Ashford International Law P.C.

The federal estate and gift tax does not reach everyone in the same way. Two questions decide the exposure. The first is whether the person making the transfer is a United States person for transfer tax purposes. The second is where the transferred property is situated. The first question turns on citizenship and domicile, and not on residence, which is a separate concept used for income tax. The distance between the answers is measured in millions of dollars.

Three categories, not two

United States citizens are within the system wherever they live. A citizen who has not set foot in the country for forty years is taxed on worldwide assets in the same way as one who has never left.

Non-citizens who are domiciled in the United States are treated like citizens for nearly every purpose. Their worldwide estates fall within the US estate tax, and their worldwide gifts fall within the US gift tax.

Everyone else, described in the statute as a nonresident who is not a citizen of the United States and referred to here as a non-domiciliary, is taxed only on property with a United States situs. The trade-off is that the exemption available to this group is very small.

Position in 2026	Citizens and US domiciliaries	Non-domiciliaries
Estate tax reach	Worldwide assets	US-situs assets only
Estate tax exemption	$15,000,000	$60,000
Gift tax reach	Worldwide gifts	US real property and US tangible property only
Lifetime gift exemption	$15,000,000, shared with the estate exemption	None
Annual gift exclusion	$19,000 per recipient	$19,000 per recipient
Portability of the unused exemption to a surviving spouse	Available	Not available
Top rate	40 percent	40 percent

The $15,000,000 figure took effect in 2026 and is indexed for inflation in later years. The $60,000 figure is not indexed. It has stood since 1988 and has lost most of its value in the decades since. A treaty will frequently replace it with a far larger amount, which is discussed below.

Domicile is not residence

A person acquires a domicile in the United States by living here, for however brief a period, with no definite present intention of moving away. Two elements are therefore required: physical presence, and an intention that does not point elsewhere. Neither alone is sufficient. A person who intends to remain but has never arrived is not domiciled here, and a person who is physically present but intends to leave at a fixed point is not domiciled here either.

Domicile is not the same as residence for income tax. The income tax tests are mechanical: lawful permanent residence, or the substantial presence day count. The transfer tax test is not mechanical at all. The two systems can and often do produce different answers for the same person in the same year. A green card holder who has retired abroad may remain a US income tax resident while ceasing to be a US domiciliary. A person on a temporary visa who has in fact settled here, bought a house and enrolled the children in school may be a US domiciliary while the immigration file still describes the stay as temporary.

A person may hold several residences at once. A person has only one domicile at a time, and it persists until a new one has been acquired. Someone who leaves the United States intending to settle in a country he has not yet chosen remains domiciled here in the meantime.

How domicile is determined in practice

There is no checklist and no single controlling fact. The determination is made on the whole record, and the record is usually assembled after death, by people who were not present for any of it. The factors that carry weight include:

• statements of intention, in visa applications, wills, trust instruments, tax returns and correspondence, weighed against what the person actually did;
• the length and continuity of time spent in the United States, and the pattern of departures;
• immigration status: citizenship applications, a green card, the category of visa held and what was represented in obtaining it;
• the location, size, value and use of homes owned or rented in each country, and which one holds the personal effects;
• where the spouse and minor children live, and where the children attend school;
• the location of business interests, employment and professional licences;
• club, religious and charitable affiliations, and where social life is conducted;
• voter registration, driver’s licences, vehicle registrations and the address used for banking and insurance;
• the law under which the estate plan was drafted and the jurisdiction named in it;
• burial or cremation arrangements and where they are located.

Statements made for one purpose are read back later for another. A declaration on a state income tax return that the taxpayer is a non-resident, or a representation to an immigration officer that a stay is temporary, will be produced against the estate if it is convenient to do so. The record should be coherent across all of it.

Which assets are United States property

For a non-domiciliary, situs decides everything, and the estate tax and the gift tax use different situs rules. The mismatch is the single most useful feature of the regime for planning purposes, and the single most common cause of an unexpected assessment.

For estate tax, the following are generally United States property:

• real property located in the United States, whether held directly or through certain entities;
• tangible personal property physically present in the United States, including works of art, jewellery, motor vehicles, furniture and physical currency;
• shares in a corporation organised in the United States, wherever the certificates are kept and wherever the shareholder banks;
• debt obligations of United States persons, subject to significant exceptions.

The following are generally not United States property for estate tax:

• shares in a foreign corporation, even where the corporation’s only asset is United States real estate;
• bank deposits with a United States bank that are not connected with a United States trade or business;
• debt obligations producing portfolio interest;
• proceeds of life insurance on the life of the non-domiciliary;
• works of art on loan to a public gallery or museum for exhibition, within limits.

The treatment of interests in United States partnerships and limited liability companies is not settled and depends on facts that can be influenced in advance. It should not be assumed either way.

