Ashford International Law P.C.

Summary

1. This page concerns the settlement of the estate of a United States citizen, or of a non-citizen domiciled in the United States, who left assets abroad. The planning side is covered on estate planning with non-US assets; the reverse case is covered on non-US decedents.
2. The United States taxes the worldwide estate. Foreign assets are valued in dollars on Form 706, which is required once the gross estate and adjusted taxable gifts exceed $15,000,000 for deaths in 2026.
3. The country in which an asset is situated usually taxes it as well, and several European countries also tax a resident heir on the entire inheritance. Relief runs through the estate tax conventions and, failing a convention, through section 2014. Neither assists an estate that owes no American tax.
4. American letters of administration have no authority abroad. Each country requires its own proof of heirship, and the European Succession Regulation frequently subjects local real estate to local succession law.
5. The estate is a taxpayer in its own right, and foreign funds, accounts, trusts and companies carry income tax and reporting obligations throughout the administration.

Part I. Whose estate this is

The page applies to two groups. The first is every United States citizen, wherever he or she lived: citizenship alone brings the worldwide estate within the estate tax (sections 2001 and 2031). The second is the non-citizen domiciled in the United States at death, meaning living there with no definite present intention of leaving (Treas. Reg. 20.0-1(b)(1)). A green card does not decide domicile. A non-citizen who was not domiciled in the United States falls under the rules on non-US decedents, and the position of a living non-citizen is set out on estate planning for non-US citizens.

Both groups receive the basic exclusion of $15,000,000 for deaths in 2026 (section 2010(c)(3)). The marital deduction is unlimited where the surviving spouse is a citizen; otherwise it is available only for property passing to a qualified domestic trust (sections 2056(d) and 2056A), subject to any relief in a convention.

Three situations recur: the domiciliary living in the United States who holds property or an inheritance abroad; the citizen living abroad, whose country of residence settles and taxes the entire estate; and the non-citizen domiciliary whose country of nationality continues to treat him or her as its own taxpayer.

Part II. The United States return

The gross estate includes all property wherever situated (section 2031(a)). Foreign assets are reported on the ordinary schedules at fair market value in dollars at the date of death, converted at that day’s exchange rate, or at the alternate valuation date where the election reduces both the gross estate and the tax (section 2032). Values used for German or French tax are not necessarily fair market value. A single qualified appraisal, usable in both systems, avoids two inconsistent figures for the same asset, one of which later becomes the income tax basis. Debts and administration expenses, including the fees of foreign notaries, courts and counsel, are deductible under section 2053 to the extent allowable under the law governing the administration.

A return is required where the gross estate and adjusted taxable gifts exceed the basic exclusion amount (section 6018(a)(1)), and it is due with the tax nine months after death (section 6075(a)). Form 4768 extends the time to file but not the time to pay. For payment, section 6161 permits an extension for reasonable cause, and the regulation cites liquid assets located in several jurisdictions that the executor cannot readily marshal (Treas. Reg. 20.6161-1(a)(1)). Where no return is required, one is often filed to elect portability for the surviving spouse (section 2010(c)(5)(A)); Rev. Proc. 2022-32 allows a late election for five years. A surviving spouse who is neither a citizen nor domiciled in the United States may use the ported amount only as a convention allows (Treas. Reg. 20.2010-3(e)).

Part III. Relief from double taxation at death

Section 2014 credits estate, inheritance, legacy or succession taxes actually paid to a foreign country on property situated there and included in the gross estate. Its value turns on three points.

First, situs is decided by American rules: property is situated abroad if similar property of a nonresident non-citizen would be situated outside the United States (Treas. Reg. 20.2014-1(a)(3)). Shares are situated where the company is incorporated, and life insurance proceeds are not situated in any foreign country. A French inheritance tax on shares of a Delaware corporation therefore earns no statutory credit. Second, the credit is limited both to the foreign tax attributable to the foreign-situs property and to the American tax attributable to it (section 2014(b)); where Germany or France taxes each heir separately, the heirs’ taxes are aggregated and allocated. Third, the credit operates only against American tax. An estate below $15,000,000 owes none, and the foreign tax is then a final cost. For most families the German or French tax is the only transfer tax actually paid.

The credit is claimed on Schedule P with Form 706-CE, certified by the foreign authority, within four years after the return is filed, subject to section 2014(e). A later refund of foreign tax must be reported (section 2016). For a non-citizen domiciliary, the credit may be withheld by presidential proclamation where the country of nationality grants no reciprocal credit (section 2014(h)).

Fifteen jurisdictions have an estate tax convention with the United States, Canada through its income tax convention. The estate may take the convention credit or the section 2014 credit, whichever is more beneficial (Treas. Reg. 20.2014-4(a)(1)). Situs conventions leave each domestic tax in place and resolve conflicting situs rules. Domicile conventions assign most property to the decedent’s state of domicile and allow the other state to tax only real property and business property located there, subject to reservations.

