Probate & Trust Law Section Conference Manual ... - Minnesota CLE

The US State Department lists the various treaties, conventions and protocols that have the force of law
in the “Treaties in Force” document. The U.S. Treasury Department also lists and provides electronic
copies of tax protocols, treaties, and conventions entered into force since 1996, along with any
technical explanations or joint committee remarks.
A clearly recognized marital deduction, allowed under treaty, is a limited marital deduction under the
1995 protocol amending the 1980 United States‐Canada Tax Convention.
Note paragraph 4, Article 19 of Protocol 3, A Revised Protocol Amending the 1980 Tax Convention with
Canada (1995).
4. The amount of the credit allowed under paragraph 3 shall equal the lesser of
(a) The unified credit allowed under paragraph 2 or under the law of the United
States (determined without regard to any credit allowed previously with respect to
any gift made by the individual), and
(b) The amount of estate tax that would otherwise be imposed by the United States
on the transfer of qualifying property.
So does this treaty trump federal statute? The general rule is last in time: whichever is put into
effect last, trumps the other. Any theoretical controversy regarding whether the treaty
overrules the tax code is practically resolved by the IRS. In the instructions for the Federal
Estate Tax Return, the IRS directs filers to report a marital deduction, taken under this treaty, in
line 15 of the return.
Although the instructions only reference the Canadian treaty, arguably there are other treaties
that also create a marital deduction. See, for example, the Treasury Department’s technical
explanation of the 1998 protocol to the 1980 Convention between the United State of America
and the Federal Republic of Germany for the Avoidance of Double Taxation with Respect to
Taxes on Estates, Inheritances, and Gifts, which states that it also grants a limited marital
deduction.
While a QDOT may be recommended for many clients with a non‐citizen spouse, a good estate
planner will inquire into the current size of estate, likely increase in estate, presence of marital
deduction through applicable treaties, and likelihood that the non‐citizen spouse will acquire
US citizenship before binding your client’s estate to a QDOT plan.
9. A Minnesota court will not appoint a foreigner as guardian.
Perhaps they will.
One of the most common questions I hear from practitioners is whether a Minnesota court would
consider appointing a non‐resident as a guardian which would have the practical effect of moving the
children out of the United States. The practical question boils down to, “Is there any point to naming
the foreign person my clients want to take their place if needed, as guardian?”
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