For Korean Americans who have settled in the United States, estate planning is the most important legal preparation to protect your family. A will alone isn't enough - you need a comprehensive plan that addresses the differences in laws between New York and New Jersey, the handling of assets in Korea, and tax strategies.
The four essential documents of an estate plan
1. a Will or Living Trust
It is the primary document that legally clarifies your intentions for distributing your assets. It is advantageous for property owners to set up a Living Trust together to avoid Probate.
2. Financial Power of Attorney
Allow a trusted family member to handle your bank accounts, real estate, taxes, and more if you're unable to manage your finances yourself due to ill health or an accident.
3. Health Care Proxy
Designates someone to make health care decisions for you if you are unable to do so. Both New York and New Jersey require separate forms.
4. advance directives (Living Will)
Document your wishes for life-sustaining treatment, ventilator, nutrition, etc. in advance.
New York vs New Jersey: Inheritance law differences
- Inheritance taxNew York taxes $$6.94M and above, New Jersey eliminates inheritance tax starting in 2018 (but not estate tax)
- Spousal protectionNew York has an Elective Share of $50,000 or 1/3 of net worth; New Jersey is similar.
- ProbateBoth states require court probate proceedings (which can be avoided with a Living Trust)
Things to keep in mind for people of color
Double taxation of Korean assets
If you have real estate, savings, or stocks in South Korea, you may be subject to estate taxes in both the U.S. and South Korea. A double taxation avoidance strategy utilizing the U.S.-Korea tax treaty is essential.
Non-citizen spouse
Inheritance between U.S. citizens is unlimited, but this benefit does not apply to non-citizen spouses. You can reduce your tax burden by setting up a Qualified Domestic Trust (QDOT).
South Korea's Fuel Tax System
Korean law guarantees legal heirs a minimum share of the estate, while U.S. law does not. If you have assets in both countries, be sure to consider this difference.
Frequently asked questions
Q. Do permanent residents need an estate plan?
Required. As a permanent resident, you are subject to the same estate tax on your worldwide U.S. assets as a citizen. However, as non-citizens, they do not have the unlimited spousal exemption, which requires more careful planning.
Q. When should I start estate planning?
You should review your estate plan whenever you have a major life change, such as buying real estate, getting married, having a baby, or starting a business. The time is now, not later.
Your greatest legacy is the assets you've worked a lifetime to build, and passing them on safely to your family. Contact the Law Offices of Jin Dong Cho for an estate planning consultation. We are happy to speak with you in Korean.
Phone: (718) 353-2699 | Email: jd@choattorneys.com
