse exceed the applicable exclusion amount or the USC spousedoes not choose to use the exclusion for a bequest to the survivingRA spouse.

If a QDOT is included in the USC spouse’s will or trust, the USC spouse’s estate is entitled to a marital deduction for the fair market value (FMV) determined at death for all property placedin the QDOT.24 An estate tax later will be imposed on the distri-butions of principal from the QDOT, and the tax will be based onthe FMV of the property at the time the property was placed inthe QDOT. If the property is not distributed to the RA during theRA’s lifetime, the property will be included in the RA’s estate. In this situation, the estate tax imposed will be based on the FMVand tax rate that would have been applied if the property had beenincluded in the USC’s estate.25

Thus, the QDOT is a tax deferral mechanism that postponesthe imposition of the estate tax until the asset is distributed to orotherwise consumed by the surviving RA spouse.26 The purposeof this restriction was to prevent the RA spouse from leaving thecountry without paying the estate tax on the QDOT assets.27

To qualify for the marital deduction, the property left by theUSC spouse to the RA spouse must pass directly from the USC’s estate to the QDOT with two exceptions. If the transfer instru-ment does not contain a QDOT provision, the surviving RAspouse may create a QDOT. The RA, the USC’s personal repre-sentative, or the RA’s agent under a power of attorney may elect totransfer property left to the RA to a QDOT.This is done by mak-ing a timely28 QDOT election after creating a QDOT and subse-quently irrevocably transferring the property to the QDOT.29 If a disclaimer provision is included in the will or trust permitting thesurviving RA spouse to disclaim an inheritance, the disclaimer maybe used to exercise the QDOT election even though there are noQDOT provisions in the instrument.30 However, the surviving RAmust first create a QDOT prior to exercising the disclaimer andtransferring the property to be disclaimed into the QDOT.31 Thus,even though a QDOT was not included in the testamentary instrument, the surviving spouse can create a post-mortem QDOTand transfer the property to it.32 The second exception allows forQDOT treatment of special types of property, such as retirementplans assigned to a QDOT.33

Change of Status

If the RA becomes a USC and either: (1) has been a U.S. domi-ciliary at all times after the decedent’s death until obtaining citi-zenship; or (2) has not been a U.S. domiciliary during that time buthas received no taxable distributions, the trust ceases to be treatedas a QDOT for transfer tax purposes on the spouse’s acquisitionof citizenship, and is treated for tax purposes as a domestic maritaltrust. However, to be effective, the trustee must notify the InternalRevenue Service (IRS) of the RA’s change of status from RA toUSC. Thereafter, any distributions to the surviving RA spousefrom the QDOT will not be subject to the § 2056A tax.34

Drafting Tips

When drafting the QDOT, in addition to including the usualprovisions required for a standard marital deduction trust, the plan-ner must include provisions to meet the QDOT requirementsfound in the Regulations.35 For example, the trust must name anindividual U.S. citizen or a U.S. domestic corporation as trustee orco-trustee (the trustee). No distribution of trust corpus may bemade from the trust unless the trustee has the right to withholdfrom such distribution the deferred tax accrued as a result of the withdrawal from the corpus and the trust meets all other regulatoryrequirements intended to ensure the collection of the deferred es-tate tax.

For a QDOT with assets that exceed $2 million, the Regula-tions require the posting of a bond or other security.36 For a QDOT with assets of less that $2 million, which may include theRA’s home if its value is less than $600,000, no bond or security isrequired.37 As with a standard marital deduction, a QDOT mayalso include a testamentary power of appointment.38

The planner should consider recommending the use of theUSC’s available unified credit for a non-QDOT testamentary giftto the surviving spouse to provide transfer tax free, unrestrictedfunds to the RA spouse and surviving family.39

Hardship Provision

Should the USC settlor wish to limit the class of beneficiaries to whom the RA spouse may leave any trust principal remainderat the RA’s death, the planner should be aware of the “hardshipprovision,”40 which provides that there will be no transfer tax onany principal distribution from the QDOT to the surviving RAspouse made on account of hardship. Such a distribution wouldqualify for the exemption if the distribution was:

in response to an immediate and substantial financial need re

lating to the spouse’s health, maintenance, education or support,

or the health maintenance or support of any person that the sur

viving spouse is legally obligated to support.41 Persons a surviving spouse is legally obligated to support underColorado law are any natural or adopted children under the age of21 or a new spouse.42

There is no procedure for obtaining advanced rulings on hard-ship distributions; therefore, such distributions are made at the fidu-ciary’s risk. Substantial evidence should be assembled to support thehardship before making a distribution under this exception.

