Estate Planning for Diplomats and International Organization Staff in the United States
Members of foreign embassies and consulates, and the officers and employees of the World Bank, the International Monetary Fund, the Inter-American Development Bank, the Organization of American States and the United Nations, live in the United States under a legal regime of their own. Their salaries are not taxed here, their days of presence do not count toward income tax residence, and their household goods leave the country with them. None of this means that United States estate and gift tax passes them by. A house in Washington, a brokerage account holding United States shares, a child born in a Washington hospital and a spouse who is a United States citizen each bring the ordinary rules back into play, and the exemption available to a person who is not domiciled in the United States is $60,000, not $15,000,000.
What the privileges cover, and what they do not
The Vienna Convention on Diplomatic Relations exempts a diplomatic agent from all national, regional and municipal taxes, with exceptions (Article 34). Three of them matter here: taxes on private immovable property in the receiving State (Article 34(b)); estate, succession and inheritance duties (Article 34(c)); and taxes on private income from local sources and on local investments (Article 34(d)). The estate-duty exception is itself qualified: when a member of the mission or of the household dies, the receiving State must allow the movable property to be withdrawn and may not levy estate duties on movable property whose presence in the country was due solely to the posting (Article 39(4)). Administrative and technical staff and the families of both groups share these privileges unless they are nationals or permanent residents of the receiving State (Article 37), and the Vienna Convention on Consular Relations gives consular officers and employees the same tax position and the same rule on death (Articles 49 and 51).
Officers and employees of international organizations have less. Their salaries are exempt from United States income tax (section 893 of the Internal Revenue Code, which also covers employees of foreign governments where the home country reciprocates), and their days of presence do not count toward the substantial presence test because they are exempt individuals (section 7701(b)(5)), a rule that covers A and G visa holders (other than personal employees) and their dependants but not holders of a green card. Nothing exempts their estates from United States estate tax, and the Vienna rule on movable property does not apply to them. Investment income has no protection in any category: United States dividends, interest and rents are taxed (sections 871(a) and 871(d)), and a sale of the house carries FIRPTA withholding of 15 percent of the price (section 1445).
| Category | Visa | Tax position while posted | Children born in the United States | Estate tax position |
|---|---|---|---|---|
| Diplomatic agents on the State Department’s Diplomatic List (ambassadors, counsellors, secretaries, attachés) | A-1, A-2 | Exempt under Article 34 of the Vienna Convention, except real property, local-source private income and estate duties | Not United States citizens at birth (8 CFR 101.3); may register as permanent residents | Non-domiciliary; United States property taxable; household movables exempt under Article 39(4) |
| Administrative and technical staff of a mission | A-2 | Same tax exemption (Article 37(2)); civil immunity limited to official acts | United States citizens at birth | As for diplomatic agents |
| Consular officers and consular employees | A-1, A-2 | Exempt under Article 49 of the Consular Convention, with the same exceptions; immunity for official acts only | United States citizens at birth | Non-domiciliary; movables present because of the posting exempt under Article 51 |
| Members of permanent missions to the United Nations holding diplomatic rank | G-1 | As for diplomatic agents (Headquarters Agreement, section 15) | Not citizens at birth where the parent has full diplomatic status | As for diplomatic agents |
| Officers and employees of international organizations (World Bank, IMF, IDB, OAS, United Nations) | G-4 | Salary exempt under section 893; exempt individual for the day count; immunity for official acts only | United States citizens at birth | Domicile decided on the facts; no exemption for movables |
Domicile decides the scale of the exposure
For estate and gift tax the question is not residence but domicile: living in a place with no definite present intention of leaving it (Treasury Regulation section 20.0-1(b)(1)). Citizenship and visa class are evidence, not answers. A person domiciled in the United States is taxed on the worldwide estate with the 2026 basic exclusion amount of $15,000,000. A person who is not is taxed on United States property only, with an exemption equivalent of $60,000 that has not changed since 1988, at rates that reach 40 percent. The general tests of citizenship, domicile and situs are described in the firm’s post on US persons for transfer tax purposes and on its page on estate planning for non-US citizens.
