Topics A-Z: Non-US Persons and Estate Settlement Terms Explained
This page sets out, in full, the entries from the firm’s Topics A-Z glossary addressed to non-United States persons who hold American assets or expect to receive them, and to the settlement of estates generally.
Figures stated are those in force for 2026. The material is provided for information only and does not constitute legal advice. Positions taken by the Internal Revenue Service, by state revenue departments and by foreign authorities differ, and the application of any rule depends on facts that this format cannot accommodate.
A · B · C · D · E · F · G · H · I · J · L · M · N · O · P · Q · R · S · T · U · W
A
Alternate Valuation Date
An estate that files a federal estate tax return may elect to value the gross estate as of the date six months after death rather than as of the date of death. The election is available only if it reduces both the value of the gross estate and the combined estate and generation-skipping transfer tax liability, and once made it applies to every asset rather than to selected holdings.
The election is examined in estates holding concentrated public equity, operating businesses or real property in a falling market. Its cost is the corresponding reduction in the basis that beneficiaries take, so the analysis weighs transfer tax saved against income tax deferred to a later sale. Assets that change in value merely through the passage of time, such as certain annuities and patents, are excluded from the relief.
Ancillary Probate
Title to property situated in a state other than the decedent’s domicile passes under the law of the situs state, which ordinarily requires a supplementary proceeding in its own courts before a fiduciary may sell or convey. The requirement applies equally to a decedent domiciled abroad who held a residence, a vacation property or a brokerage relationship in the United States.
For institutions, the practical significance lies in the documents they may accept. A foreign grant of representation, a European certificate of succession or a civil-law deed of inheritance does not authorise a transfer agent or a custodian to act. Letters issued by a court of the situs state, or a recorded transfer on death instrument where the state recognises one, are what permit the transfer to proceed.
Apostille
The Hague Convention of 5 October 1961 substitutes a single certificate for the chain of consular legalisation. In the United States the certificate is issued by the secretary of state of the state whose officer executed the document, not by any federal authority, a distinction that foreign counsel and foreign registries frequently misunderstand.
Probate courts and financial institutions require the apostille on foreign death certificates, grants of representation, powers of attorney and corporate records offered in an American proceeding. The certificate authenticates the signature alone and says nothing of the legal effect of the instrument, which must still be established under the law of the jurisdiction where it is presented. Certified translation is almost invariably required in addition.
Appraisals and Qualified Appraisers
Real property, closely held interests, art and other assets without a public market require an appraisal prepared by an appraiser who meets the standards of the regulations, and estates claiming a charitable deduction must attach a qualified appraisal to the return. Reports that fail to address the appropriate standard of value, the relevant market and the applicable discounts invite adjustment.
Objects of art valued above fifty thousand dollars are referred to the Art Advisory Panel, whose recommendations the Service adopts in the great majority of cases. Institutions holding collections as custodians or lenders are frequently asked for provenance and insurance records long after the fact, and a file assembled during the owner’s lifetime is worth considerably more than one reconstructed by an executor.
B
Beneficiary Designations
A substantial share of American wealth passes by contract rather than by will: retirement accounts, life insurance, annuities, payable on death bank accounts and transfer on death securities registrations all pass to the person named on the institution’s form, and that designation prevails over a later will.
The resulting inconsistencies are the most common defect encountered in estate administration. Designations are seldom revisited after divorce, remarriage or the birth of children; contingent beneficiaries are often omitted, so that the interest of a predeceased primary beneficiary falls into the probate estate; and naming the estate itself as beneficiary of a retirement account both accelerates income taxation and subjects the account to the court proceeding it might have avoided. A review of designations belongs in every engagement alongside the will and the trust.
Blocker Corporation
A non-resident who holds United States real property directly, or through an entity disregarded for tax purposes, owns a United States situs asset exposed to estate tax at forty percent above an exclusion of sixty thousand dollars. Interposing a foreign corporation converts the asset into shares of a foreign issuer, which are not United States situs property, and removes that exposure.
The structure has costs that must be weighed against the exposure removed: corporate level tax on operating income and on gain at disposition, the branch profits tax, loss of the preferential rate on long-term capital gain, and the absence of any basis adjustment at death. Two-tier arrangements, leveraged acquisitions and partnership alternatives each address part of the problem. The analysis belongs before the purchase, since unwinding an existing holding is ordinarily a taxable event.
