Estate & Gift Taxation

Sanders US Tax Services exclusively provides U.S. estate and gift tax services for non-residents.

US Estate & Gift Taxation

Sanders US Tax Services provides U.S. estate and gift tax services for non-residents and international families with U.S. connections.

Without proper planning, the estate of a U.S. resident or a non-resident alien may face significant U.S. estate tax implications. Similarly, lifetime transfers involving U.S.-situated assets may trigger U.S. gift tax considerations. Even when no tax is ultimately due, filing an estate or gift tax return may still be required—especially in cross-border situations.

The estate tax is a tax on the transfer of property at death. U.S. citizens are generally subject to U.S. estate taxation regardless of where they live and regardless of where their assets are located. Individuals who are not U.S. citizens but who are residents of the United States for estate tax purposes may likewise be subject to U.S. estate taxation on their worldwide property.

Non-U.S. citizens who are not resident in the United States may still be subject to U.S. federal estate taxation with respect to U.S.-situated assets. U.S.-situated assets can include U.S. real estate, tangible personal property located in the United States, and securities of U.S. companies.

The gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. In international circumstances, reporting and filing requirements can apply even when there is no gift tax liability.

Questions?

If you have any questions, our team is available by telephone or email.

U.S. Citizens

U.S. citizens are generally subject to U.S. estate and gift tax whether they reside in the United States or abroad and whether their assets are located in the United States or elsewhere. The U.S. generally taxes the person making the gift or the estate of the decedent, rather than the recipient.

U.S. Residents

Individuals who are resident in the United States for estate and gift tax purposes are generally subject to tax on their worldwide property. Estate tax residency is based on domicile, which is determined by physical presence and intent and can differ from income tax residency. As a result, cross-border families can face unexpected filing obligations or exposure.

Depending on the facts and the asset mix, U.S. estate and gift tax exposure can often be mitigated through advance planning.

Non-Residents

Individuals who are not U.S. citizens and are not resident in the United States may still be subject to U.S. federal estate taxation with respect to U.S.-situated assets, such as U.S. real estate, tangible personal property located in the United States, and securities of U.S. companies.

A foreign estate would generally be required to file Form 706-NA.

For the foreign estate's U.S. assets to be released, an Estate Tax Closing Letter is generally required.

U.S. Estate Tax on Foreign Estates

The estate of an individual who, at the time of death, was not a U.S. citizen and not a resident of the United States may still be subject to U.S. federal estate taxation with respect to U.S.-situated assets, including U.S. real estate, tangible property located in the United States, and securities of U.S. companies.

The estate tax concept of residency differs from the income tax concept of residency. In other words, someone who is not a U.S. citizen and not a U.S. resident for federal income tax purposes can still be treated as a U.S. resident for estate tax purposes, and the opposite is also possible. For estate tax purposes, residency is generally tied to domicile, which is determined based on physical presence and intent.

Estate and gift tax rules for non-americans resident in the United States

Just like U.S. citizens, individuals resident in the United States for estate and gift tax purposes are generally subject to tax on their worldwide property. Because estate tax residency is determined based on domicile (physical presence and intent), the analysis is more subjective than for income tax residency.

Depending on the facts, U.S. estate and gift tax exposure can often be reduced through relatively simple advance planning techniques.

What are the effects of Estate Tax Treaties?

The United States has concluded Estate & Gift Tax Treaties with various countries. For an overview and the current status of the treaties, click here. Treaties may be helpful in cases where two (or more) countries assert that a person is domiciled in that country for estate tax purposes. For example, the United States may assert that a non-American is domiciled in the United States whereas another country, such as Germany, may assert that the same person is domiciled in Germany. In such as situation, the Estate & Gift Tax Treaty between the United States and Germany allocates the right to tax either to the United States or Germany, thus solving the problem of potential double taxation. This is called the tie-breaking rule. However, not all treaties concluded by the United States include a tie-breaking rule. For example, the Estate & Gift Tax Treaty between the United States and Switzerland does not include a tie-breaking rule. Therefore, in a situation involving the Switzerland, the treaty is not helpful in the allocation of taxing rights.

U.S. taxation of foreign estates

Even if a decedent was not a U.S. citizen and not a resident of the United States, the estate may still be subject to U.S. federal estate taxation with respect to U.S.-situated assets. U.S.-situated assets can include American real estate, tangible personal property located in the United States, and securities of U.S. companies.

As noted above, estate tax residency differs from income tax residency. For estate tax purposes, residency is generally tied to domicile, which is determined based on physical presence and intent.

Estate taxation of U.S. citizen with a foreign spouse

U.S. citizens are generally subject to U.S. estate and gift tax regardless of where they live and regardless of where their assets are located. The U.S. generally taxes the person making the gift or the estate of the decedent, rather than the recipient.

Gifts or bequests to a foreign spouse can raise U.S. estate and gift tax issues. Relatively simple advance planning techniques can often help mitigate U.S. estate and gift tax exposure, depending on the circumstances.

Special rules for gifts and requests from covered expatriates

The expatriation tax provisions under Internal Revenue Code (IRC) sections 877 and 877A apply to U.S. citizens who have renounced their citizenship and certain long-term residents (green card holders) who have ended their U.S. resident status for federal tax purposes.

Covered Expatriate

Exit Tax

Gift or request from a covered expatriate

U.S. Estate Tax for U.S. Citizens with a Foreign Spouse

U.S. citizens are subject to U.S. estate and gift tax, no matter whether they reside in the United States or abroad, and no matter whether their property is located in the United States or elsewhere. Unlike many other countries, the U.S. generally does not impose a tax on the individual receiving a gift or inheritance, but rather the individual making the gift or the estate of the decedent.

A gift or inheritance received by the foreign spouse of a U.S. citizen is subject to U.S. estate and gift taxation. Relatively simple advance planning techniques can often help to mitigate U.S. estate and gift tax.

Frequently asked questions.

What is the U.S. estate tax?

The estate tax applies to transfers of property at death and may affect U.S. citizens, U.S. residents, and non-residents with U.S.-situated assets.

What is the U.S. gift tax?

The gift tax can apply to lifetime transfers where less than full value is received in return. Filing can be required even when no tax is due.

Who is considered a U.S. resident for estate tax purposes?

Estate tax residency is based on domicile, which depends on physical presence and intent and may differ from income tax residency.

What counts as U.S.-situated assets for non-residents?

Common examples include U.S. real estate, tangible personal property located in the United States, and securities of U.S. companies.

When is Form 706-NA required?

Foreign estates with U.S.-situated assets generally must file Form 706-NA, even when tax may not ultimately be owed.