The German convention shows those reservations. Where the decedent was domiciled in the United States, Germany may tax German real property and business property (Articles 5 and 6) and may also tax an heir domiciled in Germany (Article 11(1)(b)); the United States credits German tax on situs property (Article 11(2)), and Germany credits American tax in the heir-domicile case (Article 11(3)). Where the decedent was a citizen domiciled in Germany, the United States taxes by citizenship and credits German tax on property outside the United States (Article 11(2)). Article 4(3) treats a citizen of only one state who took up domicile in the other within ten years before death as domiciled in the state of citizenship, subject to its conditions; it does not apply to dual nationals.

Type describes the architecture of the convention. The jurisdictions follow the Internal Revenue Service list of estate and gift tax treaties. The Swedish convention ceased to have effect on January 1, 2008. Article numbers are given only where the firm has verified them.

Part IV. Authority to act abroad

Letters testamentary issued by an American court have no direct effect in Europe. Banks, land registries and companies abroad require the proof of heirship recognised by their own law.

In every member state of the European Union other than Denmark and Ireland, the Succession Regulation (Regulation (EU) No 650/2012) governs deaths on or after August 17, 2015 (Article 83). It applies the law of the last habitual residence to the whole succession (Article 21), even where that is the law of an American state (Article 20), and accepts a reference back by the conflict rules of a non-member state (Article 34). American conflict rules generally submit real property to the law of its location. For a decedent habitually resident in the United States, a German or French court therefore applies its own succession law to local real estate and the American state’s law to the remainder, and the children’s reserved share under local law can attach to that real estate even though the will is valid at home.

For a citizen habitually resident in Germany or France, local law governs the entire succession unless the will chose the law of nationality (Article 22), which is then applied without renvoi (Article 34(2)); Article 36 identifies the relevant American state. The courts of the last habitual residence have jurisdiction over the whole estate (Article 4). For a decedent resident outside the Union, a member state where assets lie has jurisdiction over the whole estate if the decedent was its national or resided there within the preceding five years, and otherwise over the local assets only (Article 10). These rules also govern national certificates such as the Erbschein (Court of Justice, Oberle, C-20/17, June 21, 2018).

The European Certificate of Succession (Articles 62 to 73) is recognised in every participating member state and protects those who pay or deliver property to the person it names (Article 69). An American will is generally formally valid in Germany and France under the Hague Convention of October 5, 1961 on the form of testamentary dispositions, which the Regulation leaves in force (Article 75); the original or a certified copy is required, with an apostille and a certified translation.

Part V. Germany

The probate court (Nachlassgericht) at the local court opens the will. A will not executed before a German notary is not a German public instrument, so the heirs ordinarily need a certificate of inheritance (Erbschein, section 2353 BGB), which may be limited to assets in Germany (section 352c FamFG), or a European Certificate of Succession. The land register requires one of them (section 35 GBO). Banks may not insist on an Erbschein where heirship is otherwise proven (BGH, October 8, 2013, XI ZR 401/12), but an American will alone rarely suffices. An executor named in the will may receive an executor’s certificate if the office corresponds to that of a Testamentsvollstrecker (section 2368 BGB).

The estate vests in the heirs automatically. An heir who wishes to avoid a German estate burdened with debt or tax must disclaim within six weeks, or six months where the decedent’s last residence was only abroad or the heir is abroad when the period begins (section 1944 BGB).

Inheritance tax. Where neither the decedent nor the heir was resident in Germany, the tax reaches only German domestic property under section 121 BewG (section 2(1) no. 3 ErbStG): principally real estate, business property of a German permanent establishment and holdings of at least ten percent in German corporations, but not ordinary bank deposits or portfolio securities. An heir resident in Germany, or a German national who left not more than five years earlier, is taxed on the entire inheritance (section 2(1) no. 1 ErbStG). Allowances range from 500,000 euros for a spouse and 400,000 euros for a child to 20,000 euros in classes II and III (section 16 ErbStG), reduced proportionately in cases of limited liability (section 16(2)); class I rates run from 7 to 30 percent (section 19). Each acquisition must be notified to the tax office within three months (section 30 ErbStG).

Income tax. Germany grants no basis adjustment at death. The heir continues the decedent’s cost and acquisition date, so a sale of German real estate within ten years of the decedent’s purchase is taxable unless an exception such as owner occupation applies (section 23 EStG), whereas the United States measures gain from the value at death (section 1014).

Part VI. France

A notaire establishes the heirs by an acte de notoriété (article 730-1 Code civil), prepares the attestation de propriété for real estate and files the inheritance tax return. Because French law governs the French real estate of a decedent domiciled in the United States (Part IV), the children’s reserved share applies to it: one half for one child, two thirds for two and three quarters for three or more (article 913 Code civil). No heir can be compelled to elect within four months of the death (article 771 Code civil).

