It's common for people to assume that foreign assets aren't relevant to their "U.S." estate plans. However, foreign — indeed, all of your assets — should be included in your estate plan. Financial experts can structure ownership of your foreign assets according to U.S. laws and those of the country where they're located to help your estate avoid unnecessary tax consequences.
U.S. citizens are subject to federal gift and estate taxes on all worldwide assets, regardless of where they live or where their assets are located. So, if you own assets in other countries, there's a risk of double taxation if the assets are subject to estate, inheritance or other death taxes in those countries. You may be entitled to a foreign death tax credit against your U.S. gift or estate tax liability — particularly in countries that have tax treaties with the United States — but in some cases those credits aren't available.
Keep in mind that you're considered a U.S. citizen if you meet one of two conditions:
Even if you're not a U.S. citizen, you may be subject to U.S. gift and estate taxes on your worldwide assets if you're domiciled in the United States. Domicile generally means you reside in a place with an intent to stay indefinitely and to always return when you're away. Once the United States becomes your domicile, its gift and estate taxes apply to your assets outside the United States, even if you leave the country, unless you take steps to change your domicile.
Because the 2024 federal gift and estate tax exemption is $13.61 million, you may not be concerned about these taxes. But remember, the exemption amount is scheduled to revert to its pre-2018 levels of $5 million (indexed for inflation) as of the beginning of 2026. Even if your estate is well within the current exemption amount, you probably should plan for a potential estate tax bill down the road. Also, for married couples, the rules are different — and potentially a lot more complex — if one spouse is neither a U.S. citizen nor considered a resident for estate tax purposes. For example, the annual exclusion for gifts to a non-U.S. citizen spouse is $185,000 in 2024, while an unlimited amount can be gifted to a U.S. citizen spouse.
To ensure that your foreign assets are distributed according to your wishes, your will must be drafted and executed in a manner that will be accepted in the United States as well as in the country or countries where the assets are located. Often, it's possible to prepare a single will that meets the requirements of each jurisdiction, but it may be preferable to have separate wills for foreign assets. One advantage of doing so is that separate wills, written in the foreign country's language (if not English) can help streamline the probate process.
If you prepare two or more wills, it's important to work with local counsel in each foreign jurisdiction to ensure that the wills meet each country's requirements. And it's critical for your U.S. and foreign advisors to coordinate their efforts to ensure that one will doesn't nullify the others.
Estate planning can be complicated for foreign citizens living in the United States. One source of confusion is the difference between residency and domicile. If you're a U.S. resident — which is based on the amount of time you spend in the United States — you're subject to U.S. income taxes on your worldwide income. But resident aliens aren't subject to U.S. gift and estate taxes unless they're domiciled in the United States. You can be a resident without being a domiciliary, although residency is a factor in determining domicile.
If you're not a U.S. citizen or domiciliary — so if you're a resident alien who's not domiciled in the United States or you're a nonresident alien — U.S. gift and estate taxes won't reach your assets outside the United States. However, you'll be subject to taxes on assets that are "situated" in the United States, including real estate and certain business investment taxes. And unlike the $13.61 million allowed to U.S. citizens and domiciliaries in 2024, the estate tax exemption amount is far less for resident and nonresident aliens.
The bottom line: If you own foreign assets, disclose and account for them in your estate plan. And if you're unsure about whether an asset belongs in your estate and what the tax implications might be, consult with your estate attorney and tax advisor.
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