Branch Profits Tax
A foreign corporation engaged in a United States trade or business is subject, in addition to the regular corporate tax, to a thirty percent tax on its dividend equivalent amount, a measure of earnings treated as repatriated. The rate is reduced or eliminated under a number of income tax treaties, subject to the limitation on benefits article.
The tax is the principal reason a foreign corporation used to hold American real property is ordinarily placed beneath a second entity or established in a treaty jurisdiction. It also explains why a structure that appears efficient at the level of income tax alone may prove costly on exit, and why the complete cycle of acquisition, operation and disposition should be modelled before a structure is adopted.
C
Check-the-Box Election
An eligible entity may elect how it is classified for United States tax purposes, as a corporation, a partnership or an entity disregarded from its owner. The election is made on Form 8832 and is ordinarily effective no more than seventy-five days before filing, which makes it a planning instrument rather than a remedy.
For inbound families the election governs whether a foreign holding company shields American assets from estate tax or is ignored for that purpose, and for outbound American families it governs whether a foreign company is a controlled foreign corporation or a transparent entity whose income is reported currently. Elections made without regard to the law of the entity’s home jurisdiction produce hybrid results that treaty provisions increasingly disallow.
Community Property
Nine states treat property acquired during marriage as belonging to the spouses in equal shares. The classification affects the disposition available at death, the reach of creditors, and, most significantly, the basis adjustment, since the entire community interest is adjusted on the first death rather than only the decedent’s half.
Couples who marry under a civil law regime and later establish residence in the United States generally retain their matrimonial property regime, but American institutions, registries and title companies do not take account of it unless it is documented. A written characterisation of existing assets, prepared before an American acquisition, prevents disputes at death and at divorce and is among the more valuable steps an international couple can take.
Controlled Foreign Corporation
A foreign corporation more than half owned by United States shareholders is a controlled foreign corporation, and those shareholders are taxed currently on defined categories of its income without regard to distribution. The categories comprise subpart F income and the amount formerly described as global intangible low-taxed income and now designated net CFC tested income.
The regime is encountered by American families with European operating companies, by Americans resident abroad who incorporate a professional practice, and, frequently and unexpectedly, by an estate in which a foreign company passes to United States beneficiaries and thereby becomes controlled for the first time. Reporting is made on Form 5471, whose penalties apply without regard to whether tax is due.
Covered Expatriate
An individual who relinquishes United States citizenship, or who surrenders a green card held in eight of the preceding fifteen years, becomes a covered expatriate if net worth, average tax liability or compliance history crosses the statutory thresholds. The consequence is a mark-to-market regime treating worldwide assets as sold on the day before expatriation, with deferred compensation and certain trust interests taxed under separate rules.
A second consequence is less widely understood and outlasts the expatriation itself. Gifts and bequests received from a covered expatriate by a United States person are taxed to the recipient at the highest transfer tax rate, reported on Form 708, whose instructions were issued in December 2025. Families contemplating expatriation should model both consequences several years in advance, since the compliance certification required on Form 8854 cannot be improvised.
Creditor Claims
Probate provides a mechanism for barring claims: notice is published and, in most states, given directly to known creditors, after which a short statutory period runs, and claims not presented within it are extinguished. This is one of the few advantages of a court proceeding and is sometimes reason enough to open one even where assets pass outside probate.
A fiduciary who distributes before claims and taxes are satisfied is personally liable, and federal law gives the government priority over other claimants in an insolvent estate. Fiduciaries administering international estates should also consider claims arising abroad, which may be subject to different limitation periods and may not be barred by an American proceeding.
D
Disclaimer
A qualified disclaimer is an irrevocable refusal of an interest, made in writing within nine months of the transfer, by a person who has accepted neither the property nor its benefits and who does not direct where it passes. The property is then treated as though the disclaimant had predeceased.
The technique is the principal instrument of post-mortem correction. It redirects property to a lower generation, perfects a marital or charitable deduction, or removes an asset whose associated liability exceeds its value. Because the nine-month period runs from death rather than from the discovery of the problem, the review that identifies the opportunity must occur early in the administration.
Domicile
Domicile governs liability for federal estate and gift tax, and it is a question of residence combined with the absence of a definite present intention to depart. It is determined on the facts: the location of the family home, immigration status, the place where children attend school, driving licences, voter registration, where medical care is received and statements made in documents.
It is not the same as residence for income tax purposes, which follows the objective tests of lawful permanent residence and substantial presence. A person may be a non-resident for income tax and domiciled for transfer tax, or the reverse, and the consequence is the difference between an exclusion of fifteen million dollars and one of sixty thousand. Where two states claim domicile, the applicable estate tax treaty supplies a hierarchy of tests, and several treaties limit the effect of a domicile acquired only recently.
