Article
Understanding U.S. gift and estate tax issues for non-U.S.. Persons with U.S. assets
Oct. 29, 2025 · Authored by Brittain Cunningham and Stuart Myhill
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-U.S. persons now hold significant financial, real estate, and physical property located in the United States, making U.S. gift and estate tax rules a critical consideration in their wealth transfer strategies.
Explore key tax considerations for non-U.S. individuals who own U.S.-situated assets or have U.S. beneficiaries, including critical concepts, planning opportunities, and compliance obligations with the following insights.
What causes U.S. gift and estate tax exposure for non-U.S.. Persons?
The U.S. tax system imposes estate and gift taxes on transfers of property by individuals. For non-citizen non-U.S. U.S. domiciled persons, only assets considered U.S. situs are subject to U.S. estate and gift tax. This contrasts with U.S. citizens or U.S. domiciled individuals, whose worldwide assets are subject to these taxes.
Following are some key definitions.
U.S. domicile
A complex, fact-specific determination based on an individual’s residence, intent to remain, and other ties to the U.S. U.S. citizens and U.S. domiciliaries are subject to estate and gift tax on worldwide assets.
Non-U.S.. Domicile
Individuals who aren’t U.S. citizens and who don’t meet the domicile criteria are taxed only on U.S. situs assets.
U.S. situs assets
Assets considered located in or connected to the U.S. under U.S. tax rules. U.S. situs assets include U.S. real estate, tangible personal property physically located in the U.S., certain intangible assets, and U.S. corporate stock and other financial assets.
Estate and gift tax exemption thresholds: Stark differences
One of the most significant distinctions between U.S. domiciliaries and non-U.S. domiciliaries is the amount of exemption available.
- U.S. citizens and U.S. 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-U.S. citizens that are non-U.S. domiciled individuals have a much lower exemption of only $60,000, not adjusted for inflation, applicable solely to U.S. situs assets. This limited exemption often results in substantial estate tax exposure for non-U.S. persons with U.S. situs assets.
What assets are considered U.S. situs?
Understanding which assets are U.S. situs is crucial for tax planning.
Real property
U.S.-located real estate, such as homes, land, and mineral rights, is unequivocally U.S. situs and subject to U.S. estate and gift tax.
Tangible personal property
Movable assets, such as artwork, jewelry, and automobiles, are U.S. situs if physically located in the U.S. at the time of death or gift.
Corporate stocks
Stock issued by U.S. corporations is U.S. situs for estate tax purposes but not for gift tax purposes. Notably, mutual funds or money market funds structured as U.S. corporations also count as U.S. situs assets.
Bonds and debt
Debt issued by U.S. persons is U.S. 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 U.S. situs.
Intangible assets
Ownership interests in U.S. LLCs, trademarks enforceable in the U.S., and annuity contracts with U.S. entities are generally U.S. situs for estate tax purposes but not for gift tax purposes.
Cash
Cash, in physical form, or transferred physically in the U.S. is U.S. situs property. There’s some uncertainty around U.S. 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-U.S. persons we recommend consulting a U.S. tax advisor on how to minimize U.S. situs cash.
Gift tax considerations for non-U.S.. Persons
The U.S. gift tax applies to transfers of property during an individual’s lifetime. For non-U.S. domiciliaries, gift tax applies only to gifts of U.S. 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 U.S. 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-U.S. citizens domicile status is pivotal in determining U.S. 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 U.S. or non-U.S. domicile status.
Due to the significant discrepancy between lifetime exemptions for U.S. domiciled individuals and non-U.S. domiciled individuals — $60,000 versus $15 million — whether an individual will pay less U.S. estate tax depends on the value and location of their assets. It also depends on the alternative domicile for the individual. If not the U.S., 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 U.S. domicile, documentation of intent is key to supporting either a U.S. or non-U.S. domicile.
Other planning strategies
- Asset planning. Where possible, U.S. situs assets may be exchanged for non-U.S. 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 U.S. 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 U.S.-UK treaty allows UK residents to claim the full U.S. exemption amount, mitigating the limited $60,000 exemption for non-U.S. 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 U.S. compliance for non-U.S. estates with U.S. 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-U.S. decedent’s heirs.
Filing form 706-NA
The estate executor or personal representative of a non-U.S. person who owns U.S. situs assets at death is required to file Form 706-NA, the U.S. 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 U.S. tax identification number
A critical step in the filing process is securing a U.S. Tax Identification Number for the decedent’s estate if the individual did not already have a U.S. 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 U.S. 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 U.S. bank account
Having a U.S. 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 U.S. 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 U.S. 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.
Related sections
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.