Ashford International Law P.C.

Summary

1. A non-citizen who has become domiciled in the United States is taxed at death on the worldwide estate, exactly like a citizen, and has the same $15,000,000 exclusion in 2026. The green card is not what decides this.
2. What such a person does not have is the unlimited marital deduction. Property passing to a spouse who is not a United States citizen qualifies only through a qualified domestic trust, through naturalization before the return is filed, or under a treaty.
3. Domicile is acquired by intention and it can be acquired quickly. Almost everything worth doing has to be done before it is acquired, because the planning window closes when the client’s centre of life moves.
4. Income tax residence and transfer tax domicile are separate questions with separate tests, and a person can be inside one and outside the other. Both have to be tracked.
5. Leaving is its own regime. A long-term green card holder who gives up the card is treated like a citizen who expatriates, with a mark-to-market exit tax and a tax on the American recipients of later gifts and bequests.

Part I. Three positions, and which one applies

United States transfer tax sorts individuals into three positions. A citizen is taxed on the worldwide estate wherever he lives. A non-citizen who is domiciled in the United States is taxed on the worldwide estate in the same way, and is treated as a citizen for almost every purpose except the marital deduction. A non-citizen who is not domiciled in the United States is taxed only on property situated there, with an exemption of $60,000; that position is the subject of a separate page, asset and tax planning for non-US residents with US assets.

The row that does the damage is the marital one. A German or French couple who move to the United States on an employment transfer, buy a house, enrol the children in school and never take citizenship are, within a few years, taxed on their worldwide estates and denied the deduction that every American married couple takes for granted.

Part II. The green card is not the test

Domicile for transfer tax is residence in the United States combined with the absence of a definite present intention to depart (Treasury Regulation section 20.0-1(b)). Income tax residence is a different question with a different answer, decided by the green card test or by the substantial presence test, a weighted count of days over three years (section 7701(b)).

The two diverge in both directions and neither controls the other. A person on a temporary work visa who buys a home, moves the family and says publicly that he intends to stay can be domiciled while still nominally temporary. A green card holder who keeps a home abroad, returns each year, keeps the family and the business there and holds the card for convenience may remain a non-domiciliary. A person who has left the United States can remain domiciled until a new domicile is actually acquired. Domicile is proved by facts, and the facts that matter are where the permanent home is, where the family lives, where the children are educated, where medical care is taken, where the client is registered and licensed, what the will says, and what the client has told banks, insurers and immigration authorities.

Where an estate tax convention applies, its Article 4 tie-breaker supplies a single fiscal domicile through permanent home, centre of vital interests, habitual abode and nationality. The German convention adds a rule of real value to families moving between the two countries: an individual who is a citizen of one State and not also of the other, and who is domiciled in both under domestic law, is deemed domiciled in the State of his citizenship for the first ten years, and so are the members of his household who meet the same conditions (Article 4(3), the period having been extended from five years to ten by the 1998 protocol). It is a citizenship rule, so it protects a German national who moves to the United States; it does not protect an American green card holder who is not a German citizen.

Diplomats, consular officers and the staff of international organizations are a category of their own: their days of presence do not count toward the substantial presence test, and their domicile turns on the posting, on the Vienna Conventions and on the treaty rules for posted officials. They are dealt with in the firm’s post on estate planning for diplomats and international organization staff in the United States.

Part III. The window before domicile closes

Almost everything that can be done for a non-citizen who is moving to the United States has to be done before the move. Once domicile is acquired the worldwide base applies, and the transfers that would have been free become taxable.

Before domicile, the individual is a nonresident donor and the gift tax reaches only United States real and tangible property (sections 2501(a)(2) and 2511(a)). Shares, bonds, partnership interests, foreign real estate and foreign companies can all be given away, or settled on an irrevocable trust for the family, at no United States gift tax cost and with no use of any exclusion. After domicile, the same transfers are taxable gifts against the $15,000,000 exclusion. A transfer made with a retained interest, a retained power or within three years of death is pulled back where the property is United States situs (section 2104(b)), so the transfer has to be complete and it has to be made in good time.

Income tax residence arrives on its own schedule and brings its own work. Before the residence starting date it is generally right to review foreign investment funds, which become passive foreign investment companies taxed under section 1291 once the holder is a United States person; foreign pension arrangements, which may be treated as non-exempt employees’ trusts; foreign life policies, which are respected only if they satisfy section 7702; and foreign companies, which become controlled foreign corporations once American shareholders control them. Entity classification elections, distributions and dispositions are all cheaper before the starting date than after it. Basis in appreciated foreign assets is not adjusted on arrival, so a pre-arrival disposition and repurchase is sometimes worth its cost.

Part IV. The marital deduction and the non-citizen spouse

No marital deduction is allowed where the surviving spouse is not a United States citizen, whatever the length of the marriage and wherever the couple lives (section 2056(d)). Three routes exist.

The first is a qualified domestic trust (section 2056A). It requires at least one United States trustee, and where the assets exceed $2,000,000 either a bank trustee or an approved security arrangement. It defers rather than removes: income distributions are taxed as ordinary income, principal distributions other than for hardship trigger the deferred estate tax, and the remaining balance is taxed in the first decedent’s estate at the survivor’s death. Because it may be created by the executor, or by the surviving spouse, before the return is filed, it also works as a rescue where the family discovers the citizenship rule after the death.

The second is naturalization. If the surviving spouse becomes a United States citizen before the estate tax return is filed, and has been resident in the United States at all times since the death, the ordinary deduction is available.

