Category: Alerts

On February 28, 2014, the U.S. Department of Homeland Security announced Chile’s designation as the newest member of the Visa Waiver Program. Eligible Chilean nationals who have an electronically readable passport and have obtained authorization for travel from Electronic Screening System for Travel Authorization (ESTA) prior to initiating travel will be able to visit the United States under the Visa Waiver Program (VWP) commencing May 1, 2014.

For more information regarding the VWP, list of designated countries, and ESTA requirements, please visit the Department of State website at http://www.travel.state.gov/visa/temp/without/without_1261.html.

An important issue affecting many estate plans will soon be decided by the United States Supreme Court. Estate planners are often confronted with the question of whether their clients should leave their IRA’s outright to their heirs or whether to leave the IRA’s in trust.  The case to be decided by the Supreme Court, Clark v. Rameker, involved Heidi Heffron-Clark who inherited an IRA from her mother. Mrs. Heffron-Clark and her husband subsequently filed for bankruptcy. Usually retirement accounts are protected in bankruptcy proceedings.  In this case the bankruptcy judge held that the inherited IRA was not protected because the funds in an inherited IRA may be withdrawn and are not solely for the heir’s retirement.

The bankruptcy court decision was appealed to a federal district court which held for Mrs. Heffron-Clark.  When that decision was appealed to the Seventh Circuit Court of Appeals the decision of the bankruptcy judge was upheld.

The Supreme Court will decide the issue because there is a conflict of the Seventh Circuit and the Fifth Circuit and Eighth Circuit Courts of Appeals. The Fifth and Eighth circuits have previously held that the inherited IRA’s are protected because the protection is for the IRA regardless of whether it is inherited or not.

Planners and clients wanting to avoid this uncertainty should use trusts to protect their heirs’ inherited IRA’s while awaiting the Supreme Court decision.

What is the Diversity Visa Lottery?

The Diversity Immigrant Visa Program, which is administered by the U.S. Department of State, permits up to 50,000 diversity immigrant visas to be granted for fiscal year 2015 to persons from countries with low immigration rates to the United States. Foreign nationals are selected for eligibility to file an application for permanent residence under this program on the basis of a lottery.

When can I apply?

The U.S. Department of State will accept applications for the 2015 diversity lottery between noon Eastern Daylight Time (EDT) on Tuesday, October 1, 2013, and noon Eastern Daylight Time (EDT) on Saturday, November 2, 2013. Applicants are encouraged to apply in the early part of the application period.

Who is eligible?

In order to enter the diversity visa lottery, an individual must be a national of an eligible country and must meet minimum education/work requirements.

Nationality:

No visas may be awarded to foreign nationals of countries that have sent more than 50,000 immigrants to the U.S. over the period of the last five years. For the 2015 diversity lottery, nationals of the following countries are NOT eligible to apply: Bangladesh, Brazil, Canada, China (mainland born), Colombia, Dominican Republic, Ecuador, El Salvador, Haiti, India, Jamaica, Mexico, Nigeria, Pakistan, Peru, the Philippines, South Korea, the United Kingdom (except Northern Ireland) and its dependent territories, and Vietnam. Persons born in Hong Kong SAR, Macau SAR, and Taiwan are eligible.

Nationality is defined by the location of a person’s birth. However, if a foreign national is ineligible to apply based on their country of birth, there are two alternate ways to qualify. First, a foreign national whose spouse was born in a country whose natives are eligible to apply, may apply provided the spouse is eligible. Second, a foreign national who was born in a country whose natives are ineligible to apply is eligible to apply if neither of his/her parents were born in or resided in that country at the time of the foreign national’s birth.

Education/Work:

In order to enter the diversity lottery, a foreign national must have either a high school education or its equivalent, or two years of work experience within the past five years in an occupation requiring at least two years training or experience.

How Do I Apply?

Diversity lottery submissions are only accepted electronically. The electronic applications are submitted via the U.S. Department of State’s website. Applicants may only submit ONE lottery entry; individuals who attempt to submit more than one application will be disqualified from participating in the lottery.

A diversity application must be accompanied by digital photographs of the applicant, the applicant’s spouse (if applicable), and the applicant’s dependent children (if applicable) taken in accordance with specific requirements set forth in detail on the U.S. Department of State’s website. Note: each spouse may submit his/her own application if he/she otherwise qualifies. In completing the electronic entry form, the following data will be required: full name, date of birth, gender, city of birth, country of birth, country of eligibility for the program, photograph(s), mailing address, current country of residence, phone number (optional), email address, educational level, marital status, number of children, and information about spouse and children.

