Americans Whose Adult Children Live Abroad
A son or daughter has settled in London, Munich or Paris, may have married there and may hold another nationality. The parents’ estate plan now provides for an heir whose country taxes what he or she receives, whose bank asks for papers a U.S. probate court does not issue, and who may not be able to serve as executor or trustee without changing how the plan works. The firm’s attorneys plan the gifts, the trusts and the administration with the child’s country in view.
Law stated as of October 2026
In brief.
- A gift by a U.S. parent is subject to U.S. gift tax wherever the child lives; in 2026 the first USD 19,000 a year to each child is excluded, and the excess uses the parent’s exclusion of USD 15,000,000 (sections 2501 and 2503(b)).
- The child’s country may tax the same gift or inheritance because the child lives there: Germany taxes a resident recipient on the whole acquisition, with an allowance of EUR 400,000 from each parent over ten years (§§ 2, 14 and 16 ErbStG); France taxes property from abroad received by an heir domiciled there for six of the preceding ten years (Article 750 ter CGI).
- A U.S. trust becomes a foreign trust for U.S. tax purposes if a person who is not a U.S. person controls a substantial decision, for example a child abroad without U.S. citizenship named as trustee (Treas. Reg. § 301.7701-7).
- Income a U.S. estate or trust carries out to a child who is not a U.S. person is withheld upon at 30 percent or the treaty rate (section 1441); a child who is a U.S. citizen files Form 1040 wherever he or she lives.
- Whether a child abroad may serve as executor depends on the state: the District of Columbia and Maryland do not appoint a non-citizen without a green card and require a local agent, Virginia requires consent to service of process and a bond, and California appoints a person living outside the United States only if the will names that person.
What is happening
For the parents, the child’s residence does not change the U.S. tax. A gift by a U.S. citizen or domiciliary is subject to gift tax whether the child lives in Ohio or in Bavaria (section 2501(a)(1)); the annual exclusion is USD 19,000 per child in 2026 (section 2503(b); Rev. Proc. 2025-32, section 4.42), and gifts above it are reported on Form 709 and use the parent’s basic exclusion amount of USD 15,000,000. At death, the estate is taxed in the same way whatever the heirs’ residence. What changes is the other side. Germany treats a recipient who has a residence or habitual abode there as an Inländer and taxes the whole acquisition, gifts and inheritances alike, even where the parent never lived in Germany (§ 2(1) Nr. 1 ErbStG); a child has an allowance of EUR 400,000 from each parent, and acquisitions from the same person within ten years are added together (§§ 14 and 16(1) Nr. 2 ErbStG). France taxes property situated outside France that is received by an heir or donee domiciled in France for at least six of the ten years preceding the receipt (Article 750 ter, 3° CGI). The conventions with fifteen countries allocate the taxing rights and the credits; with the other countries, the timing and the form of each transfer decide whether tax is paid twice.
Trusts and fiduciaries need the same attention. A trust is a U.S. trust only if a U.S. court can exercise primary supervision over it and U.S. persons control all of its substantial decisions (Treas. Reg. § 301.7701-7(a)(1)); a child abroad who is not a U.S. citizen, named as trustee or given a power over substantial decisions, can make the trust foreign, with the reporting and income tax consequences that follow, and an inadvertent change, such as a trustee’s move or death, must be corrected within twelve months (Treas. Reg. § 301.7701-7(d)(2)). The child’s country may tax the trust as well: a U.S. trust that binds assets for the family can be a Vermögensmasse ausländischen Rechts in Germany, whose distributions to a beneficiary living there are taxed as acquisitions during its existence and on its dissolution (§ 7(1) Nr. 9 ErbStG). Income an estate or trust carries out to a child who is not a U.S. person is withheld upon at 30 percent or at the treaty rate claimed on Form W-8BEN (section 1441), and an inherited IRA is withheld upon on each payment; a child who is a U.S. citizen furnishes Form W-9, reports the income on Form 1040 and credits the foreign tax. Each of the four states has its own rules for an executor who lives abroad, and the child’s bank abroad asks for a certificate of inheritance or a European Certificate of Succession rather than letters testamentary.
| Question | Child who is a U.S. citizen abroad | Child who is not a U.S. person |
|---|---|---|
| Gift from the parent | U.S. gift tax on the parent; annual exclusion USD 19,000 (2026); Form 709 above it | The same |
| Tax in the child’s country | Gift or inheritance tax on a resident recipient, for example in Germany and France | The same |
| Income from a U.S. estate or trust | Form 1040; credit for the foreign tax | 30 percent withholding or the treaty rate; Form W-8BEN; Form 1042-S |
| Inherited IRA or 401(k) | Form W-9; distribution within ten years | Withholding on each payment; distribution within ten years |
| Child as trustee of a U.S. trust | The trust remains a U.S. trust | The trust may become a foreign trust (Treas. Reg. § 301.7701-7) |
| Child as executor | Rules for nonresidents: local agent (District of Columbia, Maryland), consent and bond (Virginia), named in the will (California) | The same; the District of Columbia and Maryland do not appoint a non-citizen without a green card |
| The child’s own U.S. filings | Form 1040 on worldwide income; FBAR and Form 8938 for accounts abroad | Only on U.S.-source income |
What has to happen, in order
- Establish each child’s position
Citizenship, residence, marital property regime and the gift and inheritance tax of the child’s country: each decides how a transfer will be taxed there.
- Choose the form of each transfer
Outright gift, gift in trust, bequest or beneficiary designation, each tested in both countries before it is made.
- Use the allowances on both sides
The U.S. annual and lifetime exclusions, and the allowances of the child’s country, which in Germany renew every ten years.
- Draft the trust for both systems
Trustees and powers that keep the trust a U.S. trust, and terms that limit the tax in the child’s country on each distribution.
- Name fiduciaries who can act
An executor and a trustee the state will appoint, or a resident co-fiduciary or professional fiduciary where the child cannot serve.
- Prepare the papers the child will need
Apostilles, translations, a certificate of inheritance where the child’s bank requires one, and the withholding forms.
- Review on each change
A child’s move, marriage or naturalization abroad changes the plan; it is checked against the new facts.
How the firm helps
The firm’s attorneys plan the parents’ gifts and estate with the child’s country in view, and work with the child’s adviser abroad.
- The estate plan: wills, trusts and fiduciaries that work for an heir abroad.
- The gift plan, tested against the U.S. gift tax and the tax of the child’s country.
- Trust drafting that keeps the trust a U.S. trust and limits the tax in the child’s country.
- The administration after a death, including the withholding and the papers for the child’s bank abroad.
- Correspondence with the child’s advisers abroad, in English, German or French.
What documents to prepare for the initial consultation
- Existing wills, trusts, beneficiary designations and powers of attorney
- Each child’s citizenships, country of residence and, if married, marital property regime
- A list of gifts already made to each child, with dates and values, and the Forms 709 filed
- Statements of the accounts and retirement accounts intended for the children
- Deeds of real estate and documents on family companies
- Gift or inheritance tax assessments the children have received abroad
- The names of the children’s tax advisers abroad, if any
- The last three U.S. income tax returns
Copies are sufficient. The firm sets up a secure portal for the documents and reviews them before the consultation.
Fifteen countries have an estate or gift tax convention with the United States. The German convention covers estates and gifts; for an heir who lives in Germany, Germany credits the U.S. estate tax on the property it taxes (Article 11). Where no convention applies, each country’s own credit rules decide, and the order and the form of the transfers matter more.
Describe the family in a few lines
Where each child lives, which citizenship each holds and what the parents own are enough for the firm to say what the plan needs and how it would proceed.
