Concept
For a non-citizen who is not a US resident, the US estate tax is unforgiving. Only $60,000 of US-situs property escapes the tax; everything above that is taxed on a graduated scale that tops out at 40%. A US citizen or domiciliary, by contrast, has a $15 million exemption in 2026, made permanent by the 2025 tax act and indexed for inflation thereafter. The same death and the same assets can carry a 250-fold difference in the shielded amount, turning on one question: where the deceased was domiciled.
What Counts as US-Situs
The catalogue of US-situs property is broad. It takes in US real estate, including a home held through a US LLC; tangible things physically located in the country; shares of US corporations, wherever the certificate or the brokerage account happens to sit; US-domiciled mutual funds and ETFs; and US retirement accounts. Shares of US companies are the trap people walk into without noticing, because holding them through a foreign broker does nothing to move their situs. Tangible movables run the other way and are no less awkward: a jet, a yacht or a collection takes its situs from wherever it physically sits on the date of death — the mechanics are set out in the situs of movable assets.
What Usually Escapes the Trap
Several categories sit outside the net. Bank deposits not tied to a US business, debt that qualifies for the portfolio-interest exemption, and the proceeds of life insurance on the deceased's own life are generally not US-situs. Nor are shares of a foreign company, even one whose only asset is a Manhattan apartment, which is the whole logic of the blocker structure. The classifications are technical, and the line between taxable and exempt is easy to cross by accident.
Estate and Gift Tax Treaties
The US has 15 estate and gift tax treaties. Seven of them, with the United Kingdom, France, Germany, Japan, Australia, Austria and Denmark, reach both estate and gift tax; the rest, including Italy, the Netherlands, Switzerland and Ireland, cover estate tax alone, while Canada's relief sits inside its income tax treaty. A treaty can swap the $60,000 figure for a slice of the full US exemption, prorated by how much of the worldwide estate is US-situs, or shift the test from situs to domicile. Whether the deceased's country holds such a treaty often changes the bill more than any structure does.
How to Protect
The usual toolkit is structural. US stocks and real estate are held through a foreign company or a layered blocker, so that what the estate owns is shares of a non-US entity rather than US property. Portfolios move from US-domiciled ETFs to non-US ones, often Irish-domiciled UCITS funds that track the same indices without carrying US situs. Life insurance, partnerships and debt secured on US real estate each have their place. These structures have to be built while the owner is alive, because the executor cannot re-cut situs after death.
Lifetime Gifts Follow a Different Map
Gift tax for non-residents runs on a narrower map than estate tax, and the gap is an opening. During life, a non-resident is taxed only on gifts of US real estate and tangible things physically in the country. Gifts of intangibles fall outside US gift tax altogether, and that includes shares of US corporations. The very shares that would face up to 40% if they passed through the estate can often be given away during life with no US gift tax. The transfer has to be genuine and complete, and the donor's home-country rules and any US income tax on the disposition still apply.
A Non-Citizen Spouse and the QDOT
The unlimited marital deduction that lets Americans pass everything to a surviving spouse free of tax does not extend to a spouse who is not a US citizen. To avoid paying estate tax at once, the property is settled into a qualified domestic trust (QDOT): at least one trustee is a US person, and the tax is withheld when principal is paid out. That defers the estate tax until distributions are made or the second spouse dies, but it takes a separate structure and an election on Form 706.
Filing and the Release of Assets
The compliance side outlasts the planning. An estate with more than $60,000 of US-situs assets files Form 706-NA within nine months of death, and files even when a treaty erases the tax. Before a US bank, broker or transfer agent releases a deceased non-resident's assets, it normally waits for an IRS transfer certificate on Form 5173, issued once the Service is satisfied the estate tax position is settled. In practice that can freeze an account for the better part of a year, which is its own argument for holding US assets through a structure that never enters the US clearance machinery.
Where the Rules Are Heading
The 2025 tax act set the citizen and resident exemption at $15 million from 2026 and made it permanent, indexed to inflation from 2027. For non-residents nothing moved: the $60,000 figure, frozen since the Tax Reform Act of 1976, stays where it is, so the distance between an insider and an outsider only grows. The drift toward financial transparency, CRS reporting and registers of beneficial owners changes who can see an asset, not where it sits, so it leaves the estate tax exposure untouched. The planning stays what it has always been: structural, done in advance, and built around situs rather than disclosure.
Q/A
I have paid US income tax as a resident for years. Is the USD 15 million exemption mine?
Not necessarily. For estate tax the status turns on domicile, not on a day count or a green card: a resident is someone who at death was domiciled in the US, having lived there with no definite present intention of leaving. The test runs separately from income tax, so you can file as a resident for years and die a non-resident with USD 60,000 of cover.
Can I really give US shares to my children during life with no US gift tax?
Yes. A non-resident is charged gift tax only on real estate and tangible things physically situated in the US; gifts of intangible property, shares of US corporations among them, fall outside US gift tax altogether. The very same shares, if still held at death, come within estate tax at rates of up to 40%.
Is it enough to move the US portfolio into an offshore company?
For situs it is enough, but only if done during life. Section 2104(a) IRC treats shares as US property only where they were issued by a domestic corporation, so shares of a foreign company stay out of a non-resident's estate. That is what the blocker structure rests on. Situs cannot be re-cut after death, and partnership interests are left unclassified by statute, which makes them the risky part.
Russia has no estate tax treaty with the US. Can the USD 60,000 be raised at all?
It cannot. Only a treaty opens up a prorated slice of the full US exemption, and the US has fifteen of them — the UK, Germany, France, Japan, Switzerland, the Netherlands, Italy, Ireland and a handful more; Russia is not among them. What is left is the unified credit of USD 13,000, which is exactly the USD 60,000 of cover, with rates up to 40% above it.
US assets come to just over USD 60,000. Does a return still have to be filed?
Yes. The executor files Form 706-NA once the date-of-death value of the US-situs assets, together with lifetime taxable gifts, exceeds the USD 60,000 threshold; it is due nine months after death, with an extension applied for on Form 4768. A treaty can remove the tax itself, but it does not remove the duty to file.