OLA 1711 T 1008

Your Guide to Giftand Estate Planningfor Non-U.S. Citizens

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This material was not intended or written to be used, and cannot be used, to avoid penalties imposed under the Internal Revenue Code. This material was written to support the promotion or marketing of the products, services, and/or concepts addressed in this material. Clients and other interested parties to whom this material is promoted, marketed, or recommended should consult with and rely solely on their own independent advisors regarding their particular situation and the concepts presented here.

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Transfer Tax Planning for Non-U.S. Citizens Non-U.S. citizens face different rules

Differences could result in substantial and possibly higher transfer taxes than for U.S. citizens

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Are You Affected?

Resident and Nonresident Aliens owning U.S.-situated property

Married couples with a non-U.S. citizen spouse

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Not All Foreign Nationals Are the Same

Taxed differently based on residency status

Two classifications:

Resident Alien (RA)

Nonresident Alien (NRA)

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Your Residency Matters

Residency determined by location of individual’s domicile

Domicile is location where someone lives and intends to reside permanently

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Transfer Tax Overview

Transfer taxes affecting U.S. citizens and resident aliens:

Gift taxes

Estate taxes

Generation-skipping transfer taxes

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Gift Taxes for U.S. Citizens and Resident Aliens

When does the tax apply?

Tax levied on gratuitous transfer of property to third party

Gift must be accepted by recipient to be taxable

Donor is liable for tax

Annual exclusion gifts of assets or cash up to $12,000—for 2008—to each individual are generally not subject to gift taxes

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Lifetime Exemption Amounts and Gift Tax Rates

Year Applicable Gift Exemption Amount

Maximum GiftTax Rate

2008 through 2009 $1 million 45%

2010 $1 million 35%

2011 or later $1 million 55%

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Estate Taxes for U.S. Citizens and Resident Aliens

How does the estate tax work?

Assessed when assets are transferred at death

Applies to transfer of all worldwide assets

Tax is due within nine months of death

Estate is liable for any taxes due

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Lifetime Exemption Amounts and Estate Tax Rates for U.S. Citizens and Resident Aliens

Year Estate TaxExemption Amount

Maximum EstateTax Rate

2008 $2 million 45%

2009 $3.5 million 45%

2010 Unlimited 0%

2011 or later $1 million 55%

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Transfers to U.S. Citizen Spouse

Unlimited Marital Deduction

Permits unlimited amount of assets to be transferred between spouses free of gift or estate taxes

Only available if recipient spouse is U.S. citizen

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Resident Alien Similar to U.S. Citizen

Treated same as U.S. citizen for gift and estate tax purposes

Unlimited marital deduction depends upon spouse’s citizenship

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Non-U.S. Citizen Spouses Treated Differently Gifts or bequests to non-U.S. citizen spouse treated

differently even if person making transfer is U.S. citizen

Unlimited marital estate tax deduction generally disallowed unless transferred to Qualified Domestic Trust (QDOT)

In 2008, $128,000 annual exclusion allowed for gifts to non-U.S. citizen spouse

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QDOT Drawbacks

Strict QDOT requirements may limit flexibility

Delays, but does not avoid, payment of estate taxes

Distributions from QDOT generally subject to estate taxes

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Overview of Nonresident Aliens’ Gift and Estate Taxes Gift and estate tax rates same as those for U.S. citizens

Only real estate and tangible assets are not subject to gift taxes

Only U.S.-sitused assets are subject to estate taxes

Rules to determine if property is located in U.S. differ, depending on type of property and gift or estate tax applicability

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Overview of Nonresident Aliens’Estate Tax Only $60,000 can be sheltered from estate tax

Certain assets exempt from estate tax

Depending upon assets, substantial U.S. estate tax exposure can arise

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Example: Nonresident Alien Juan Valdivia $10 million in U.S. property and investments

No advanced planning

Death in 2008

Gross Estate Taxes ($4,380,800)Less Credit $13,000 Net Estate Taxes ($4,367,800)

Net U.S. Assets $5,632,200Amount of Estate Shrinkage 43%

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Planning Strategies for Non-U.S. Citizens Determining if and when taxes might apply

Taking advantage of available exclusions and exemptions

Considering gifting strategies

Planning for estate liquidity

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Life Insurance: A Tool That Provides Estate Liquidity Cash gifts can fund policy

Insurance proceeds are income tax–free

Policy can be structured to avoid estate inclusion

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Is Gift and Estate Tax Planning Applicable to Me? Are either you or your spouse a non-U.S. citizen?

Are you a Resident or Nonresident Alien?

Do you have a sizeable estate?

Do you have sizeable investments located in the U.S.?

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Transamerica Life Insurance Company, Transamerica Financial Life Insurance Company (collectively “Transamerica”), and their representatives do not give tax or legal advice. This material is provided for informational purposes only and should not be construed as tax or legal advice. You should rely solely upon your own independent advisors regarding your particular situation and the concepts presented here.

Discussions of the various planning strategies and issues are based on our understanding of the applicable federal tax laws in effect at the time of presentation. However, tax laws are subject to interpretation and change, and there is no guarantee that the relevant tax authorities will accept Transamerica’s interpretations. Additionally, this material does not consider the impact of applicable state laws upon clients and prospects.

Although care is taken in preparing this material and presenting it accurately, Transamerica disclaims any express or implied warranty as to the accuracy of any material contained herein and any liability with respect to it. This information is current as of October 2008.

Transamerica Financial Life Insurance Company is authorized to conduct business in the state of New York. Transamerica Life Insurance Company is authorized to conduct business in all other states.

OLA 1711 T 1008

Your Guide to Giftand Estate Planningfor Non-U.S. Citizens