As the world experiences significant generational transfer of wealth from the Baby Boomer generation to younger cohorts such as Gen X, Millennials, and Gen Z, cross-border estate planning has become increasingly important.

Many non-US persons now hold significant financial, real estate, and physical property located in the United States, making US gift and estate tax rules a critical consideration in their wealth transfer strategies.

Explore key tax considerations for non-US individuals who own US-situated assets or have US beneficiaries, including critical concepts, planning opportunities, and compliance obligations with the following insights.

What Causes US Gift and Estate Tax Exposure for Non-US Persons?

The US tax system imposes estate and gift taxes on transfers of property by individuals. For non-citizen non-US US domiciled persons, only assets considered US situs are subject to US estate and gift tax. This contrasts with US citizens or US domiciled individuals, whose worldwide assets are subject to these taxes.

Following are some key definitions.

US Domicile

A complex, fact-specific determination based on an individual’s residence, intent to remain, and other ties to the US. US citizens and US domiciliaries are subject to estate and gift tax on worldwide assets.

Non-US Domicile

Individuals who aren’t US citizens and who don’t meet the domicile criteria are taxed only on US situs assets.

US Situs Assets

Assets considered located in or connected to the US under US tax rules. US situs assets include US real estate, tangible personal property physically located in the US, certain intangible assets, and US corporate stock and other financial assets.

Estate and Gift Tax Exemption Thresholds: Stark Differences

One of the most significant distinctions between US domiciliaries and non-US domiciliaries is the amount of exemption available.

• US citizens and US domiciled individuals benefit from a unified estate and gift tax exemption of $15 million, adjusted for inflation as of 2026. This exemption applies to the combined total of taxable gifts made during life and assets held at death.
• Non-US citizens that are non-US domiciled individuals have a much lower exemption of only $60,000, not adjusted for inflation, applicable solely to US situs assets. This limited exemption often results in substantial estate tax exposure for non-US persons with US situs assets.

What Assets Are Considered US Situs?

Understanding which assets are US situs is crucial for tax planning.

Real Property

US-located real estate, such as homes, land, and mineral rights, is unequivocally US situs and subject to US estate and gift tax.

Tangible Personal Property

Movable assets, such as artwork, jewelry, and automobiles, are US situs if physically located in the US at the time of death or gift.

Corporate Stocks

Stock issued by US corporations is US situs for estate tax purposes but not for gift tax purposes. Notably, mutual funds or money market funds structured as US corporations also count as US situs assets.

Bonds and Debt

Debt issued by US persons is US situs for estate tax purposes but not for gift tax purposes. However, debt that meets the portfolio interest exception of Section 871(h)(2) is not US situs.

Intangible Assets

Ownership interests in US LLCs, trademarks enforceable in the US, and annuity contracts with US entities are generally US situs for estate tax purposes but not for gift tax purposes.

Cash

Cash, in physical form, or transferred physically in the US is US situs property. There’s some uncertainty around US situs classification for cash held in a bank account versus brokerage account and when transferring cash via check, ETF, or wire transfer. When planning a cash gift or for estate tax planning for non-US persons we recommend consulting a US tax advisor on how to minimize US situs cash.

Gift Tax Considerations for Non-US Persons

The US gift tax applies to transfers of property during an individual’s lifetime. For non-US domiciliaries, gift tax applies only to gifts of US situs assets. Annual gift exclusions allow tax-free gifts up to $19,000 per recipient in 2025, annually indexed for inflation, regardless of domicile. Gifts to a US citizen spouse are unlimited and exempt from gift tax, but gifts to non-citizen spouses have a lower annual exclusion limit that is approximately $190,000 in 2025, annually indexed for inflation.

The Importance of Domicile and Planning Opportunities

For non-US citizens domicile status is pivotal in determining US gift and estate tax exposure. Since domicile is a facts-and-circumstances test without a bright-line rule, individuals with uncertain status may benefit from careful planning and documentation to support their US or non-US domicile status. 

Due to the significant discrepancy between lifetime exemptions for US domiciled individuals and non-US domiciled individuals—$60,000 versus $15 million—whether an individual will pay less US estate tax depends on the value and location of their assets. It also depends on the alternative domicile for the individual. If not the US, does the foreign country they want to live in have a more advantageous estate or inheritance tax regime? Since intent to stay is an important factor in determining US domicile, documentation of intent is key to supporting either a US or non-US domicile.

Other Planning Strategies

• Asset planning. Where possible, US situs assets may be exchanged for non-US situs assets.
• Use of trusts and entities. Placing assets in trusts or other legal entities can be a strategy to change the situs of assets.
• Lifetime gifts. Utilizing the annual gift exclusion and lifetime gifting can help reduce the taxable estate. This strategy can be particularly effective when the value of an asset, such as a closely held business, is anticipated to increase significantly in the future.

Treaties Can Provide Relief

The US has estate tax treaties with 15 countries, including the UK, which can increase the exemption amount and provide relief from double taxation. For example, the US-UK treaty allows UK residents to claim the full US exemption amount, mitigating the limited $60,000 exemption for non-US domiciliaries. However, treaty benefits require careful compliance and may necessitate disclosure of worldwide assets. Since there are only 15 countries with estate tax treaties it’s quite common that a treaty will not be available.

Practical Considerations

Below are some practical considerations for US compliance for non-US estates with US situs assets. It’s important to keep in mind that financial institutions and intermediaries, such as real estate title companies, often enforce estate tax compliance by requiring proof that estate tax has been paid before transferring title to a non-US decedent’s heirs.

Filing Form 706-NA

The estate executor or personal representative of a non-US person who owns US situs assets at death is required to file Form 706-NA, the US Estate Tax Return for Nonresident Aliens, within nine months of the date of death. This filing deadline is strict, with an option to request a six-month extension; however, it’s important to note that this extension applies only to the time allowed for filing the return, not for payment of any estate tax due. Taxes must be paid by the original nine-month deadline to avoid interest and penalties on late payments.

Because estate administration and asset valuation can be complex and time-consuming—often taking years—early involvement of the estate executor, personal representative, or tax advisors is crucial to ensure timely filing and payment. Delays in filing or payment can result in significant penalties and interest charges.

Obtaining a US Tax Identification Number

A critical step in the filing process is securing a US Tax Identification Number for the decedent’s estate if the individual did not already have a US tax ID, either an ITIN or SSN. The tax ID is essential for IRS communications, filing the estate tax return, and processing any payments or refunds. For nonresident estates of decedents who didn’t have a US social security number or ITIN, the IRS will assign an Internal Revenue Services Number (IRSN) to the estate when either an extension is filed, or the estate tax return is filed.

Maintaining a US Bank Account

Having a US bank account in the decedent’s or the estate’s name can help facilitate the payment of estate taxes and handling of other administrative expenses. Without a US bank account, making payments to the IRS or receiving refunds can be complicated and slow, potentially causing cash flow issues during estate administration.

State-Level Taxes and Additional Compliance

In addition to federal estate tax obligations, some US states impose their own estate or inheritance taxes, which may have different filing requirements and deadlines. Executors should be aware of these state-level obligations to ensure full compliance.

We’re Here to Help

For help with estate and gift planning for non-US persons, please contact your firm professional.

Additional Resources

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• Tax Planning Resources