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Estate Planning and Undocumented Immigrants

As the quest to deport illegal aliens looms, immigrants with questionable status wait and worry about their dependents’ financial well being.

The country’s 11 million undocumented immigrants have always been in a precarious legal position. But with federal and state authorities cracking down, the threat of sudden detainment or deportation is more real than ever.

A simple power of attorney will do the trick in some situations, but others may require a full-fledged trust. That’s where things can get complicated.

To open a trust or bank account, a resident alien needs to register with the IRS to get an international taxpayer identification number (ITIN).

While many undocumented immigrants studiously avoid any contact with the federal government, plenty — 3.8 million of them — have ITINs and are paying taxes.

If members of this group can scrape up enough proof of identity to satisfy the trust company and if nothing in their background raises a red flag, the process of creating a trust can be relatively simple.

Meet the deportation trust

The arrangements that estate planners are coming up with — call them “deportation trusts” if you like — need to work like a conventional asset protection trust, while building in a lot of the features of a will or estate plan.

Once the trust is in place, it works like a conventional asset protection trust. The settlor can use the assets as long as he or she is in the United States, and if a deportation order is ever served, the asset protection kicks in to make it harder for the authorities to freeze or confiscate wealth granted to the trust.

Meanwhile, the “estate plan” side provides instructions for winding down life in the United States in an orderly fashion: appointing guardians for children left behind, liquidating non-trust assets and paying debts.

The one thing you probably want is to make sure you’re creating the trust in a jurisdiction that allows for self-settled trusts

Because the deportation process rarely gives people longer than one year to wind down their U.S. affairs, it’s going to be too late to get the trust process moving if someone is already on Immigration’s radar.

This makes advance planning critical.

For truly undocumented immigrants, granting power of attorney to a U.S. citizen and designating a temporary guardian for any children should go a long way toward ensuring that a sudden shift in the enforcement environment doesn’t wreck their lives completely.

Stipulations in the power of attorney can act like a “living will,” spelling out exactly what should be done with assets left behind in the event that the signer is detained or deported.

Without granting clear authority, it can be tough to sell cars, real estate or businesses in order to send the cash back or free it up for family members who remain here.

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