Ashford International Law P.C.

The United States taxes transfers of wealth separately from income. Three federal taxes apply: the gift tax on transfers during life, the estate tax on transfers at death, and the generation-skipping transfer tax on transfers to grandchildren and more remote generations. Twelve states and the District of Columbia add an estate tax, and five states an inheritance tax. Which of these taxes applies, and to which property, depends first on citizenship and domicile, and for families outside the United States on the estate and gift tax convention between the United States and their country. This page sets out the framework as of September 2026 and refers to the firm’s detailed pages on gift tax for non-US citizens, estate tax in the United States and estates of nonresident non-US citizens.

Summary

1. The gift tax and the estate tax form a unified system with a single basic exclusion amount of $15,000,000 for 2026, indexed for inflation from 2027, and a top rate of 40 percent. The generation-skipping transfer tax has a separate exemption of the same amount.
2. United States citizens and non-citizens domiciled in the United States are taxed on their worldwide transfers. Non-citizens domiciled abroad are taxed only on property located in the United States, with an exemption of $60,000 at death and no lifetime exemption for gifts.
3. The unlimited marital deduction applies only to transfers to a spouse who is a United States citizen. Transfers to a non-citizen spouse are limited to $194,000 a year during life and require a qualified domestic trust or treaty relief at death.
4. The recipient of a gift or inheritance pays no federal tax on the receipt, but must report gifts and bequests from abroad above the reporting thresholds.
5. For families in the fifteen countries whose conventions with the United States provide estate tax relief, the convention, not domestic law, ordinarily determines which country may tax which property and how large the United States exemption is.

Part I. Three federal taxes

The gift tax applies to transfers during life for less than full value (IRC §§ 2501 and 2511). Each donor may give $19,000 per recipient in 2026 without using any exemption (IRC § 2503(b)), and payments of tuition and medical expenses made directly to the institution are excluded without limit (IRC § 2503(e)). Gifts above the annual exclusion are reported on Form 709 by April 15 of the following year and reduce the basic exclusion amount available at death.

The estate tax applies to the taxable estate at death, computed by adding the adjusted taxable gifts made after 1976 and crediting the tax attributable to the basic exclusion amount (IRC §§ 2001 and 2010). Public Law 119-21 of July 4, 2025 set that amount at $15,000,000 for 2026, indexed for inflation from 2027, without a scheduled expiration. A surviving spouse may add the unused exclusion of the first spouse to die if the executor elects portability on a timely estate tax return (IRC § 2010(c)(4) and (5)).

The generation-skipping transfer tax applies at the top estate tax rate to transfers that skip a generation, whether made outright or through a trust, to the extent they are not covered by the donor’s GST exemption, which equals the basic exclusion amount (IRC §§ 2601, 2631 and 2641). Unlike the estate tax exclusion, the GST exemption is not portable between spouses.

Part II. Citizenship and domicile

For transfer tax purposes, the decisive test for a non-citizen is domicile: residence in the United States combined with the absence of a definite present intention to leave (Treas. Reg. § 20.0-1(b)(1)). Domicile is a question of fact. A green card is evidence but not the test, and the income tax residence rules of IRC § 7701(b) do not apply. The firm’s page on estate planning for non-US citizens describes the determination in detail.

IRC §§ 2001, 2010, 2102(b), 2106(a)(3), 2501(a)(2), 2523(i), 2056(d) and 6018; Rev. Proc. 2025-32.

Part III. Gifts

A donor who is a citizen or a domiciliary uses the lifetime exemption for gifts above the annual exclusions and pays gift tax only once the exemption is exhausted. A non-citizen domiciled abroad pays no United States gift tax on gifts of intangible property, including shares in American companies, but has no lifetime exemption against gifts of American real estate or tangible property located in the United States (IRC §§ 2501(a)(2) and 2511(a)). The recipient takes the donor’s income tax basis (IRC § 1015), not a basis stepped up to market value. A United States recipient of more than $100,000 in a year from a nonresident individual or foreign estate reports it on Form 3520, although no tax is due. The page on gift planning covers gifts by citizens, domiciliaries and nonresidents, the gift tax conventions and the reporting of gifts from abroad.

