Understanding U.S. Estate Tax for Non-Residents: What Foreign Owners of U.S. Real Estate Must Know (Part 2)

If you’ve read Part 1 of this article, you now understand the significant estate tax exposure faced by non-resident aliens who own U.S. real estate. In Part 2, we focus on solutions—how to protect your assets, avoid probate, and minimize or eliminate tax liability.

Planning Options for Non-Treaty Country Residents

If your country does not have an estate tax treaty with the U.S., your best protection comes from proactive, jurisdiction-sensitive planning.

Key options include:

• Transferring the U.S. property into an irrevocable foreign grantor trust
• Using a foreign corporation, with careful attention to FIRPTA and U.S. tax treatment
• Considering lifetime gifting strategies to reduce exposure

Each of these has trade-offs:

• A foreign trust can eliminate estate tax but must be carefully drafted to avoid income tax or FIRPTA complications
• A foreign corporation removes estate tax risk but increases income tax at sale and adds withholding obligations

These structures must be customized based on the property, family dynamics, and home country rules.

Simplified Planning for Treaty Country Residents

If you reside in a treaty country, your options are broader and often simpler.

While you still face the U.S. estate tax, the treaty may allow you to:

• Claim a portion or all of the $13.61M exemption
• Apply foreign tax credits to reduce or eliminate double taxation

In many cases, all you may need is:

• A properly structured revocable trust to avoid U.S. probate
• A residency certification from your home country’s tax authority
• Accurate and timely IRS estate filings with treaty references

But even in these cases, failure to plan or file correctly can still trigger unnecessary tax.

Irrevocable Trusts and Estate Tax Protection

An irrevocable foreign grantor trust can shield your U.S. real estate from estate tax by removing it from your taxable estate.

Key benefits:

• Avoids U.S. estate tax entirely if properly structured
• Keeps ownership out of U.S. probate
• Maintains long-term privacy and control

However, the trust must:

• Be created and funded well before death
• Be treated as a foreign trust for U.S. tax purposes
• Avoid classification as a U.S. real property holding company
• Comply with disclosure rules under FATCA and other U.S. laws

Working with a legal team experienced in cross-border trust planning is essential.

How to Avoid Probate While Minimizing Exposure

Beyond tax planning, avoiding probate is critical. U.S. probate is public, expensive, and time-consuming.

Ways to avoid probate:

• Use a revocable trust (ideal for treaty residents)
• Use an irrevocable trust or foreign entity (for non-treaty residents)
• Title property in the name of the trust or entity from the start

Avoid holding U.S. real estate in your individual name. Upon death, it will trigger:

• Probate proceedings in the U.S.
• Delays in transferring title to heirs
• Possible estate tax even if below $60,000 (due to valuation and IRS audit risk)

How Bianchi Fasani Green Law Helps Foreign Investors

At Bianchi Fasani Green Law PLLC, we advise international clients who own or plan to acquire U.S. real estate, especially in Florida.

Our services include:

• Drafting foreign and domestic trusts to avoid U.S. estate tax
• Coordinating with tax professionals in your home country
• Creating corporate or entity structures for holding U.S. real estate
• Preparing and filing IRS Form 706-NA and treaty disclosures
• Avoiding probate through trust and title planning

We tailor every structure to match your nationality, residency, and goals.

Final Thoughts

If you are a non-U.S. person who owns real estate in the United States, you face:

• A tiny $60,000 estate tax exemption
• Estate tax rates of up to 40%
• U.S. probate court jurisdiction

If you are a resident of a treaty country, you may qualify for expanded exemptions—but you still need to plan for probate.

If your country does not have a treaty, an irrevocable trust may be your best defense against devastating tax liability.

Do not wait until it’s too late. Schedule a consultation with Bianchi Fasani Green Law at bfg.law and let us help you:

• Protect your U.S. assets
• Reduce or eliminate estate tax
• Avoid probate delays
• Leave your property to loved ones, not the IRS

Secure your future. Protect your legacy. Start planning today.