E
Effectively Connected Income
Income of a non-resident that is effectively connected with a United States trade or business is taxed at graduated rates on a net basis, after deductions, and is reported on Form 1040-NR or Form 1120-F. Income that is not so connected, chiefly dividends, interest, rents and royalties, is taxed on a gross basis at thirty percent, collected by withholding at source and reduced by treaty.
The distinction determines the economics of American real estate held by foreign owners. Absent an election, gross rents suffer thirty percent withholding with no deduction for mortgage interest, taxes, insurance or depreciation; with an election to treat the activity as a trade or business, net income is taxed and the result is frequently a fraction of the alternative. The election is easily made and just as easily overlooked.
Elective Share
A surviving spouse who is dissatisfied with the provision made by will may claim a statutory share, commonly one third, and in several states computed against an augmented estate that reaches assets transferred outside probate. The claim must be asserted within a short period after the grant of representation.
This is the only forced share the common law jurisdictions recognise. Children, including minors, have no equivalent entitlement, which distinguishes American law sharply from the civil law systems of continental Europe and from Louisiana. For international families the governing question is not what the will provides but which law governs the succession, since movables follow the law of domicile and immovables the law of their situs.
Estate Account
A fiduciary opens an account in the name of the estate, supported by letters of appointment and an employer identification number, through which all receipts and disbursements pass. Commingling with personal funds is a breach of duty, and the account record is the foundation of the accounting the fiduciary will render.
Foreign fiduciaries encounter two obstacles: the institution’s onboarding requirements, which are framed for domestic customers and may not accommodate an applicant without a Social Security number, and the delay in obtaining an employer identification number, since an applicant without an American identification number must apply other than online. Both should be addressed in the opening weeks of the administration.
Estate Tax Treaties
The United States has concluded estate and gift tax treaties with a limited number of states, among them Germany, France, the United Kingdom, the Netherlands, Switzerland, Austria, Denmark, Finland, Greece, Ireland, Italy, Japan, Norway, South Africa, Australia and Canada. Their absence elsewhere is as consequential as their presence.
A treaty performs four functions: it resolves competing claims of domicile by a hierarchy of tests, it limits the assets each state may tax, it substitutes for the sixty thousand dollar exclusion a credit prorated by the ratio of United States situs assets to the worldwide estate, and it governs the crediting of tax paid in one state against tax due in the other. Several treaties add relief for a surviving spouse who is not an American citizen. None of this is automatic: the benefit must be claimed on a timely return, supported by a statement of the worldwide estate.
Executor and Personal Representative
The fiduciary named in a will derives authority from the court’s grant, not from the instrument, and until letters issue no institution will act on the appointment. Where there is no will, or the named person cannot serve, the court appoints an administrator, frequently requiring a bond.
Several states restrict the appointment of a fiduciary who resides outside the jurisdiction, or require a resident agent or increased bond. A family that names a relative living abroad, or a European executor appointed under a foreign will, should confirm that the person can in fact be appointed where the assets lie, since discovering otherwise after death delays the administration by months.
Expatriation
Relinquishment of citizenship, or surrender of a green card held in eight of the preceding fifteen years, triggers the mark-to-market regime for individuals whose net worth, average tax liability or compliance record crosses the thresholds. Worldwide assets are treated as sold on the day before expatriation, with an exclusion indexed annually, and deferred compensation, retirement accounts and non-grantor trust interests follow separate rules.
The consequences continue after departure. Gifts and bequests later made by a covered expatriate to a United States person are taxed to the recipient at the highest transfer tax rate and reported on Form 708. Planning that begins several years before the intended date, addressing valuation, the timing of the final year and the correction of any reporting arrears, is materially more effective than planning undertaken in the final months.
F
Fiduciary Income Tax
An estate or trust is a separate taxpayer filing Form 1041. Its rate brackets compress rapidly, reaching the top marginal rate at a very low level of income, which creates a standing incentive to distribute rather than to accumulate. Income distributed carries out to beneficiaries under the distributable net income rules and is reported to them on Schedule K-1.
Distributions to foreign beneficiaries attract withholding and reporting on Form 1042-S, and the character of the income determines the rate and the availability of treaty relief. Trusts holding foreign assets or with foreign trustees must also determine their own classification as domestic or foreign, since a foreign trust is taxed as a non-resident and its United States beneficiaries carry their own reporting obligations.
