Ashford International Law P.C.

Summary

1. This page concerns the settlement of an estate after the death of a person who was neither a United States citizen nor domiciled in the United States, and who left assets in the United States. The planning side of the same subject is covered on asset and tax planning for non-US residents with US assets.
2. The estate is taxed on United States situs property alone, against an exemption of $60,000 and a top rate of 40 percent, and a return is required once that threshold is crossed.
3. Where an estate tax convention applies it can remove most of the exposure, but only if it is claimed on a timely return that discloses the worldwide estate.
4. Nothing is released until the Internal Revenue Service issues a transfer certificate, which it states takes twelve to eighteen months. The tax is due at nine months. That mismatch is the defining practical feature of these estates.
5. Administration is local: a foreign grant of representation has no authority in the United States, and the estate usually needs a state court or a non-probate instrument to reach the assets at all.

Part I. The first question is domicile, and it is answered after the death

Whether the estate is taxed on the whole of the decedent’s property or only on the American part depends on domicile at the date of death, which is residence in the United States combined with the absence of a definite present intention to depart (Treasury Regulation section 20.0-1(b)). It is not the day-count test that governs income tax residence (section 7701(b)), and it is not settled by immigration status: a green card is evidence of intention, not proof of it, and a person may hold one for years without becoming domiciled, or may become domiciled on a temporary visa.

The question is therefore one of fact, and after a death it has to be answered from documents rather than from the decedent. What matters is where the home was, where the family lived, where the tax returns were filed and on what basis, where the medical care was taken, what was said in the will and in immigration and banking documents, and where the decedent intended to be buried. Where the answer is genuinely uncertain, and a convention applies, the convention’s tie-breaker in Article 4 supplies a single fiscal domicile through permanent home, centre of vital interests, habitual abode and nationality. Where no convention applies, the question is decided under United States law alone, and the difference in outcome is the difference between an exemption of $15,000,000 and one of $60,000.

Part II. What the estate owes, and on what

The federal estate tax falls on the United States situs property of the decedent (sections 2101 to 2108). What counts as situs property is set out asset by asset in sections 2104 and 2105 and is described in detail on the planning page. In short: United States real estate, tangible property located in the United States, shares in United States corporations including American mutual funds, and debt of United States obligors that does not qualify as portfolio debt. Bank deposits, portfolio debt and the proceeds of insurance on the decedent’s own life are outside it.

Against that base the estate is allowed a unified credit of $13,000, equivalent to an exemption of $60,000 (section 2102(b)(1)). The figure is not indexed. It is reduced dollar for dollar by any unified credit already allowed against gift tax on the decedent’s lifetime gifts (section 2102(b)(3)(B)), which is a point frequently missed where the decedent made reportable gifts of United States real property in earlier years. The rate above the exemption reaches 40 percent (section 2001(c)).

Deductions are prorated. Debts, expenses and losses are allowed only in the proportion that the United States gross estate bears to the worldwide gross estate (section 2106(a)(1)). Claiming a funeral bill, an administration expense or a mortgage therefore requires disclosing the whole estate, wherever it is. A non-recourse debt secured on the American property is different in kind: it reduces the value of the property included rather than being claimed as a deduction, so the form of the borrowing changes the arithmetic. The alternate valuation date is available to these estates as it is to any other, and is elected in Part V of the return (section 2032), but only where it reduces both the gross estate and the tax.

Part III. The return and the calendar

Form 706-NA is required where the United States situs gross estate exceeds $60,000, measured gross before debts and expenses and reduced by post-1976 adjusted taxable gifts and any specific exemption claimed after September 8, 1976 (sections 6018(a)(2) and (3)). The deadlines are short and they run from the death, not from the appointment of a representative or from the moment the family learns that a filing is required.

Where a foreign representative has not yet been recognised in any American forum, the first nine months are often consumed by the question of who is entitled to sign the return at all. Starting the estate inventory and the domicile file immediately, rather than waiting for the foreign succession to be concluded, is what keeps the federal deadline reachable.