Part IV. Estates

For a citizen or a domiciliary, the estate tax applies to the worldwide gross estate, including life insurance, retirement accounts, jointly held property and trust assets the decedent controlled, less debts, expenses and the marital and charitable deductions. These rules, the generation-skipping transfer tax, the state estate and inheritance taxes and the income tax consequences of a death are described on the page on estate tax in the United States.

For a non-citizen domiciled abroad, the estate tax applies only to property located in the United States: real estate, tangible property, shares in American corporations and certain debt claims, while bank deposits, portfolio debt and life insurance proceeds are excluded (IRC §§ 2104 and 2105). The estate cannot distribute or transfer American assets until the Internal Revenue Service issues a transfer certificate. These rules are described on the pages on non-US decedents and asset and tax planning for non-US residents with US assets.

Part V. State estate and inheritance taxes

Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, Washington and the District of Columbia levy an estate tax in 2026, with exemptions ranging from $1,000,000 in Oregon to $15,000,000 in Connecticut. Kentucky, Maryland, Nebraska, New Jersey and Pennsylvania levy an inheritance tax, which depends on the relationship between the decedent and each heir. A state taxes the estate of its domiciliaries and the real estate and tangible property located within its borders, irrespective of the owner’s domicile, and the federal conventions do not limit state taxes. The state figures are tabulated on the page on estate tax in the United States.

Part VI. The conventions

For most families outside the United States with American assets, the applicable convention is the rule and domestic law the fallback. The modern conventions assign a single fiscal domicile and confine the other country to real estate and permanent establishment property; the older conventions allocate taxing rights by situs. Nine conventions replace the $60,000 exemption with a share of the full exemption prorated by the ratio of American assets to the worldwide estate, and several provide marital relief without a qualified domestic trust. Canada has no estate tax convention, but its income tax convention contains the equivalent relief.

Instructions to Form 706-NA; IRC § 2102(b)(3). Belgium, Israel, Luxembourg, Norway, Portugal, Spain and Sweden have no estate tax convention with the United States.

A convention allocates taxing rights for a given decedent or donor; the country in which an heir resides may still tax the inheritance under its own law, with a credit for the American tax where its law or the convention provides one.

Part VII. Practical steps

1. Establish the citizenship and domicile of each family member, and document the facts that support the domicile position.
2. List the assets by location and type, since the estate tax and the gift tax treat the same asset differently for a non-citizen domiciled abroad.
3. Identify the applicable convention and determine whether it assigns fiscal domicile, removes securities from American taxation, prorates the exemption or provides marital relief.
4. Where a spouse is not a United States citizen, plan transfers within the $194,000 annual limit and provide for a qualified domestic trust or treaty relief at death.
5. Check the estate and inheritance taxes of each state in which the family is domiciled or owns real estate.
6. Calendar the returns: Form 709 by April 15, Form 706 or Form 706-NA nine months after death, Form 3520 for gifts and bequests received from abroad.

Part VIII. The pages in this section

• Gift tax for non-US citizens: gifts by citizens, domiciliaries and nonresidents, the gift tax conventions, basis and the reporting of gifts from abroad.
• Estate tax in the United States: the gross estate, deductions, exemption and portability, returns and payment, the generation-skipping transfer tax, state taxes and income tax at death.
• Estates of nonresident non-US citizens: domicile, situs, Form 706-NA, the conventions and the transfer certificate.

How the firm helps

Ashford International Law PC advises families, executors and heirs on the American gift, estate and generation-skipping transfer taxes and on their interaction with foreign inheritance and gift taxes, prepares Forms 706, 706-NA, 709 and 3520, and applies the estate and gift tax conventions. Related material is available on the firm’s pages on estate planning for non-US citizens, non-US beneficiaries, US decedents with non-US assets and statutory succession. 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.