104 The Colorado Lawyer | August 2007 | Vol. 36, No. 8

Jointly Held Property

The most common form of jointly held property ( JHP) ac-quired by a couple during their marriage is real estate. In this arti-cle, JHP refers to jointly held interests in real property acquired af-ter November 10, 1988, the effective date of TAMRA.

“JHP” is defined in the Regulations as property held “as jointtenants with right of survivorship, or as tenants by the entirety.”43 In Colorado, the terms “joint tenancy with right of survivorship”and “tenants by the entirety”have been eliminated and replaced bythe single term “joint tenancy.”44 Jointly held property acquired be-fore the adoption of this new definition or located in another state,or community property located in community property statesowned by Colorado residents, is recognized and treated as jointlyheld property in Colorado, even though the terms “tenants by theentirety” and “joint tenancy with right of survivorship” no longerare recognized for the ownership of jointly held Colorado real es-tate.45 For the purposes of this article, JHP is defined as joint ten-ancy property under Colorado law.

The planner should determine when and how—whether bypurchase or gift, including an interspousal gift—the JHP was ac-quired. This information is relevant when determining whether atransfer tax later will be imposed.

JHP Subject to Estate Tax at Death of the First Spouse

The marital deduction rules that apply to a testamentary trans-fer of JHP owned by a USC couple differ substantially from therules that apply to a USC-RA couple. Because of the unlimitedmarital deduction rules applicable when both spouses are USCs,only one-half of the FMV of JHP is included in the estate of thefirst spouse to die, regardless of whether the survivor, the decedent,or both provided the assets used to acquire the JHP.46 Under

The following is an example of the application of the gift tax rules to jointly held property (JHP) owned by a U.S. citizen (USC) and a resident alien (RA) couple.

The USC spouse owns real estate acquired solely with USC funds for $500,000. Later, the USC spouse re-titles the property in the USC and RA as JHP. No gift is deemed to have occurred for transfer tax purposes as a result of the transfer.1 Thereafter, the RA spouse does not contribute any consideration to the JHP. Five years later, the couple sells the JHP for $1 million. The proceeds of sale are divided evenly between the spouses. The USC spouse will be deemed to have made a gift of $500,000 to the RA spouse and a gift tax is incurred on the $500,000 received by the RA spouse. On the other hand, if the USC spouse had made annual gifts to the RA spouse of USC spouse’s interest in the property in amounts the value of which did not exceed the annual exclusion amount, and the gifts totaled $500,000 over the years of ownership, no gift tax would be triggered by the sale of the JHP and distribution of $500,000 of the proceeds to the RA spouse.

1. Treas. Reg. § 25.2523(i)-2(b)(1).

TAMRA, the transfer is an interspousal gift, and gifts betweenUSC spouses qualify for the unlimited marital deduction.47

Those rules do not apply if the surviving spouse is an RA.48 If the USC spouse is the first to die, 100 percent of the value of theJHP will be included in the decedent’s gross estate, unless the per-sonal representative can submit facts to the IRS sufficient to sub-stantiate that, when acquired, the property was not paid for withconsideration furnished by the decedent or was not acquired by thedecedent and decedent’s RA spouse by gift, bequest, devise, or in-heritance. To be excluded from the decedent’s estate, the estatemust show that the JHP was acquired by the decedent and the RAwith assets contributed by both spouses.To the extent that the JHPwas acquired with RA assets, the RA’s “contribution” to the FMV of the JHP will not be included in the USC spouse’s gross estate.49

The following IRS example provides guidance on how thetransfer tax calculation will be made:

X, a U.S. citizen, is married to Y, a resident alien. X and Y own

their residence as tenants by the entirety. X dies and Y becomes

sole owner of the residence through survivorship. It is deter

mined that X contributed all but 10 percent of the cost of ac

quiring the residence. Y may transfer 90 percent of her interest

in the property to a QDOT and X’s estate may claim a marital

deduction for the date of death (or alternated valuation date)

value of that 90 percent interest.50

Lifetime Transfers of JHP

As with testamentary disposition of JHP, the rules that apply tothe creation and termination of spousal ownership in JHP for aUSC-RA couple yield substantially different results on sale ortransfer than is the case for a USC couple. These rules are dis-cussed below.