Fiduciary Liability
A trustee or personal representative owes duties of loyalty, impartiality, prudence in investment and accounting, and is personally answerable for breach. Liability arises most often not from dishonesty but from distributing before liabilities are ascertained, from failing to diversify a concentrated position inherited with the trust, and from neglecting a filing whose penalty falls on the fiduciary personally.
Federal law makes a fiduciary personally liable for unpaid federal claims where estate assets are distributed before those claims are satisfied. Discharge procedures exist and are under-used. In international administrations the exposure is compounded by obligations arising abroad, of which an American fiduciary may be unaware until a foreign authority asserts them.
Foreign Grantor Trust
Where a foreign settlor retains the power to revoke, or where distributions during the settlor’s life may be made only to the settlor and spouse, the trust is treated as owned by that settlor. Its income is therefore outside the American tax net except as to United States source items, and distributions to United States beneficiaries are treated as gifts rather than as carrying out income.
The structure is the classic vehicle for a foreign family with American children or grandchildren, since it permits value to be transferred without American income tax during the settlor’s lifetime. Its weakness is that it ends with the settlor: on death the trust becomes a foreign non-grantor trust, and unless a distribution is made within the permitted period or the trust is domesticated, accumulated income becomes subject to the throwback rules. The successor arrangements should be settled long before the death that triggers them.
Foreign Non-Grantor Trust
A foreign trust not treated as owned by its settlor is taxed as a non-resident individual, on United States source and effectively connected income only. Distributions to United States beneficiaries carry out current income first, and thereafter accumulated income under the throwback rules, which recharacterise the distribution as ordinary income of the earlier years and add a non-deductible interest charge that can approach or exceed the amount distributed.
Beneficiaries report receipts on Form 3520 and the trustee’s information on Form 3520-A, with penalties calculated as a percentage of the assets or of the distribution. Mitigation is available: default calculations where records are missing, distributions structured to avoid accumulation, and in some cases domestication of the trust. Every one of these depends on records the trustee may never have been asked to keep, which is why the position of a foreign trust with American beneficiaries should be examined before, not after, the first distribution.
Form 706 and Form 706-NA
Form 706 reports the worldwide gross estate of a citizen or domiciliary and is due nine months after death, with a six month extension available for filing but not for payment. It must also be filed, though no tax is due, where the surviving spouse wishes to preserve the unused exclusion of the first spouse to die.
Form 706-NA applies to a decedent who was neither a citizen nor domiciled and is required where United States situs assets exceed sixty thousand dollars measured gross, before debts. Treaty relief is claimed on this return, which requires disclosure of the worldwide estate in order to compute the prorated credit, and its acceptance is the precondition for the transfer certificate that releases assets held by American institutions. Processing frequently exceeds a year, a fact that should shape expectations at the outset of the administration.
Form 3520 and Form 3520-A
A United States person reports on Form 3520 the creation of a foreign trust, transfers to it, distributions received from it, and gifts or bequests received from foreign persons above threshold. The trustee of a foreign trust with a United States owner files Form 3520-A, and if the trustee does not, the owner must file a substitute.
The penalties are calculated on the value of the assets or the transfer and accumulate rapidly, and the courts have devoted considerable attention in recent years to their assessment and to the defence of reasonable cause. A foreign inheritance received by an American beneficiary is reportable even though it bears no American tax, which is the single most common omission encountered when a family’s affairs are first reviewed.
Form 5471
United States persons who are officers, directors or shareholders of a foreign corporation report on Form 5471 according to categories that determine the schedules required. The form conveys the information needed to apply the controlled foreign corporation rules and carries penalties that begin at ten thousand dollars per form per year and increase on continued failure.
Estates encounter the obligation when a foreign company passes to American beneficiaries, at which point a corporation that was never controlled becomes so and reporting begins for a year in which no one expected it. A fiduciary administering an estate with foreign entity holdings should determine the position early and, where the analysis is uncertain, file protectively.
G
GILTI and Net CFC Tested Income
United States shareholders of controlled foreign corporations include currently a measure of the corporation’s income in excess of a deemed return on tangible assets. The regime, introduced as global intangible low-taxed income, now appears as net CFC tested income following the 2025 legislation, with adjusted deduction and credit percentages.
Individual shareholders fare worse than corporate ones unless an election is made to be taxed as a domestic corporation for this purpose, which restores a portion of the foreign tax credit at the cost of a second layer on distribution. American families holding European operating companies, and Americans abroad who have incorporated a professional practice, are the typical affected parties, frequently without having been told.