Inheritance tax. Where the decedent was not domiciled in France, France taxes property situated in France, including shares of entities holding principally French real estate (article 750 ter CGI). An heir domiciled in France for at least six of the ten preceding years is taxed on the entire inheritance under the same article; whether the convention permits that charge where the decedent was domiciled in the United States must be examined before the French return is prepared. Each child has an allowance of 100,000 euros (article 779 CGI), direct-line rates reach 45 percent (article 777 CGI), and the surviving spouse and partner under a pacte civil de solidarité are exempt (article 796-0 bis CGI). The return is due within twelve months where the death occurred outside metropolitan France (article 641 CGI).

Under the convention, France may tax French real property and business property (Articles 5 and 6), and the United States credits French tax on the property the convention allows France to tax by situs (Article 12). For a citizen domiciled in France, France taxes the entire estate and deducts American tax only on property the United States may tax by situs, and the United States credits the French tax net of that deduction (Article 12(2)).

Income tax. The value retained for inheritance tax becomes the acquisition price for French capital gains purposes (article 150 VB CGI), and a nonresident seller of French real estate is taxed at 19 percent plus social levies (article 244 bis A CGI). A single appraisal used for Form 706 and adopted in the French return therefore aligns the American basis and the French acquisition price.

Other countries. An American grant cannot be resealed in England and Wales, so an English grant is required, ordinarily under rule 30 of the Non-Contentious Probate Rules 1987; since April 6, 2025 United Kingdom inheritance tax has turned on long-term residence rather than domicile. Swiss certificates of inheritance and inheritance taxes are cantonal. Austria has levied no inheritance tax since August 1, 2008, but its estates still pass through a court procedure conducted by a notary as court commissioner.

Part VII. Income tax and reporting during the administration

An estate administered in the United States is ordinarily a domestic estate taxed on worldwide income. An estate administered principally abroad by a foreign representative may be a foreign estate, taxed only on American-source and effectively connected income (section 7701(a)(31)(A)), and American heirs report distributions from it above $100,000 on Form 3520. The classification should be settled at the outset.

Property included in the gross estate takes a basis equal to its value at death (section 1014), foreign property included, with one important exception: stock of a passive foreign investment company, typically a non-American investment fund, keeps the decedent’s adjusted basis unless the decedent was a nonresident alien throughout the holding period (section 1291(e)). While the estate holds such stock, the beneficiaries are treated as owning it proportionately (section 1298(a)(3)). Exchange gains on foreign currency held by the estate, or on repaying a foreign-currency mortgage, are ordinary income (section 988), and the personal transaction exclusion is available only to individuals.

An estate formed under United States law files FinCEN Form 114 where its foreign accounts exceed $10,000 in aggregate. Where the decedent was treated as owner of a foreign trust, or a foreign trust is in the gross estate, the executor files Form 3520 (section 6048(a)(3)(A) and (a)(4)). Penalties on these returns are measured by value rather than tax, and an estate that owes no estate tax can still incur them; the regime is set out on the tax compliance page. Withholding on distributions to heirs abroad is addressed on non-US beneficiaries.

Part VIII. Practical steps

1. Inventory the foreign assets by country and legal form, including pensions, policies, company interests and any trust or foundation.
2. Determine domicile and habitual residence separately for the United States and each European country concerned.
3. Obtain one fair market value appraisal per foreign asset and use it for Form 706, the foreign return and the later basis.
4. Establish at once whether any heir resides in a country that taxes resident heirs on the entire inheritance, and whether a German disclaimer period is running.
5. Apply for the Erbschein, the acte de notoriété or a European Certificate of Succession in parallel with the American probate.
6. Calendar the German three-month notification, the French twelve-month return and the American nine-month return.
7. Compare the treaty credit with the section 2014 credit and obtain Form 706-CE once the foreign tax is paid.
8. Request an extension of time to pay where foreign assets cannot be marshalled in time.
9. Review foreign funds for passive foreign investment company status and settle the estate’s FBAR and Form 3520 obligations before assets are sold or distributed.

Conclusion

An American estate with assets abroad is settled under several legal systems at once. The United States taxes the whole estate and credits foreign tax only against tax of its own, the situs country taxes the asset and often the resident heir, and European succession law may govern foreign real estate regardless of the American will. Domicile, valuation, proof of heirship and the foreign filings should therefore be settled in the first months.

How the firm helps

Ashford International Law PC settles the estates of United States citizens and domiciliaries with assets in Germany, France and other countries: preparing Form 706 on the worldwide estate and computing the treaty and statutory credits, coordinating the Erbschein, the acte de notoriété or the European Certificate of Succession with the American probate, working with notaries and tax offices abroad on the foreign returns, conducting the American administration in the jurisdictions where the firm’s attorneys are admitted, and bringing the estate’s foreign holdings into compliance with the United States reporting rules. Related pages cover estate planning with non-US assets, tax planning with non-US assets, estate settlements, estate settlements in Virginia, non-US decedents, non-US beneficiaries, asset planning using joint titles and marital property regimes. The advisor guides on double taxation relief and on FATCA classification of trusts and estates treat the credit and reporting questions in greater depth. Defined terms are collected in the Topics A-Z.

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.