USC couples. Lifetime acquisition of JHP by USC couples andinterspousal transfers of property between USC couples qualify forthe unlimited marital deduction and no gift tax is imposed as aconsequence of such transactions. For USC couples, the propor-tion of assets contributed by each spouse to the acquisition or re-ti-tling of property also has no gift tax consequences.51 When a USC couple creates JHP, to the extent that one spouse does not con-tribute or contributes less than the other spouse and acquires ajoint property interest in the property, a gift will be deemed to havebeen made by the USC spouse contributing the consideration tothe non- or less-contributing USC spouse. However, the unlimitedmarital deduction applies to offset the gift and no gift tax is im-posed.

The same rule applies to contributions by either USC spouse forany improvements made to the JHP. If the USC couple later sellsthe JHP, no gift tax will be assessed as a result of the transaction,regardless of whether some or all of the proceeds are distributed tothe non- or less-contributing USC spouse, again because of theunlimited marital deduction available to USC couples.

USC-RA couples. Since the adoption of TAMRA, the gift andunlimited marital deduction rules described above do not applywhen a USC-RA couple acquires JHP. The applicable Regula-tion52 provides that if a USC-RA couple creates a joint tenancy inreal property, the election to treat the creation of the JHP as an in-terspousal gift is not available. Because the election is not available,the unlimited marital deduction rules do not apply.53

For a USC-RA couple, the creation of a joint tenancy, as well asany additions to the value of the tenancy property, such as im-provements or reductions of indebtedness, are not deemed to be atransfer of property for gift tax purposes. This is so regardless ofthe proportion of the consideration furnished by each spouse, if thecreation of the tenancy otherwise would be a gift because onespouse is a noncitizen.54 If during the lifetime of both spouses, theJHP is later sold or gifted and the joint tenancy status is terminat-ed, the USC spouse will be deemed to have made a gift to the ex-tent that the proportion of the total consideration furnished by theRA spouse, multiplied by the proceeds of the termination, exceedsthe value of the proceeds of termination received by the RAspouse.55 Thus, at the time of transfer of JHP during the lifetime ofa USC-RA couple, to the extent that the RA spouse receives morethan his or her proportionate share of the proceeds, based on thepercentage of consideration each spouse contributed toward theoriginal purchase price, plus contributions toward any improve-ments or reductions in indebtedness, the USC spouse will bedeemed to have made a taxable gift to the RA spouse.56

No gift tax is triggered at the time of acquisition of JHP by theUSC-RA couple, because the acquisition of an interest by a non-contributing or less contributing RA spouse is a not recognized asa “gift”as is the case when JHP is acquired by a USC couple.How-ever, a gift tax will be imposed when the property is sold or other-wise transferred, to the extent that the RA spouse receives pro-rataproceeds that exceed the RA spouse’s original or subsequent con-tribution.57 The planner should advise the USC-RA couple con-sidering the sale of JHP that a gift tax can be avoided by dividingthe proceeds in accordance with each spouse’s pro-rata contribu-tions to the JHP. JHP originally acquired by gift, bequest, or re-ti-tling is treated in the same manner as a purchased property. If theJHP is later sold, to the extent that the RA spouse receives morethan his or her contributed consideration, a gift tax is incurred onthe amount received in excess of the RA spouse’s proportionate share.58 (See accompanying sidebar entitled “JHP and Gift Taxes”for an application of the gift tax rules.)

Practical Tips

The planner should consider recommending that during own-ership of the JHP a long-term plan be employed to transfer annu-ally to the RA spouse USC interests in the JHP, of up to the maxi-mum annual exclusion amount, to set off the gift tax that other-wise will be imposed on sale. If such a plan is not in place, whenthe JHP is sold, the USC spouse still can reduce or eliminate theimposition of a gift tax by using the annual exclusion available inthe year of sale and also using some portion of the USC’s remain-ing lifetime gift tax exemption to offset any gift tax generated.

