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.
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 stays frozen, 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.
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