Green Card
Lawful permanent residence makes the holder a resident for income tax from the first day, taxable on worldwide income and subject to the full range of foreign asset reporting. It is strong evidence of domicile for estate and gift tax purposes although it does not establish it as a matter of law.
Surrender does not necessarily end the exposure. A card held in eight of the preceding fifteen years brings the holder within the expatriation regime, with its mark-to-market charge and its enduring consequences for gifts and bequests to American recipients. Pre-immigration planning before the card is issued, and a considered exit several years before it is surrendered, are both materially more effective than anything that can be done in between.
H
Holding Structures for United States Real Estate
The choice among direct ownership, a domestic limited liability company, a domestic corporation, a foreign corporation, a two-tier arrangement, a trust or a partnership turns on the owner’s status and objectives. For a non-resident the dominant consideration is usually estate tax exposure, since direct ownership and disregarded entities leave the asset within the American net while a foreign corporation removes it.
Every structure that solves the estate tax problem creates an income tax cost, whether corporate rates on operating income and gain, the branch profits tax, the loss of preferential capital gains rates or the absence of a basis adjustment at death. The correct answer depends on the holding period, whether the property is for personal use or investment, whether debt is involved and who the intended successors are. It should be settled before acquisition; restructuring afterwards is generally taxable.
I
Income in Respect of a Decedent
Amounts earned by the decedent but received after death, principally retirement accounts, deferred compensation, accrued interest and unpaid fees, retain their character as income and are taxed to the estate or to the recipient on receipt. They are expressly excluded from the basis adjustment available to other assets.
A retirement account therefore reaches a beneficiary encumbered with the deferred income tax, while a securities portfolio of equal value arrives with its accrued gain eliminated. A deduction is available for the estate tax attributable to the same amounts, which mitigates the double charge and is frequently missed. The distinction should govern which assets are left to charity, which to a surviving spouse and which to children.
Intestacy
Where there is no valid will, the law of the decedent’s domicile governs movables and the law of the situs governs immovables, so a single estate may be distributed under two schemes. The shares allotted to a surviving spouse in the presence of children from an earlier relationship vary considerably among states.
No intestacy statute appoints a guardian for minor children, which remains the exclusive province of a will, and none accounts for wishes expressed informally. For international families the further difficulty is that the applicable law may not be the one the family assumes, since a choice of law made in a foreign will is generally ineffective as to American real property.
Investor Visas and Residence Planning
Immigration status and tax status are determined separately, and the sequence in which they are acquired matters. A person who becomes a lawful permanent resident, or who satisfies the substantial presence test, becomes taxable on worldwide income from that moment, and the planning available beforehand is far broader than anything available after.
The steps ordinarily considered before arrival include accelerating gains, structuring foreign entities to avoid controlled foreign corporation and passive foreign investment company treatment, funding a drop-off trust outside the American net, and reviewing the treatment of existing life insurance and pension arrangements. Where a family also contemplates an eventual departure, the expatriation rules should be modelled at the same time, since they are the exit price of the status being acquired.
J
Joint Accounts and Survivorship
Property held jointly with right of survivorship passes to the survivor by operation of law, outside the will and outside probate, and institutions transfer it on presentation of a death certificate. Between spouses several states recognise tenancy by the entirety, which adds protection from the separate creditors of either.
Adding a child or other relative as a joint owner is nonetheless rarely advisable. It exposes the asset to that person’s creditors, divorce and bankruptcy, is usually a completed gift, and denies the survivor a basis adjustment on the portion so acquired. Where the surviving spouse is not an American citizen, the entire value is presumed included in the decedent’s estate unless the survivor’s contribution to the acquisition can be proved, a burden few couples can discharge after decades of joint finances.
L
Letters Testamentary
The court’s grant, styled letters testamentary where there is a will and letters of administration where there is none, is the instrument that confers authority. Institutions require a certified copy, frequently one issued within the preceding sixty days, and will not act on the will itself, on a foreign grant or on the fiduciary’s own assurance.
Foreign personal representatives should expect to obtain ancillary letters in each state where assets are located, supported by the foreign grant, the will, and evidence of the foreign proceeding, all translated and apostilled. Several states restrict appointment of non-residents or require a resident agent, and these requirements are best identified before the application is prepared rather than after it is rejected.