Conclusion

When preparing a plan for a USC-RA couple, complete infor-mation regarding citizenship, residence, domicile, and propertyownership must be obtained at the commencement of the plan-ning process. Particular care must be taken to include in the planthe most tax efficient provisions available for disposition of JHP.A carefully drafted plan can take advantage of the tax provisionsfavorable to USC-RA couples.

The taxing scheme imposed by the Code on an RA spouse limitsthe use of the marital deduction as an estate planning tool. AQDOT allows for a partial use of the marital deduction to defer theimposition of estate taxes on assets left to the surviving RA spouse.

Because a gift tax will be generated on the sale of JHP, to the ex-tent that the RA spouse receives proceeds that exceed the RA’s contribution, consideration should be given to whether the USCspouse should receive all of the proceeds of the sale. If the RAspouse receives more than the RA’s proportionate share, the cou-ple should consider using the USC’s annual exclusion and, if nec-essary, the USC’s lifetime gift tax credit to offset the transfer tax.

Notes

  1. It should be noted at the outset that Colorado no longer has an es-tate, an inheritance, or a gift tax. Prior to the adoption of The EconomicGrowth and Tax Relief Reconciliation Act of 2001, Colorado, like moststates,had a “pick-up”estate tax,picking up the first $60,000 of federal es-tate tax of federally taxable estates. Congress phased out the pick-up ex-ception to the states over a three-year period ending in 2004. The Colo-rado gift tax was repealed effective May 22, 2003.

  2. IRC § 2103 provides that the gross estate of a nonresident alien in-cludes only property situated within the United States at the time ofdeath. IRC § 2511(a) provides that gifts of property by nonresident aliensare subject to gift tax only if the property is located in the United States.

3. IRC § 2001(a).

4. See Heimos,“Non-Citizens—Estate,Gift and Generation-SkippingTaxation,”837 Tax Management: Estates, Gifts, and Trusts Portfolio A-15 (Aug.22,2005).

  1. U.S.C. § 1430(a) and (b).

  2. U.S.C. § 1401(c).7.Treas.Reg.§ 20.0-1(b)(1) and (2).

8. CRS §1-2-102(1)(a) (I).

9.CRS § 1-2-102(1)(a)(I) defines “residence”as follows:The residence of a person is the principal or primary home or place ofabode of a person. A principal or primary home or place of abode is thathome or place in which a person’s habitation is fixed and to which that person, whenever absent, has the present intention of returning after adeparture or absence, regardless of the duration of the absence. A resi-dence is a permanent building or part of a building and may include ahouse, condominium, apartment, room in a house, or mobile home. Novacant lot or business address shall be considered a residence.

The Colorado courts have defined “domicile” as the place of residencewhere an individual intends to reside and has no present intention of re-siding elsewhere on a permanent basis. Theobald v. Byrns, 579 P.2d 609 (Colo.1978); Gordon v. Blackburn, 618 P.2d 668 (Colo. 1980).

  1. CRS § 1-2-102(1)(a)(II)(d).

  2. IRC § 2001(a).12.Treas.Reg.§ 20.0-1(b)(1).

13. Id.
14.Treas.Reg.§ 25.2501-1(b).

  1. CRS § 1-2-102(b) states:In determining what is the principal or primary place of abode of a per-son, the following circumstances relating to the person shall be takeninto account:Business pursuits,employment,income sources,residencefor income or other tax purposes, age, marital status, residence of par-ents, spouse, and children, if any, leaseholds, situs of personal and realproperty, existence of any other residences and the amount of timespent at each residence, and motor vehicle registration.

  2. IRC § 2001(a).

17. IRC §§ 2505 to 2009. The lifetime gift tax exemption is $1 million.

  1. IRC § 2501(a)(1).

  2. See IRC § 2523(i) when the gift is to an RA.

  3. IRC §§ 2010(a) and 2056A.

21.The Technical and Miscellaneous Revenue Act of 1988 (TAMRA)added IRC §§ 2523(i), 2056(d), and 2056A.

  1. IRC §§ 2523(i) and 2503(b).

  2. IRC § 2056A(a).

106 The Colorado Lawyer | August 2007 | Vol. 36, No. 8

24.Treas.Reg.§ 20.2056A-2(a) (the valuation will be made at or within nine months of the date of death).