Part IV. Where a convention applies

Fifteen jurisdictions have an estate tax convention with the United States: Australia, Austria, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, the Netherlands, South Africa, Switzerland and the United Kingdom. The modern conventions confine the United States to real property and to the business property of a permanent establishment, and reserve everything else to the country of domicile, which usually removes the exposure on an American securities portfolio altogether. Nine of the fifteen also substitute for the $60,000 exemption a credit prorated by the ratio of United States situs assets to the worldwide estate (section 2102(b)(3)(A)). The full treaty map, with the marital provisions and the income tax withholding rates alongside, is set out on the planning page.

Two things are true of every convention claim. It must be made on a timely filed return, and it requires the worldwide estate to be disclosed and valued, because the relief is computed as a fraction of it. Families are often reluctant to put a complete foreign balance sheet in front of the Internal Revenue Service in order to claim relief on a modest American asset. That reluctance is understandable and it is usually misplaced: the alternative is the $60,000 exemption and a 40 percent rate. Returns claiming treaty relief also attract examination more often than others, so the valuations and the domicile evidence supporting the claim should be assembled to a standard that will survive one.

Part V. The transfer certificate

American banks, brokers, transfer agents and title companies will not release the assets of a deceased nonresident without a transfer certificate, because the federal estate tax lien attaches to the property and an institution that releases it can be held responsible for the unpaid tax. The certificate is a release of that lien (Treasury Regulation section 20.6325-1). There are two routes to it, and choosing the wrong one delays the estate by months.

Two points are worth stating plainly because they are widely misunderstood. Being below the filing threshold does not remove the procedure; it changes the paperwork. And there is no exception for property passing to a surviving joint tenant. Survivorship property is included in the gross estate under section 2040(a), the lien attaches to it, and nothing in the regulation, the Service’s published instructions or the Internal Revenue Manual releases it by reason of survivorship alone. The treatment of joint holdings across borders is covered on asset planning using joint titles.

The consequence for the family is a liquidity problem with a fixed shape. The tax is payable nine months after the death. The assets that would pay it are frozen for twelve to eighteen months after that, and often longer where the return is examined. Where the American position is large and the family has no other liquidity, the answer has to be arranged in advance, through insurance, a reserve held outside the United States, or a borrowing facility agreed while the account holder is alive.

Part VI. Administration in the state where the assets are

Federal tax is one problem and title is another. A German Erbschein, a French acte de notoriete, a European Certificate of Succession, a Swiss Erbbescheinigung and an English grant of probate all have one thing in common in the United States: an American transfer agent, bank or county recorder will not act on them. What works is a grant issued by a court in the state where the asset is located, obtained through an ancillary proceeding, or an instrument that avoids probate altogether.

The shape of the proceeding varies by state and by asset. Real property must be dealt with in the state where it lies, on that state’s timetable and under that state’s law of descent, which applies regardless of what the decedent’s home country’s succession law provides. Securities and bank accounts are dealt with by the custodian, which will usually accept small-estate affidavits where the state provides for them and the value is low. Assets carrying a beneficiary designation, a transfer on death registration or a payable on death designation pass outside probate entirely and are, in most estates of this kind, the only assets that move quickly. None of that removes the transfer certificate requirement, which applies to the asset rather than to the procedure.

Where the firm’s attorneys are admitted, the ancillary proceeding is conducted in house. Estate settlements in Virginia are described on estate settlements in Virginia, and the procedure in the other jurisdictions is compared on the estate settlements page.

Part VII. Income tax does not stop at the death

Three income tax obligations run alongside the estate tax and are regularly overlooked in these estates.

The decedent’s final return is due for the year of death where there was United States source income requiring one, on Form 1040-NR. Income received after the death belongs to the estate, and an estate with United States source income files its own return.

If the estate sells United States real property, the sale is a disposition by a foreign person and the withholding rules apply in the ordinary way, at 15 percent of the gross price unless a withholding certificate is obtained on Form 8288-B before closing (sections 897 and 1445). An estate selling to fund the estate tax can find the proceeds reduced by a withholding that exceeds the tax actually owed on the gain.