An official posted to Washington for a tour of duty, who expects to be transferred or to retire at home, is not domiciled here however long the tour runs. The picture changes with the international organization career: staff of the World Bank or the IMF often remain in Washington for decades, buy houses, raise children who are United States citizens and retire locally. The Supreme Court held in Elkins v. Moreno (435 U.S. 647 (1978)) that G-4 status carries no requirement to keep a foreign residence and no restriction on intent, so nothing in federal law prevents a G-4 holder from becoming domiciled here; once the intention to stay has formed, the estate is a domiciliary estate, whatever the visa says. A green card, available to such employees as special immigrants after fifteen years of service, is strong evidence of the same thing, ends the exempt-individual status and, where the employee keeps working for the organization, requires a waiver of privileges (Form I-508) that ends the section 893 exemption.
The treaties settle the question for nationals of several countries in the official’s favour. A German citizen who has been domiciled in the United States for not more than ten years is deemed domiciled in Germany, together with the household (German convention, Article 4(3)); a French citizen who has kept the manifest intention of retaining a French domicile and has been domiciled here for less than five of the preceding seven years is deemed domiciled in France (French convention, Article 4(3)(a)); and a United Kingdom national is deemed domiciled in the United Kingdom unless resident in the United States for income tax purposes in seven of the preceding ten years (British convention, Article 4(2)), which an exempt individual never is. The French convention goes further: where diplomatic or consular privileges prevent taxation in the receiving State, the right to tax is reserved to the sending State and the official is not deemed domiciled in the receiving State at all (Article 17(2)).
What the United States taxes at death
The estate of a non-domiciliary pays federal estate tax on property situated in the United States above the $60,000 exemption equivalent, and the executor files Form 706-NA within nine months of death. Situs is decided asset by asset (sections 2104 and 2105). Real estate and tangible property located in the United States are United States property, as are shares of United States corporations, including United States mutual funds and exchange-traded funds, wherever the account that holds them is kept. Deposits with United States banks, portfolio debt including Treasury securities, and the proceeds of life insurance on the decedent’s life are not; cash left in a brokerage account is not a bank deposit and generally counts as United States property.
The Vienna Conventions take the household movables out of the base: furniture, cars, jewellery and works of art that are in the United States only because of the posting are not subject to estate duty. The rule does not reach a house, which is immovable, or shares of United States companies, whose presence here has nothing to do with the posting; those two asset classes are where the tax is found in practice.
| Asset | Estate tax on death | Gift tax on a lifetime transfer |
|---|---|---|
| Real estate in the United States | Taxable | Taxable above the annual exclusion |
| Household goods, cars, jewellery and art in the United States | Taxable, but exempt for members of a mission or consular post and their households where present only because of the posting | Taxable while the property is in the United States |
| Shares of United States corporations, United States mutual funds and ETFs | Taxable, wherever the account is held (section 2104(a)) | Not taxable (section 2501(a)(2)) |
| Shares of non-United States companies | Not taxable | Not taxable |
| Deposits with United States banks | Not taxable (section 2105(b)(1)) | Unsettled for cash; give from an account outside the United States |
| Cash in a United States brokerage account | Generally taxable | Unsettled; give from an account outside the United States |
| Treasury securities and other portfolio debt | Not taxable (section 2105(b)(3)) | Not taxable |
| Life insurance on the decedent’s own life | Not taxable (section 2105(a)) | Not taxable |
| Interest in a United States business or LLC | Generally taxable; unsettled for partnerships | Not taxable |
Two administrative points follow. United States banks and brokers generally will not release the assets of a deceased non-domiciliary without a federal transfer certificate (Form 5173), which the IRS issues after Form 706-NA has been processed or, for estates below $60,000, after an affidavit and supporting documents have been reviewed, with a stated processing time of twelve to eighteen months. And state taxes come on top: the District of Columbia taxes real and tangible property in the District that belonged to a decedent who lived elsewhere where the estate exceeds its exclusion of $4,988,400 in 2026, Maryland does the same above $5,000,000, New York’s exclusion is $7,350,000, and Virginia has no estate tax.