For gift tax, the position is much narrower. A non-domiciliary is subject to United States gift tax only on transfers of United States real property and United States tangible personal property. Intangible property is outside the gift tax entirely for this group, and shares in a United States corporation are intangible property.

The consequence is direct. Shares in a United States company held by a non-domiciliary at death are taxed. The same shares given away during life are not taxed at all, at least not by the United States. Timing, rather than structure, resolves a large number of these cases. The same shares, if instead held through a properly maintained foreign holding company, are outside the estate tax as well, although that route carries income tax consequences that have to be weighed before it is taken.

Spouses who are not United States citizens

The unlimited marital deduction, which allows one spouse to leave everything to the other without estate tax, is not available where the surviving spouse is not a United States citizen. This rule turns on the survivor’s citizenship, not on the decedent’s, so it applies to the estate of a United States citizen who married a non-citizen and never thought about it again.

Three responses exist. The property can pass to a qualified domestic trust, which defers the tax and imposes a United States trustee and a withholding regime on distributions of principal. The surviving spouse can become a United States citizen before the estate tax return is filed, which restores the deduction. Or the exposure can be reduced in advance through lifetime transfers, for which a separate annual exclusion applies: in 2026, the first $194,000 of gifts to a non-citizen spouse is excluded, in place of the unlimited treatment available between citizen spouses.

Treaties usually change the answer

For clients with ties to Western Europe, the treaty position is the starting point of the analysis rather than an afterthought. The United States has estate tax treaties, and in some cases gift tax treaties, with the following countries:

Treaty partner	Estate tax	Gift tax
Australia	Yes	Yes
Austria	Yes	Yes
Canada	Yes, under the income tax treaty	No
Denmark	Yes	Yes
Finland	Yes	No
France	Yes	Yes
Germany	Yes	Yes
Greece	Yes	No
Ireland	Yes	No
Italy	Yes	No
Japan	Yes	Yes
Netherlands	Yes	No
South Africa	Yes	No
Switzerland	Yes	No
United Kingdom	Yes	Yes

These treaties do four things that matter here.

They supply a tie-breaker where both countries consider the person domiciled within them, usually by reference to a permanent home, then a centre of vital interests, then habitual abode, then citizenship. They re-allocate taxing rights over particular categories of asset, so that the country of situs, the country of domicile, or both in a defined order, may tax. They grant the estate of a non-domiciliary a proportionate share of the full United States exemption rather than the $60,000 floor: the exemption is multiplied by the ratio of United States-situs assets to the worldwide estate, so a German-domiciled decedent whose United States assets represent five percent of the worldwide estate may claim five percent of $15,000,000, which is $750,000, instead of $60,000. And several of them, the German treaty among them, provide a form of marital relief that does not require a qualified domestic trust.

Treaty relief is not automatic. It has to be claimed on a United States return, with disclosure of the position taken and of the worldwide estate on which the proportionate calculation depends. An estate that files without claiming it does not get it by default.

Green card holders and visa holders

Neither status determines domicile by itself, although a green card is strong evidence of it and is difficult to explain away.

A green card holder who has retired to her home country, sold the United States house, lives abroad most of the year and returns for a few weeks to see family is unlikely to be a United States domiciliary, notwithstanding that she remains a United States income tax resident until the card is formally surrendered or abandoned. A student on a temporary visa who returns home after graduation was never domiciled here. An executive transferred on an intra-company visa who buys a house, moves the family, puts the children into local schools and lets the foreign home go probably is domiciled here, whatever the visa category says.

The hardest cases are the deliberate ones: the person who keeps the green card without using it, in order to preserve the option of returning. That posture tends to produce continued income tax residence, an unresolved domicile question, and an estate that has to be litigated.

Giving up citizenship or a green card

Ending United States status does not always end United States transfer tax exposure. A person who expatriates and meets the income, net worth or compliance tests becomes a covered expatriate. Gifts and bequests from a covered expatriate to a United States recipient are then taxed at the highest estate tax rate, currently 40 percent, and the tax is payable by the recipient rather than by the donor or the estate. Regulations finalised in 2025 gave this regime its reporting mechanism, and the return is now in circulation. Expatriation planning that ignores the position of the family members who remain behind is incomplete.

Why the question is worth settling in advance

Status is fixed at the moment of the transfer, but the evidence that proves it is built over years. A file assembled contemporaneously, in which the immigration record, the tax filings, the estate plan, the property holdings and the family’s actual life all say the same thing, is worth far more than a reconstruction produced by an executor under a nine-month filing deadline.

Where the answer is that the person is not a United States domiciliary, the planning that follows is mostly about situs, and most of it has to be done while the client is alive and competent. Where the answer is that the person is a United States domiciliary, the planning is about the worldwide estate, the foreign reporting that comes with it, and the credit relief available under the applicable treaty. Either way, the first step is to answer the question rather than to assume it.

This article describes general principles and is not legal or tax advice. Transfer tax status depends on the particular facts, and the figures given are those applicable in 2026.