And distributions to beneficiaries who are not United States persons carry their own withholding. Distributable net income keeps its character in the beneficiary’s hands (section 662(b)), so the United States source components of a distribution are subject to withholding at 30 percent or the applicable treaty rate (sections 1441 and 1442), and a distribution attributable to gain on United States real property is withheld at 21 percent (section 1445(e)(1)). The executor is the withholding agent and is personally liable for tax not withheld (section 1461), with only partial relief where the beneficiary later pays (section 1463), and a representative who pays other claims before a claim of the United States is personally liable to the extent of the payment (31 U.S.C. 3713(b)). This is treated in full on non-US beneficiaries.

Part VIII. The home country is settling the same estate

The American procedure runs in parallel with a foreign one, and the two have to be sequenced rather than run independently, because each country’s relief depends on what the other has assessed and paid.

Germany taxes the entire worldwide acquisition where either the decedent or the acquirer is an Inlaender, which includes any person with a residence or habitual abode in Germany and any German national who has been permanently abroad for not more than five years (section 2 ErbStG). A unilateral credit for foreign inheritance tax is available on application, but only in unlimited liability cases, only for foreign tax actually assessed and paid, only against German tax on assets that qualify as Auslandsvermoegen, and only where the German tax arose within five years of the foreign tax (section 21 ErbStG). Because the qualifying categories are drawn from section 121 BewG, some American assets, bank deposits in particular, may fall outside the credit even though they were taxed in the United States. Where the convention applies it governs instead.

France taxes the worldwide transfer where the decedent was domiciled in France, and also where the heir or legatee is domiciled in France on the day of the transfer and has been for at least six of the ten preceding years (article 750 ter of the Code general des impots). Foreign transfer tax paid is creditable, but only against the French tax attributable to the foreign-situs assets (article 784 A).

The credit articles of the conventions operate in both directions. Under the German convention, Article 11 obliges each State to credit the other’s tax on property the other may tax under the situs articles; the French convention does the same in Article 12. Claiming in the right order, and within each country’s own limitation period, is what determines whether the relief is actually obtained. Double taxation relief is treated in detail in the firm’s guide on the Articles and Guides page.

Part IX. Practical steps

1. Build the domicile file first. Residence history, tax filings, immigration documents, property, family location and any statements of intention. It decides everything else and the evidence disperses quickly.
2. Inventory the American assets by situs, not by institution. Foreign shares in an American account are outside the tax; an American fund held through a Swiss bank is inside it.
3. Establish within the first weeks whether a return is due, measuring gross and taking lifetime gifts into account, because the transfer certificate route depends on the answer.
4. Identify the convention and fix the treaty domicile before deciding how much of the worldwide estate will have to be disclosed.
5. Start the American court procedure in parallel with the foreign succession rather than after it.
6. Plan the tax payment on the assumption that the American accounts are frozen for twelve to eighteen months after the return is filed.
7. Do not distribute to a foreign beneficiary before the withholding and the documentation are in place. The liability is the representative’s own.
8. Sequence the two countries’ claims so that each credit is claimed on the correct return and within that country’s limitation period.

Conclusion

An estate of this kind is not a small estate that happens to be foreign. It is two settlements running on different clocks, with an American tax due before the American assets can be touched, a relief regime that must be claimed on time and with full disclosure, and a title system that ignores the documents the family already holds. What determines the outcome is almost entirely what is done in the first three months.

How the firm helps

Ashford International Law PC settles estates of nonresident decedents with United States assets: establishing domicile, identifying situs property, preparing and filing Form 706-NA with any treaty claim, obtaining transfer certificates, conducting ancillary probate in the jurisdictions where the firm’s attorneys are admitted, handling withholding on distributions to foreign beneficiaries, and coordinating the American settlement with the foreign one so that the credits on both sides are preserved. Related pages cover US decedents with non-US assets, asset and tax planning for non-US residents with US assets, estate planning for non-US citizens, non-US beneficiaries, gift planning, asset planning using joint titles and marital property regimes. 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.