Gifts during the posting
The gift tax follows a narrower situs rule. A non-domiciliary pays gift tax only on transfers of real estate and tangible property located in the United States (section 2511(a)); transfers of intangible property, including shares of United States corporations, are outside the tax altogether (section 2501(a)(2)). The annual exclusion is $19,000 per recipient in 2026, and gifts to a spouse who is not a United States citizen are excluded up to $194,000 a year (section 2523(i)(2)). United States shares that are to stay in the family can therefore be given during the posting free of United States gift tax, whereas the same shares would be taxed at death. One further point deserves attention: the Consular Convention lists “duties on transfers” among the taxes a consular officer must bear (Article 49), whereas the Diplomatic Convention names only estate, succession and inheritance duties (Article 34), and whether a serving diplomatic agent is subject to United States gift tax on a gift of a Washington house at all is not addressed in published IRS guidance and should be settled before the gift is made.
The home country usually has a view of its own. Germany treats German nationals employed by a German public body and paid from a German public treasury, and the German nationals in their household, as resident for inheritance and gift tax purposes for as long as the country of posting taxes them only on local property (section 2(1) no. 1 letter c of the Inheritance and Gift Tax Act); France reaches the same result for agents of the State serving abroad through articles 4 B and 750 ter of the Code général des impôts. The worldwide estate and every gift remain taxable at home, and the United States tax is relieved by credit under the applicable convention rather than avoided.
The estate and gift tax treaties
The United States has estate tax conventions with fourteen countries, and the Canadian income tax convention contains estate tax provisions (Article XXIX B). Each convention preserves the fiscal privileges of diplomatic and consular officials under general international law (Article 15 of the German convention, Article 17 of the French, Article 13 of the British), so the Vienna rules apply within the treaty framework rather than being displaced by it. The conventions with Australia, Finland, Greece, Ireland, Italy, Japan, South Africa and Switzerland are situs conventions: they allocate each class of asset to one country and leave domicile to domestic law. Those with Austria, Denmark, France, Germany, the Netherlands and the United Kingdom are domicile conventions: they contain tie-breaker rules and generally limit the United States, for a person domiciled in the other country, to real estate and business property located here. Nine conventions replace the $13,000 unified credit with a pro rata share of the credit available to a United States citizen, computed by the ratio of the United States assets to the worldwide estate (section 2102(b)(3)(A)). For an official with a Washington house worth $2,000,000 and a worldwide estate of $10,000,000, one fifth of the credit that shelters $15,000,000 eliminates the federal tax on the house; the price is disclosure of the worldwide estate on Form 706-NA.
| Treaty partner | Type | Gift tax covered | Principal relief for a posted official |
|---|---|---|---|
| Australia | Situs | Yes | Pro rata unified credit |
| Austria | Domicile | Yes | Tie-breaker; United States limited to situs assets |
| Canada | Income tax convention, Article XXIX B | No | Pro rata unified credit; marital credit |
| Denmark | Domicile | Yes | Tie-breaker; United States limited to situs assets |
| Finland | Situs | No | Pro rata unified credit |
| France | Domicile | Yes | Five-of-seven-year rule; officials not deemed domiciled in the receiving State (Article 17(2)); pro rata credit; marital relief |
| Germany | Domicile | Yes | Ten-year rule covering the household (Article 4(3)); pro rata credit (Article 10(5)); marital exemption (Article 10(6)) |
| Greece | Situs | No | Pro rata unified credit |
| Ireland | Situs | No | Situs allocation only |
| Italy | Situs | No | Pro rata unified credit |
| Japan | Situs | Yes | Pro rata unified credit |
| Netherlands | Domicile | No | Tie-breaker; United States limited to situs assets |
| South Africa | Situs | No | Situs allocation only |
| Switzerland | Situs | No | Pro rata unified credit |
| United Kingdom | Domicile | Yes | Seven-of-ten-year rule (Article 4(2)); United States limited to situs assets |
| No convention (for example Belgium, Spain, Luxembourg, Portugal, and most of Asia, Africa and Latin America) | Domestic law only | No | $60,000 exemption equivalent; relief only through the home country’s credit rules |
Spouses and children
A married couple posted to Washington usually holds the house as tenants by the entirety, which the District, Maryland and Virginia all recognise, so that the survivor becomes sole owner without probate. Where the survivor is not a United States citizen, the fifty percent rule for spousal joint property does not apply, and the whole value is included in the first estate except to the extent the survivor can prove her own contribution (sections 2040(a) and 2056(d)(1)(B)). Creating the tenancy is not a taxable gift (section 2523(i)(3)), but ending it during life can be. The marital deduction is available only where the survivor is a United States citizen, becomes one before the return is filed (section 2056(d)(4)), or takes the property through a qualified domestic trust (section 2056A); the German and French conventions add marital relief of their own (Article 10(6) and Article 11(2) and (3) respectively).