Life Insurance
Proceeds are received free of income tax but are included in the insured’s gross estate where the insured held any incident of ownership, including the power to change the beneficiary or to borrow against the policy. Ownership by an irrevocable trust, or by the intended beneficiary from inception, avoids that inclusion.
A rule favourable to non-residents deserves emphasis: proceeds on the life of a person who was neither a citizen nor domiciled are not United States situs property and escape the estate tax entirely. Private placement policies are used by substantial international families to hold investment portfolios within an insurance wrapper, and their treatment depends on satisfying the diversification and investor control requirements, and on the tax law of each country where a beneficiary resides.
M
Multi-Jurisdictional Estates
An estate with assets or heirs in more than one country presents three separate questions that are frequently conflated: which courts have jurisdiction, which law governs the succession, and which states may tax. The answers need not coincide, and each is determined by its own rules.
The European Union’s succession regulation unifies jurisdiction and applicable law among participating states and permits a choice of national law, but the United States is not bound by it and the European certificate of succession has no effect there. American conflicts rules apply the law of the domicile to movables and the law of the situs to immovables. Coordination in practice means running the proceedings in parallel, with a single set of valuations, a common inventory and one adviser responsible for reconciling the tax filings, since sequential administration in each country can extend a settlement by years.
N
No-Contest Clause
A provision disinheriting a beneficiary who challenges the instrument deters litigation by putting an existing gift at risk. Its enforceability varies: some states decline to apply it where the challenge is brought in good faith and with probable cause, and others enforce it strictly.
The clause works only where the beneficiary has enough to lose, so a legacy of meaningful size to the person most likely to object is part of the design. Where beneficiaries reside abroad, the practical deterrent is weaker, since a foreign claimant may pursue remedies in a jurisdiction that disregards the clause, and the coordination of proceedings becomes the real battleground.
Non-Citizen Spouse
The unlimited marital deduction requires that the surviving spouse be a United States citizen. A spouse who is a long-standing lawful permanent resident does not qualify, and the property passing to that spouse is taxed in the estate of the first to die unless it passes to a qualified domestic trust or the survivor naturalises before the return is filed.
Lifetime gifts between spouses are similarly restricted to an enhanced annual amount rather than being unlimited, and jointly held property is presumed to belong wholly to the decedent unless the survivor’s contribution is proved. Several estate tax treaties provide relief that domestic law withholds, which is a further reason to establish the treaty position before assuming the domestic result.
Non-Probate Assets
A large part of a typical American estate passes outside the will: property held with survivorship rights, accounts with beneficiary designations, securities registered transfer on death, and assets held in trust. Institutions release these on proof of death without any grant of representation.
The classification of each asset therefore determines who receives it, how quickly and on what documentation, and it is the first exercise in any administration. It also explains how a carefully drafted will can prove almost entirely inoperative, and why a review of designations belongs in every estate plan rather than in the estate administration that follows it.
Nonresident Alien
The term describes a person who is neither a citizen nor a resident, but residence is determined differently for each tax. For income tax it follows lawful permanent residence or the substantial presence test; for estate and gift tax it follows domicile, which depends on intention.
A nonresident alien is taxed on United States source income and, at death, on United States situs assets, with an exclusion of sixty thousand dollars rather than fifteen million. Treaty relief materially alters that position for residents of the limited number of states with which estate tax treaties are in force, and must be claimed on a timely return supported by disclosure of the worldwide estate.
O
Offshore Disclosure and Correction
Unreported foreign accounts, entities and trusts are corrected through defined procedures rather than by quiet amendment. The streamlined procedures apply where the failure was not wilful and require a certification to that effect; the voluntary disclosure practice applies where wilfulness cannot be excluded and produces a negotiated penalty framework; delinquent information return procedures apply where income was reported but forms were omitted.
Selection among them is a legal judgment turning on facts, and it must be made before the authorities act, since eligibility closes once an examination begins. Families reviewing their position for the first time, commonly on an inheritance, a relocation or the discovery of American citizenship acquired at birth, should expect this analysis to precede any planning, because a structure built on an uncorrected history is unsound.
P
Passive Foreign Investment Company
Foreign corporations meeting an income or asset test are passive foreign investment companies, a definition that captures nearly every European collective investment fund, including the ordinary funds and investment companies sold to retail investors in Germany, France and Switzerland.
In the absence of an election, excess distributions and gains are allocated across the holding period, taxed at the highest rate for each year and increased by an interest charge, with annual reporting on Form 8621 for each holding. The qualified electing fund and mark-to-market elections improve the result but depend on information that foreign managers do not always supply. The problem arises for Americans resident abroad who invest locally, and for heirs who become American taxpayers while holding a European portfolio, which is a common consequence of a marriage or a relocation.
