Understanding U.S. Estate Tax for Non-Residents: What Foreign Owners of U.S. Real Estate Must Know (Part 1)

What Is the U.S. Estate Tax for Non-Residents?

The U.S. estate tax is a federal tax on the transfer of a deceased person’s assets. For non-U.S. residents, this tax applies only to assets located within the United States, including real estate, tangible property, and certain financial assets.

This is known as the “U.S.-situs asset” rule, and it creates serious tax exposure for non-U.S. persons who own even a single property in the U.S.

The estate tax is entirely separate from capital gains or income tax. It applies at death, not at sale, and can catch families off guard if not properly planned for.

The $60,000 Estate Tax Exemption for Non-U.S. Domiciliaries

U.S. citizens and domiciled residents enjoy a very high estate tax exemption — currently $13.61 million (2024). But non-U.S. domiciliaries get only a $60,000 exemption for U.S.-situs assets.

This means:

• If you own U.S. real estate worth $500,000
• Only the first $60,000 is exempt
• The remaining $440,000 is subject to estate tax at progressive rates up to 40%

Many families wrongly assume estate tax won’t apply unless their total global wealth is high. But for non-residents, it only takes one modest condo to create a major estate tax liability.

Countries with Estate Tax Treaties: A Major Advantage

Fortunately, the U.S. has entered into estate and gift tax treaties with certain countries. These treaties help eliminate or reduce double taxation and, importantly, often allow foreign residents to claim a proportional share of the full U.S. exemption.

Countries with estate tax treaties include:

• United Kingdom
• Germany
• France
• Italy
• Canada
• Netherlands
• Switzerland
• Australia
• Japan
• South Africa
• Norway
• Finland
• Austria

Residents of these countries may be able to claim the same exemption a U.S. resident would — or at least a pro-rata version — if they plan accordingly and file the right forms.

However, this is not automatic. You must:

• Prove tax domicile in a treaty country
• Claim treaty benefits on IRS Form 706-NA
• Work with U.S. legal counsel to structure your estate accordingly

Without planning, your heirs may still face the full U.S. tax despite the treaty.

How the U.S. Estate Tax Is Calculated

The U.S. estate tax on non-residents is based on the fair market value of their U.S. assets at death. Deductions are limited and the exemption is small.

Tax rates range from 18% to 40%, depending on the taxable amount. The IRS expects payment within 9 months of death or an extension request with interest and penalties.

Example:

• A non-resident dies owning a $1.2M home in Florida
• After the $60,000 exemption, $1,140,000 is taxable
• Estate tax owed: potentially $400,000 or more

And until that tax is paid and probate is complete, the heirs may be unable to transfer or sell the property.

Why You Need an Estate Plan If You Own U.S. Real Estate

If you are not a resident of a treaty country, your estate could lose up to 40% of your U.S. property’s value.

Without a plan:

• Your heirs face U.S. probate (slow and public)
• They may be forced to sell the property just to pay the tax
• Delays and disputes are common, especially if there are heirs in multiple countries

You absolutely need an estate plan. And for non-resident property owners, that often means:

• Creating an irrevocable trust to remove the property from your taxable estate
• Using a compliant foreign holding structure
• Coordinating U.S. and foreign legal strategies

In Part 2 of this article, we will explain:

• How irrevocable trusts protect your estate
• Why probate avoidance is essential for foreigners
• The difference in planning for treaty and non-treaty countries

How Bianchi Fasani Green Law Helps Foreign Investors

At Bianchi Fasani Green Law PLLC, we work with foreign nationals from across the globe who own—or are planning to invest in—U.S. real estate.

From our offices in Miami and Key Biscayne, we guide clients through:

• Cross-border estate tax planning
• Structuring irrevocable trusts that comply with U.S. and foreign law
• Coordinating with foreign advisors on treaty-based exemptions
• Preparing all necessary IRS documentation and filings
• Protecting real estate from probate, taxes, and delays

Whether you’re buying your first U.S. property or reviewing an existing structure, we offer tailored strategies to protect your assets and your family.

Final Thoughts

If you are a non-U.S. resident who owns property in the U.S., you are subject to one of the most aggressive estate tax systems in the world—with only a $60,000 exemption unless protected by a treaty.

✅ If your country has a treaty: You may be able to access a portion of the U.S. exemption, but still need probate planning.
❌ If your country has no treaty: You urgently need an estate plan to avoid losing up to 40% of your U.S. assets.

The right time to plan is before anything happens.

📞 Contact us at bfg.law to schedule your consultation.
Protect your legacy. Shield your real estate. Secure your family’s future.

Stay Tuned for Part 2: How to Protect Your U.S. Property from Estate Tax and Probate