Navigating US Gift & Estate Taxes for Non-Resident Non-Citizens: Key Rules, Risks, and Planning Opportunities
- Malissa Marshall, CFP®, MS Tax, EA
- Sep 19
- 4 min read
When non-resident non-citizens (NRNCs) hold assets located in the United States — known as “US situs” assets — they face a patchwork of transfer tax rules that can be daunting even for experienced global professionals. This post aims to bridge the technical divides, clarifying what is taxed and how, while highlighting sophisticated planning opportunities that can optimize both tax outcomes and family security.
What Counts as a US Situs Asset?
For US transfer tax purposes, NRNCs are only subject to estate and gift taxes on assets considered “situated” in the United States. This definition is broader and more nuanced than often assumed:
Asset Type | Estate Taxable? | Gift Taxable? | Notes |
US real estate & tangible property | Yes | Yes | Includes art and valuables physically located in the US |
US stocks (even in foreign accounts) | Yes | No | Unique divergence; stocks are not subject to gift tax |
US corporate bonds | Usually | No | "Portfolio interest" exclusion may apply |
US bank deposits (no US business) | No | No | Excludes deposits unless connected to a US business |
Life insurance on NRNCs | No | No | Proceeds generally not considered US situs |
Foreign stocks & bonds | No | No | Regardless of custodian location |
Cash in US safety deposit box | Yes | Yes | Treated as tangible personal property |
Key Planning Note: The divergence between estate and gift tax treatment is a classic pitfall. For instance, outright gifts of US stocks are exempt from US gift tax, yet those same stocks may trigger estate tax if held at death.
The Harsh Reality of US Transfer Tax for NRNCs
Estate Tax Exemption: NRNCs enjoy only a $60,000 lifetime exemption against US situs assets, compared to $13.99 million for U.S. citizens and domiciliaries (2025).
Tax Rate: The top marginal tax rate on estates and gifts can reach 40%.
Annual Gift Exclusions: The standard exclusion is $19,000 per donee per year (2025), with a special $190,000 per year exclusion for gifts to non-citizen spouses.
Charitable Gifts: Deductions are only available if donations are made to qualifying US charities.
The Domicile Puzzle: Residency, Intent, and Tax Consequences
“Domicile” is a legal concept distinct from simple residency or visa status. It hinges on both physical presence and intent to remain indefinitely in the US. This distinction is crucial because domicile status determines whether you are taxed on worldwide assets (if domiciled) or only on US situs assets (if not).
For example, a foreign executive on a multi-year, but time-limited assignment in the US, maintaining strong ties abroad, might be a resident for income tax but remain non-domiciled for transfer tax purposes, substantially affecting planning options and exposure.
Tax Treaties: Limited Relief, Highly Technical Applications
The US holds estate and gift tax treaties with just 17 countries. Some treaties provide a “pro-rata exclusion” allowing a portion of the larger US exemption to apply based on the share of assets sited in the US. However:
Not all asset categories (e.g., interests in US partnerships) qualify for treaty relief.
Residency or nationality requirements are strict and must be carefully documented.
Conflicts with civil law inheritance rules frequently limit treaty application or effectiveness.
Practical takeaway: Treaties are important to review but rarely eliminate the need for prudence and planning.
Planning Opportunities: Blending Tax and Financial Strategies
Pre-Move Restructuring
Begin by identifying all US situs assets. For tangible property, consider divesting or retitling assets before establishing US presence to minimize exposure. Structuring ownership through foreign entities can sometimes convert assets into a non-US situs status, easing transfer tax burdens.
Lifetime Gifting Strategies
Whenever possible, transfer US stocks and other non-gift taxable assets during life to take advantage of annual exclusions and avoid surprise estate tax hits. Coordinating the timing of gifts — especially for expatriates entering or leaving the US — can open favorable tax windows.
Addressing Cross-Border Family Dynamics
Align ownership and beneficiary designations thoughtfully. Children or spouses with US or dual citizenship add complexity, potentially drawing assets into the US tax net. Be mindful of reporting obligations such as IRS Form 3520, required for large foreign gifts or inheritances to US persons.
Post-Mortem Planning: Qualified Domestic Trusts (QDOTs) and Alternatives
Non-citizen surviving spouses typically do not qualify for unlimited marital deductions unless assets are placed in a QDOT. While QDOTs provide tax relief and income for the surviving spouse, they require diligent trustee selection and ongoing administration.
Integrating Country-Specific and Civil Law Considerations
Foreign forced heirship laws, matrimonial property regimes, and probate processes can complicate transfers. Your financial and estate plan must comprehensively reflect these realities, ensuring consistent titling, documentation, and compliance across borders.
The Bottom Line: Planning with Purpose
Cross-border US estate and gift tax planning is not merely a technical exercise — it’s a thoughtful process rooted in your family’s future, preserving wealth, and thoughtfully minimizing legal and tax burdens. Starting early expands your options and empowers you to navigate complexity with confidence and calm.
If you’re navigating the challenges of US transfer taxes as a non-resident non-citizen or advising clients who are, having a clear, integrated plan can make a world of difference.
To explore strategic approaches tailored to your situation, consider scheduling a conversation with an experienced advisor.
This content is for informational and educational purposes only and is not intended as legal, tax, or financial advice. The information may not be applicable to your specific circumstances or current regulatory changes. No client relationship is created by reading this blog. Always consult a qualified legal, tax, or financial professional for advice tailored to your individual situation and jurisdiction.
