Many Non-Resident Aliens (NRAs) purchase real estate in the United States for themselves and/or their families.
New York City, Los Angeles and Miami have traditionally been popular cities for the purchase of residential real estate by NRAs. U.S. real estate is frequently purchased in a South Dakota Dynasty Trust or an offshore entity to avoid U.S. estate taxes. The South Dakota Dynasty Trust also generally avoids any possible imputed rental income for use of the property by the beneficiaries, although the NRA grantor may have to pay rent if he also uses the real estate. An NRA who purchases U.S. real estate outright, versus in trust, only has a $60,000 U.S. estate tax exemption for U.S. situs property. Consequently, the NRA should purchase in trust or alternatively purchase U.S. life insurance to pay for the estate taxes owed on the real estate at the NRA’s death. Life insurance is an exempt U.S. asset for NRAs, nonetheless, the U.S. insurance carriers may require that it be purchased in trust to provide additional nexus to the U.S.. Commercial real estate in the U.S. has also been a popular investment by NRAs.