  1. IRC § 2056A(b)(2).

  2. Id.

27. Brodsky, “Handling Joint Tenancies in Real Estate When OneSpouse is a Noncitizen,”32 Estate Planning 29 (Aug. 2005), quoting House Report 100-795.

28.IRC § 2056A(a)(3).For a qualified domestic trust (QDOT) electionto be timely made,it must be filed before the due date (including extensionsactually granted) for filing the decedent’s estate tax return; currently, a re-turn must be filed within nine months of the date of death unless an exten-sion is granted. But see Treas. Reg. § 20.2056A-3 (permitting a QDOTelection to be made on the first “untimely”return).

29. IRC § 20.2056A-4(b)(1).

30. If QDOT provisions are missing from the marital trust, reforma-tion to comply with QDOT requirements may be available post-mortem,if the instrument permits or by court order. See IRC § 20.2056A-4 (a).

31.Treas.Reg.§ 20.2056A-1(a).

32. Property can be treated as passing to the surviving spouse in aQDOT if the property interest either is actually transferred to a QDOTbefore the estate tax return is filed or is transferred on or before the last date prescribed by law that the QDOT election must be made.Treas.Reg.§ 20.2056A-4(b)(1).

33.Treas.Reg.§ 20.2056A-4(b)(7) provides the rules under which re-tirement assets and annuities may be assigned to QDOT and are not dis-cussed in this article.

  1. IRC § 2056A(b)(12); Treas. Reg. § 20.2056A-10.

  2. Most of the requirements are set forth in Treas. Reg. § 20.2056

A-2(b)(1).36.Treas.Reg.§ 20.2056A-2(b).37.Treas.Reg.§ 20.2056A-2(d)(iv)(A).

  1. IRC § 2056(b)(5).

  2. IRC § 2056A(b)(3).

  3. IRC § 2056A(b)(3)(B).41.Treas.Reg.§ 20.2056A-5(c)(1).

42. CRS §§ 19-4-101 et seq.; CRS §§ 14-5-101 et seq. See also In re

Marriage of Weaver, 571 P.2d 307, 310 (Colo.App. 1977).43.Treas.Reg.§ 20.2056A-8(a)(1).

44. CRS § 38-31-103 provides in part:No conveyance or devise of real property to two or more natural per-sons shall create an estate in joint tenancy in real property unless, in theinstrument conveying the real property or in the will devising the real

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property, it is declared that the real property is conveyed or devised in

joint tenancy or to such natural persons as joint tenants.CRS §§ 38-31-101 et seq. also includes the definition of “joint tenancywith right of survivorship” and abolishes “tenancy by the entireties,” re-placing it with “joint tenancy.”

45. CRS §§ 38-31-101 et seq. 46.Treas.Reg.§ 20.2056A-8(a)(1) provides:General rule. If property is held by the decedent and the survivingspouse of the decedent as joint tenants . . . and the surviving spouse isnot a United States citizen . . . at the time of the decedent’s death, the property is subject to inclusion in the decedent’s gross estate in accor-dance with the rules of section 2040(a). . . .

  1. IRC § 2040(b).

  2. IRC § 2056(d)(1)(B).

  3. IRC § 2040(a) and (b).50.Treas.Reg.§ 20.2056A-8(a)(3).

51. IRC § 2523(a).52.Treas.Reg.§ 25.2523(i)-2(b)(1).

53. IRC § 2523(i) provides:If the spouse of the donor is not a citizen of the United States—

(1)
no deduction shall be allowed under this section . . .
(3)
the principles of sections 2515 and 2515A [26 USCS §§ 2515 and2515A] (as such sections were in effect before their repeal by the Eco-nomic Recovery Tax Act of 1981) shall apply, except that the provisionsof such section 2515 [26 USCS § 2515] providing for an election shallnot apply.

54. Id.55.Treas.Reg.§ 25.2523(i)-2(b)(2)(i).56.Treas.Reg.§ 25.2523(i)-2(b)(1).57.Treas.Reg.§ 25.2523(i)-2(b)(1) and 25.2523(i)-2(b)(2)(i).58.Treas.Reg.§ 25.2523(i)-2(b)(2)(i).