New Jersey is a very diverse state, and I have quite a few clients of Indian heritage. Accordingly, I thought I would share some advice regarding estate planning for Americans with assets in India:
- India does not have an estate or an inheritance tax;
- There is no treaty with respect to the US and India on Estate and Inheritance Taxes;
- As a US citizen, all of your assets, worldwide, will be subject to the federal estate tax;
- If you are also a NJ domiciliary; some of your assets may also be subject to the NJ Inheritance taxes. Note—New Jersey also has the right to tax certain assets on a worldwide basis! (The NJ Inheritance tax will typically apply if you are leaving money to someone besides a spouse, your descendants, or your ascendants. Many people do not realize that leaving a bank account to a sibling can trigger this NJ Inheritance tax.)
- There IS a treaty between the US and India with respect to income taxes (see: https://www.irs.gov/businesses/international-businesses/india-tax-treaty-documents) Tax returns need to be coordinated and you will receive a deduction for income taxes paid in India. This may still result in higher taxes as you must report income on worldwide profits.
- Proper planning will minimize the tax burden.
- It is often advisable to deal with assets in India before you pass, particularly if your children do not have a strong connection to India and it would be difficult for them to deal your affairs there.
Estate planning for Americans with assets in India can be quite tricky. We strongly recommend speaking with an international estate planning attorney in order to minimize complex probate issues.
Note: Updated from June 17, 2008 Post.