Personal Finance for Noncitizens
By YBB Personal Finance
The US is a melting pot of immigrants. But the path to naturalized citizenship is long. In many families, one or more members may be noncitizens. Briefly outlined here are the situations where your immigration or domicile (or resident) status may matter.
BANKING & CREDIT
For banking & credit, personal identification & financial history are more important than the immigration or domicile status.
Apply for a SOCIAL SECURITY Card as soon as possible. But keep the Social Security Number (SSN) confidential & provide it only to businesses & institutions that genuinely need it.
Get a DRIVER LICENSE or a STATE ID. Your foreign passport is good at immigration & custom at the airports but using it for routine identification will create an immediate hesitancy for a business to grant you credit.
STORE CARDS may be easier to get. Find a large store in your area & apply for its card. But store cards have lost their popularity now that regular credit cards are in wide use.
Apply for a regular CREDIT CARD from Visa (the biggest), MasterCard, American Express, or Discover. As the card companies require prior credit history, they may require a cosigner (who will have to pay if you don’t), or issue a secured or prepaid card, or set a low credit limit. Student may use campus promos for getting starter credit cards.
Open a CHECKING account at a credit union or bank. There may be an ATM/DEBIT or credit card associated with the account. There may be a credit union where you are studying or working & it may be easier to open a new account there. Beware that money comes out directly from your checking account when you use the ATM/debit card, but you pay the credit card bill only after you get the monthly statement. Credit cards also have better consumer protections than debit cards.
NONBANK APPS (financial) are becoming popular, but don’t rely on them exclusively. They don’t have tough regulations as for banks or credit unions & your app access can be turned off suddenly.
Unlike many countries, noncitizens may own PROPERTY in the US if their credit, income & assets are good.
JOBS
Most JOBS are open to noncitizens, but the visa status may be important. Some US government jobs (defense, national security) & related contractors require citizenship. Permanent Residents (Green Card holders) cannot vote, but pay regular taxes, & may serve in the military (or, may be required to serve in some cases).
ESTATE & GIFT RULES
A critical point for estate & gift rules is the DOMICILE or residency status. This domicile status has a different IRS definition than that used by Immigration (USCIS/DHS). The IRS domicile test is based upon substantial documentable presence in the US over 1 & 3 years. If you have permanent-resident status (Green Card), then you are presumed to be noncitizen-domicile. If you don’t meet these tests, you are noncitizen-nondomicile. To complicate matters, the IRS uses different criteria for residence for income taxes & the states may have additional criteria for residency for state affairs. So, the residency status depends on who is asking & why?
That creates 3 important statuses for estate & gift considerations: citizen, noncitizen-domicile & noncitizen-nondomicile. For couples, several combinations of these statuses are possible. The noncitizen-nondomicile status is the worst situation with very few breaks.
Many estate & gift rules are similar for citizen & noncitizen-domicile, e.g. annual gift exclusion & lifetime estate exemption. For couples, the individual statuses are important while living, but on death, the status of the surviving spouse is critical. Severe limitations apply if the surviving spouse is a noncitizen. When living, unlimited SPOUSAL GIFTS are allowed between citizen spouses, but only limited annual gifts are allowed from citizen spouses to noncitizen spouses. Annual GIFT-SPLITTING is allowed only for citizen & noncitizen-domicile spouses, but without it, the spouses can still make gifts from their individual accounts utilizing their respective annual exclusions.
On death, the unlimited MARITAL DEDUCTION is available to surviving citizen spouses only. For surviving noncitizen-domicile spouses, very limited marital exemptions are available. With advance planning, a living trust with CST-QDOT mechanism may be used to provide income & some principal to noncitizen spouses.
The estate & gift TAX RATES are the same for all statuses, but the allowed deductions & exemptions will make a huge difference in the tax amounts. The US has estate & gift tax TREATIES with 16 countries that deal with dual-domicile people; the only Asian country on the list is Japan.
Please consult estate attorneys or elder law or immigration law specialists before making big financial decisions.
For more information, see ybbpersonalfinance.proboards.com/