Winners of the lottery will be selected in a random computerized process. After entering the lottery, it is critical to safeguard the confirmation page as it contains information that is needed to check the status of the application. As of May 1, 2014, applicants can check the status of their application using their confirmation number through the Entry Status Check section of the E-DV website. Lottery winners will not receive correspondence in the mail to confirm the selection of their application; the status of the application can only be checked through the E-DV website.

Selection in the lottery does not automatically confer lawful permanent resident status. Selected individuals (and their dependents) are deemed eligible to apply for lawful permanent resident status. In order to become a permanent resident of the U.S., a lottery winner’s application for permanent residence must be filed and approved between October 1, 2014 and September 30, 2015. The permanent residence application may be filed either via adjustment of status (if the foreign national is in the U.S. in a valid nonimmigrant status) or via consular processing.

Finally, please note that more lottery “winners” are selected than there are immigrant visas available because some winners will not be eligible to become U.S. permanent residents of the U.S. Accordingly, some individuals who are selected to apply for diversity visas may ultimately be unable to become U.S. permanent residents if the available diversity immigrant visas are assigned prior to their permanent residence application being adjudicated.

Where can I get more information?

Instructions for filing an application for the 2015 Diversity Visa Lottery, and information regarding photograph specifications, may be obtained from the U.S. Department of State’s website: https://travel.state.gov/content/travel.html.

For specific legal advice, please contact your Gibney representative.

This morning, June 26, 2013, the Supreme Court issued a decision in U.S. v. Windsor overturning the Defense of Marriage Act (“DOMA”).  DOMA defined marriage as being solely between a man and a woman for the purposes of federal programs and laws.  Justice Kennedy put into words the distinct issue facing many same-sex married couples: “By creating two contradictory marriage regimes within the same State, DOMA forces same-sex couples to live as married for the purpose of state law but unmarried for the purpose of federal law.”

One such duality was the difference in estate planning for those couples that lived in the 12 states and Washington D.C. where marriage was legal.  These same-sex couples had to formulate an estate plan addressing both state and Federal laws and in most cases there was no ideal planning under the Federal laws.

U.S. v. Windsor addresses one of the major estate planning hurdles that high net worth same-sex married couples faced, the marital exclusion to the estate tax.  Edith Windsor and Thea Spayer were married in Toronto, Canada in 2007 and were residents of the State of New York.  They had been together for 40 years when Thea Spayer died in 2009.  As most married people do, Thea Spayer left her entire estate to her spouse.  If her spouse had been the opposite sex her estate would have claimed a marital exclusion and no tax would have been due.  However, under DOMA because Edith Windsor was the same sex the estate tax was $363,053.

Now, same-sex couples legally married no longer have to engage in this dual regime.  Edith Windsor will now be treated as having been married to Thea Spayer under the laws of New York and the Federal government.

The Supreme Court’s decision will reach farther than the marital exclusion and will impact all same-sex married couples.  As highlighted by Justice Kennedy in his opinion, spouses have various benefits under Federal laws and programs.  While these added benefits are useful for same-sex couples, certain same-sex couples may want benefits to pass to a trust or child directly.  In such a case a spouse may need to sign a waiver.  These are issues that will need to be addressed in their overall estate plan.

In addition to the marital exemption from estate tax, same-sex couples will now also be able to make unlimited lifetime gifts to their spouses without having to use a portion of their unified credit and/or paying gift tax.   In the past same-sex couples would run into issues in how they would title their property. Under DOMA, if one spouse had purchased property and wanted to put it in joint name he or she was making a taxable gift.  It remains to be seen whether same-sex couples that made taxable a gift to their spouses can amend prior year’s gift tax returns.

This ruling also opens up the possibility for same-sex couples to make split gifts.  The annual exclusion per person is $14,000.  Married couples are allowed to split gifts so that they can make gifts up to $28,000 per done.  This is an advantageous estate planning tool where one spouse has significantly more assets.

Same-sex married couples should revisit their estate plan to make sure their current plan reflects their ultimate intentions and to take advantage of the new estate and gift tax benefits available.

Please contact Meredith Mazzola or Gerald Dunworth for additional details regarding this alert, or to schedule a consultation to review your Estate Plan.