Portfolio Interest Exemption
Interest on registered obligations paid to a nonresident is exempt from the thirty percent withholding tax where the recipient is not a ten percent shareholder, is not a controlled foreign corporation related to the payer, and is not a bank lending in the ordinary course. Certification on Form W-8BEN or W-8BEN-E supports the exemption.
The provision underpins much inbound lending, including shareholder debt used to leverage American real estate, where interest reduces net taxable income and may leave the lender’s jurisdiction untaxed. The earnings stripping limitations and the related party tests confine the technique, and structures relying on it should be documented as of the date of the loan rather than reconstructed later.
Pre-Immigration Planning
The interval before a person becomes a United States taxpayer offers opportunities that close on arrival. Gains may be accelerated to obtain a stepped-up basis, foreign entities may be reorganised or liquidated before the controlled foreign corporation and passive foreign investment company rules attach, and trusts may be funded outside the American transfer tax net for the benefit of family members who will remain abroad.
Timing is determined by the residence start date, which depends on immigration status and physical presence and can sometimes be managed. Existing arrangements deserve particular attention, since foreign pension plans, insurance wrappers and family foundations perfectly ordinary in Europe may be treated in the United States as grantor trusts, as passive foreign investment companies or as reportable foreign entities, each with its own filing obligation.
Prenuptial and Postnuptial Agreements
Agreements fixing property rights on divorce or death are enforced in every American state subject to requirements of disclosure, independent representation and the absence of unconscionability. They may waive the elective share, define separate property and govern the treatment of a family business or of interests received by gift or inheritance.
International couples require particular care, since an agreement valid where made may be ineffective where enforcement is sought, and matrimonial property regimes adopted by civil law marriage are not self-executing in American registries. Where a couple will hold property in more than one country, parallel instruments prepared with counsel in each are more reliable than a single document intended to travel.
Probate
The court proceeding that proves the will, appoints the fiduciary, supervises the payment of claims and authorises distribution reaches only assets held in the decedent’s sole name without a beneficiary designation. It commonly occupies nine to eighteen months and longer where foreign documents or foreign heirs are involved, and the file is public.
Its advantages are frequently understated: the proceeding bars late creditor claims, resolves questions of construction with finality, and produces a court-sanctioned record of the fiduciary’s administration. Where those advantages are not needed, revocable trusts, beneficiary designations and survivorship arrangements avoid it, although each must be examined for its treatment in the jurisdictions where the family and its assets are located.
Q
Qualified Domestic Trust
Where a surviving spouse is not a United States citizen, property passing to a qualified domestic trust preserves the marital deduction and defers the tax. The trust must have at least one United States trustee, and where its value exceeds two million dollars either a bank trustee or a security arrangement is required.
Income may be distributed to the surviving spouse and is taxed as ordinary income, but distributions of principal other than for hardship trigger the deferred estate tax, and the balance is taxed on the survivor’s death as part of the first decedent’s estate. The trust may be created by the will, by the executor, or by the surviving spouse who transfers the property into it before the return is filed, and that final possibility is what rescues families who discover the citizenship requirement only after the death.
R
Real Estate
American real property is United States situs property in every case, subject to estate and gift tax without regard to the owner’s citizenship or residence, and it is the asset most likely to require a court proceeding at death because title cannot be transferred without one.
Ownership by a disregarded entity does not change the estate tax analysis, since the owner is treated as holding the property directly. Foreign owners face withholding on rents unless the net election is made, withholding on the gross price at sale under FIRPTA, state and local property taxes that are reassessed on transfer in some jurisdictions, and, in community property states, consequences for a spouse that may not match the couple’s home law. The holding structure should be resolved before purchase.
S
Safe Deposit Box
Access after death is governed by state law and by the institution’s own procedure, and in several states the box may be opened only in the presence of a bank officer, or under court order, for the limited purpose of locating a will or burial instructions. General access follows the grant of letters.
The box is therefore a poor place to keep the original will, since opening it may require the very document it contains. Foreign families face the additional difficulty that the lessee’s death abroad may never be reported to the institution, so the box continues to accrue rent until the contents are eventually escheated to the state. An inventory of the box, held with the estate papers, prevents both problems.
