In this post, we’ll go over a few planning concepts that can help foreign nationals to protect their loved ones and preserve as much of their wealth as possible.
Tax Implications: The Basics
One of you first questions about life insurance will probably be "what happens if I pass away while I'm outside the U.S.?"
The good news is that as long as the policy is in force, it doesn't matter where you are when you pass away. Your beneficiary is entitled to the death benefit whether or not you were living in the U.S. at the time of death. Better still, that money isn't subject to U.S. income tax, even if you are classified as a nonresident alien.
It’s important that you tell your beneficiary about the policy, and what to do when you pass away. It will be up to the beneficiary to contact the carrier and file a claim for the death benefit. Make sure you have the carrier's contact information, along with the steps required to file a claim. You should leave a copy of that information with each of your beneficiaries. This is especially important if you beneficiary doesn't speak English, or spends time outside the U.S.
In our next blog post, we will discuss foreign nationals and U.S. tax classifications.