Children born in the United States to an officer on the Diplomatic List are not United States citizens (8 CFR 101.3); children born to consular officers, to administrative and technical staff and to G-4 employees are. A citizen child is a United States taxpayer for life, wherever the family later lives: worldwide income tax, foreign account reporting, Form 3520 for inheritances and gifts from the non-citizen parents above $100,000 in a year, and estate tax on the worldwide estate at his own death. A United States will should appoint guardians, since on the death of a member of the mission the family’s privileges last only for a reasonable period in which to leave the country (Article 39(3)).
Wills, beneficiary designations and vehicles
Succession to real estate is governed by the law of the state where it lies; succession to movable property by the law of the domicile. A will made at home will generally be given effect for United States assets if it was validly executed under the law of the place where it was signed or of the testator’s domicile, which is the rule in Maryland and in most states. The safer course is a United States will confined to the United States assets, drafted so that it does not revoke the home will, or an international will under the Uniform International Wills Act, which the District of Columbia, Maryland and Virginia have all enacted. The Washington Convention of 1973 behind that Act is in force for France, Italy and Belgium among others, but not for Germany, Switzerland or Austria, and the United States has signed but never ratified it; recognition remains a question of state law.
Bank and brokerage accounts should carry payable-on-death or transfer-on-death designations, which pass the account to the named person by contract, although the institution will still ask for the transfer certificate. A revocable trust holding the house avoids probate but changes nothing for estate tax (section 2104(b)). Vehicles of mission members are registered through the State Department’s Office of Foreign Missions, which also handles their sale or export on death; joint title with right of survivorship remains sensible. A durable power of attorney and a health care directive under local law complete the set, since immunity from civil jurisdiction is of no help in a hospital or a bank.
When the posting ends
The last year of a posting is the moment to decide what happens to the house. Selling it triggers the FIRPTA withholding and a United States income tax return, but ends the estate tax exposure. Keeping it as a rental leaves the exposure in place, with the owner no longer present to deal with it. Holding it through a foreign company removes it from the estate tax base at the cost of corporate-level tax on the rent and the gain, a trade usually worth making only for larger properties or for nationals of countries without a convention. Retiring in the United States on a green card converts the whole position: the worldwide estate becomes taxable, worldwide income becomes reportable, and the window for restructuring foreign holdings closes on the day residence begins.
What to do, in order
- Settle the domicile position in writing, with the treaty rule that applies to the household, and revisit it whenever a green card, a retirement decision or a child’s schooling changes the facts.
- List the United States assets by situs category, and move cash and securities that are not needed here outside the United States.
- Decide who holds the house, with the survivor’s citizenship and the state estate tax in mind.
- Give United States shares during the posting rather than at death, where the home country’s gift tax allows it.
- Sign a United States will for the United States assets, coordinated with the home will, appoint guardians for minor children, and put beneficiary designations on every United States account.
- Insure the tax on the house if it is to be kept; life insurance proceeds are outside the United States estate.
- Prepare the exit: the house, the accounts, and the export of the household goods under the Convention before the privileges lapse.
The articles are intended for information purposes only. They should not be construed as legal advice. For a comprehensive evaluation of your individual situation please contact us at (202) 790-2500 or at info@internationalestatelaw.com for an Initial Consultation Package.
This article describes general principles and is not legal or tax advice. The treatment of a particular household depends on its facts, on the applicable convention and on the law of the state concerned. The figures given are those applicable in 2026.