Section 2801 Tax
Gifts and bequests received by a United States person from a covered expatriate are taxed to the recipient at the highest transfer tax rate then in force. The charge falls on the recipient rather than on the transferor, which reverses the ordinary structure of the transfer tax system, and it applies without time limit after the expatriation.
Reporting is on Form 708, whose instructions were issued in December 2025, and the obligation arises on receipt rather than annually. Families with a member who has expatriated, and fiduciaries administering trusts with such a settlor, should establish the position before distributions are made, since the recipient bears a liability of which the transferor may never have informed them.
Situs
Situs determines whether an asset held by a nonresident falls within the American estate tax. The rules are technical and counter-intuitive: shares of United States corporations are situs assets wherever the certificates are held, tangible property is situs where it physically lies, and cash in a brokerage account is a situs asset, while ordinary bank deposits are not, proceeds of insurance on the life of the nonresident are not, and shares of foreign corporations are not even if held through an American custodian.
For gift tax the category is narrower still, reaching only real property and tangible property located in the United States and excluding securities entirely. That asymmetry, taxing shares at death but not on lifetime transfer, is the foundation of most planning for nonresident families, and it requires the portfolio to be examined position by position rather than in aggregate.
Substantial Presence Test
An individual who is present in the United States for at least thirty-one days in the current year and for a weighted total of one hundred eighty-three days over three years, counting all days in the current year, one third of the prior year and one sixth of the year before, is a resident for income tax purposes.
Exceptions exist for students, teachers, diplomats and employees of certain international organisations, and the closer connection exception and the residence article of an applicable treaty may displace the result. The test does not determine domicile for estate and gift tax, which is why a person may become subject to worldwide income tax while remaining outside the transfer tax net, or the reverse. Families who divide the year between countries should count days deliberately rather than retrospectively.
T
Tenancy by the Entirety
A form of ownership available only to spouses in those states that recognise it, under which neither may dispose of the property alone, the survivor takes the whole without probate, and creditors of one spouse alone cannot reach it. The protection from separate creditors is the reason it is recommended where one spouse carries professional liability.
It terminates on divorce, converting into a tenancy in common. Where the surviving spouse is not an American citizen, the entire value is presumed included in the decedent’s estate unless the survivor’s contribution is proved, so the protective advantage and the tax treatment point in opposite directions for international couples.
Tenancy in Common
Co-owners hold undivided fractional interests that are freely transferable and that pass at death into the owner’s estate rather than to the other owners. Shares may be unequal, and this is the default form where the deed is silent, except between spouses in some jurisdictions.
It suits unmarried co-owners, blended families and investment groups, at the cost of subjecting each fractional interest to probate and of multiplying the number of owners with each succeeding generation. Fractional interests are valued with discounts for lack of control and marketability, which is an advantage on a transfer tax return and a disadvantage when the property must be sold.
Transfer on Death
Securities accounts, and in a number of states vehicles and real property, may be registered so that ownership passes at death to a named person without probate, on presentation of a death certificate. The owner retains full control during life and may change the designation at any time.
The mechanism is quick and costs nothing, and for that reason is often adopted without regard to the plan set out in the will, producing distributions the decedent did not intend. It does not displace tax obligations either: an institution may still require a transfer certificate before transferring to the heir of a non-domiciliary, so the speed is procedural rather than substantive.
U
United States Real Property Holding Corporation
A corporation whose United States real property interests equal or exceed half the value of its real property and business assets is a United States real property holding corporation, and the disposition of its shares by a foreign person is treated as the disposition of the underlying real property, subject to tax and to withholding.
The rule prevents the avoidance of FIRPTA through the sale of shares rather than land, and it makes the classification of any corporation holding American property a matter to be tested rather than assumed. Exceptions exist for regularly traded shares held below a threshold and for corporations that have disposed of all their real property in taxable transactions, and the analysis is fact-dependent enough to warrant confirmation before a share sale is documented.
W
Will Contests
Challenges proceed on grounds of testamentary capacity, undue influence, fraud, or defective execution. Capacity is a low threshold, so undue influence, particularly by a caregiver, a late-life companion or one child among several, is the ground most often pleaded and the hardest to defend after the fact.
Prophylactic measures include contemporaneous evidence of capacity, independent representation, an explanation of unequal treatment recorded outside the will, a no-contest clause coupled with a legacy meaningful enough to deter, and, where suitable, a funded revocable trust, which is harder to attack and is not a public document. International families should expect a contest to be fought in more than one forum, and coordination among counsel in each is decisive.
For the full alphabetical list, see the Topics A-Z page.