You do not need to live in the United States to create U.S. estate-tax exposure. A non-U.S. investor can own shares, real estate or other assets treated as situated in the United States for federal estate-tax purposes.
The rules for a nonresident who is not a U.S. citizen differ sharply from the rules applying to a U.S. citizen or a person domiciled in the United States. The value and legal location of the assets matter, as does the owner’s domicile at death.
A U.S. brokerage account is not one asset. The estate-tax analysis looks through to what the account holds.
Start with domicile, not the income-tax return
Federal income-tax residency often turns on the green card and substantial presence tests. Estate and gift tax use a separate concept of domicile for individuals who are not U.S. citizens.
Domicile generally depends on residence and intent to remain. Relevant facts can include the family home, time spent in each country, immigration status, business ties, community connections, location of assets and estate documents.
A person can be a U.S. income-tax resident without being U.S. domiciled for estate-tax purposes, or may become domiciled before assuming it. This fact-specific question should be documented rather than guessed from a visa or day count.
What does “situs” mean?
Situs refers to the place where an asset is treated as located for a particular tax rule. For a nonresident noncitizen, U.S.-situated property can fall within the U.S. gross estate even when the owner lives abroad.
Common assets requiring review include:
- U.S. real estate
- Tangible personal property physically located in the United States
- Shares issued by U.S. corporations
- Interests connected to U.S. business or partnership structures
- Debt, deposits, insurance and retirement assets whose treatment depends on specific rules
Do not classify an asset from the broker’s address, trading currency or exchange alone. Direct shares in a U.S. corporation can have a different estate-tax result from shares in a foreign-domiciled fund that invests in the same U.S. companies.
The filing threshold can be surprisingly low
An executor for a nonresident noncitizen generally must file Form 706-NA when the value of U.S.-situated assets at death exceeds $60,000, subject to the detailed rules and treaty position. That filing threshold is far below the federal estate-tax filing threshold commonly discussed for U.S. citizens and domiciliaries.
The filing threshold is not the same as the final taxable amount. Deductions, debt allocation, treaty benefits and other calculations can affect the result. The form may still be required to establish the position.
See the current IRS guidance for estates of nonresidents who are not U.S. citizens.
Why a brokerage portfolio needs a security-level review
A portfolio may hold:
- Direct shares of U.S. companies
- U.S.-domiciled exchange-traded funds
- Foreign-domiciled funds holding U.S. securities
- U.S. government, corporate or foreign debt
- Cash deposits or money-market products
These holdings do not necessarily share the same situs treatment. Ask for a complete position list showing the legal issuer and domicile of every security. A portfolio summary labelled “U.S. equities” is not enough.
Real estate creates several layers of planning
U.S. real estate is generally U.S.-situated property. Before buying, consider:
- Who will own the property
- Whether it is personal-use, rental or business property
- How the purchase will be financed
- Income-tax and withholding consequences during ownership and sale
- Estate-tax exposure and probate administration
- Whether an entity or trust changes liability, tax or reporting
- How the plan works in the owner’s home country
No single ownership structure is best for every investor. An entity may solve one problem and create another, including corporate tax, branch tax, reporting, financing or personal-use complications. Review the structure before signing the purchase contract.
Treaties may change the result
The United States has estate or gift tax provisions with a limited group of countries. A treaty may provide credits, deductions, domicile tie-breakers or a proportionate unified credit, depending on the agreement and facts.
An income tax treaty does not automatically provide estate-tax protection. Confirm whether the relevant country has an estate or gift tax treaty and which taxes and assets it covers. The IRS maintains information on estate and gift tax treaties.
Debt and deductions need documentation
Debt does not always reduce the taxable U.S. estate dollar for dollar. The deductible amount can depend on whether the estate is treaty protected, the relationship between worldwide and U.S. assets, how the debt is secured and the Form 706-NA rules.
Keep loan agreements, mortgage statements, property valuations and evidence of the purpose and use of borrowed funds. Last-minute related-party debt without commercial support may not produce the expected result.
Transfer certificates can delay access
A U.S. financial institution or transfer agent may ask for an IRS transfer certificate before releasing U.S. assets from a nonresident estate. The estate may need to file Form 706-NA or provide documentation supporting a non-filing position.
This can create a practical liquidity problem for the family. Keep a clear asset schedule, beneficiary information, contact details for advisers and funds outside any potentially restricted account.
A practical investor review
- Confirm citizenship and likely domicile. Record the facts supporting the conclusion.
- List assets security by security. Identify the legal issuer, asset type and country of situs.
- Measure current exposure. Use realistic values and include jointly owned assets.
- Check treaty availability. Review the correct estate or gift tax agreement rather than assuming an income tax treaty covers the same issues.
- Review ownership structures. Model income, estate, gift, reporting and administration together.
- Coordinate the will and beneficiaries. Align the U.S. plan with documents in other countries.
- Plan liquidity. Consider tax, legal costs and delays in releasing assets.
Questions for the estate and tax advisers
- Am I likely U.S. domiciled for estate and gift tax?
- Which holdings are U.S.-situated?
- Would Form 706-NA be required at current values?
- Does an estate or gift tax treaty apply?
- How would debt and deductions be allocated?
- Would a proposed trust, company or insurance arrangement work in both countries?
- Could the family face a transfer-certificate delay?
- Do my will, powers of attorney and beneficiary designations support the plan?
Common mistakes
- Assuming non-U.S. residence removes all U.S. estate-tax risk
- Applying the U.S. citizen exemption to a nonresident noncitizen
- Treating every security in a U.S. brokerage account the same
- Assuming an income tax treaty covers estate tax
- Buying U.S. property before reviewing ownership
- Ignoring estate administration and liquidity
- Using an offshore structure without checking U.S. reporting
The practical takeaway
Cross-border estate planning starts with an asset-level situs map and a well-supported domicile assessment. It should happen before acquiring U.S. assets or changing ownership.
Connect this review with your U.S. will and estate documents. The America Financial Readiness service can help organize the questions and records for specialist advice.