The third is a treaty. An estate may take either the statutory route through a qualified domestic trust or the marital relief a convention allows, but not both (Treasury Regulation section 20.2056A-1(c)). The German convention allows a marital deduction in Article 10(6), the French convention in Article 11(3), the United Kingdom convention in Article 8(2) and the Danish convention in Article 9; the Canadian convention gives a marital credit in Article XXIX B(3) and (4). The Austrian convention has no marital provision at all.

Two further consequences follow from the same citizenship rule and are easy to miss. Lifetime gifts to a non-citizen spouse are limited to $194,000 a year in 2026 (section 2523(i)(2)); there is no unlimited spousal gift. And the rule that includes only half of spousal joint property in the first decedent’s estate does not apply where the survivor is not a citizen (section 2056(d)(1)(B) switching off section 2040(b)), so the whole value is included unless the survivor’s own contribution can be proved. That is treated on asset planning using joint titles.

Part V. Reporting, once the move has happened

Transfer tax follows domicile; information reporting follows income tax residence. A non-citizen who is a United States resident for income tax reports worldwide income and files the same information returns as a citizen: FinCEN Form 114 for foreign accounts above $10,000 in aggregate, Form 8938 for specified foreign financial assets above the applicable threshold, Form 3520 for transactions with foreign trusts and for gifts and inheritances from abroad above $100,000 from an individual or foreign estate, Form 8621 for each foreign fund, and Forms 5471 and 8865 for interests in foreign companies and partnerships. The penalties on these returns are measured against the value of the asset rather than against any tax, which is what makes them expensive. Compliance is treated on tax compliance.

Foreign assets also keep their own succession law. A house in Bavaria, an apartment in Paris or a Swiss account is administered locally, passes under the succession law that the European Succession Regulation designates, and is exposed to a reserved share for children that American law does not recognise. That side of the picture is set out on estate planning for U.S. persons with assets abroad, which applies equally to a non-citizen domiciliary.

Part VI. Leaving

Giving up a green card is not a neutral act. A lawful permanent resident in at least eight of the last fifteen taxable years is a long-term resident, and on giving up that status is treated in the same way as a citizen who renounces (section 877A(g)).

Such a person is a covered expatriate if any one of three tests is met: average annual net income tax for the five preceding years above $211,000 in 2026; net worth of $2,000,000 or more, a figure that has not been indexed since 2004 and that a single property now frequently exceeds; or a failure to certify five years of tax compliance on Form 8854. The third test is failed by omission and catches people well below both dollar thresholds.

A covered expatriate is treated as having sold all property at fair market value on the day before expatriation, with the resulting gain reduced by $910,000 in 2026 (section 877A). Deferred compensation, specified tax-deferred accounts and interests in non-grantor trusts are dealt with under separate rules. And the consequences continue afterwards: a United States citizen or resident who later receives a gift or bequest from a covered expatriate pays a tax of 40 percent on the amount above the annual exclusion figure, applied once per recipient for the year rather than per donor, and reports it on Form 708 (section 2801; final regulations in T.D. 10027, applicable to amounts received on or after January 1, 2025). The burden falls on the American children, not on the parent who left.

Where the departure is planned rather than reactive, the eight-year clock, the net worth test and the compliance certification can all be managed. Where it is not, the cost is usually discovered after the card has been surrendered, when nothing can be done.

Part VII. Practical steps

1. Fix the client’s status on both tests, and write it down. Income tax residence and transfer tax domicile are separate questions and both answers change over time.
2. Do the gifting before domicile. Intangible property can leave the estate free of United States gift tax while the client is still a non-domiciliary, and not afterwards.
3. Review foreign funds, pensions, policies and companies before the residence starting date, when the elections and dispositions are still cheap.
4. Settle the spousal position early. Compare a qualified domestic trust with the marital relief under the applicable convention, and consider naturalization where it is realistic.
5. Check the joint titles. Between spouses where one is not a citizen, the whole value is included unless contribution is documented.
6. Coordinate the American will with the foreign ones, and never use a general revocation clause; each instrument should revoke only within its own scope.
7. Keep the information returns current from the first year. The penalties are measured against value, and the statute of limitations stays open while a return is missing.
8. Plan any departure eight years out, not in the month the card is surrendered.

Conclusion

The non-citizen who lives in the United States occupies the least comfortable position in the system: taxed on everything he owns anywhere, denied the relief that the same law gives to his neighbours, and holding assets abroad that answer to a different succession law. None of that is unmanageable, but almost all of it is manageable only in advance. The value of the work is concentrated in the period before domicile is acquired and, at the other end, in the years before a green card is given up.

How the firm helps

Ashford International Law PC advises non-citizens living in the United States and the families and employers who move them: establishing and documenting domicile, pre-arrival gifting and entity planning, the marital deduction and qualified domestic trusts, treaty relief including the ten-year rule of the German convention, coordinating American and foreign wills, bringing foreign holdings into the American reporting system, and planning expatriation and the surrender of a green card. Related pages cover US decedents with non-US assets, asset and tax planning for non-US residents with US assets, non-US decedents, non-US beneficiaries, gift planning, asset planning using joint titles, marital property regimes, estate planning for U.S. persons with assets abroad and estate planning for diplomats and international organization staff. Defined terms are collected in the Topics A-Z. The federal gift, estate and generation-skipping transfer taxes and the state death taxes are summarized on the page on gift and death-related taxes, and the estate tax on citizens and domiciliaries is described on the page on estate tax in the United States.

This page is intended for general educational purposes and does not constitute legal or tax advice, nor does it create an attorney-client relationship. The matters described depend on the specific facts, the countries and states concerned, and the law in effect at the relevant time. Statuses and figures are stated as of September 2026 and must be confirmed before any decision.