International inheritance tax in the US context comes down to three questions: was the person who died a US citizen or domiciliary, where were their assets located, and are you a US heir receiving money from abroad. The answers determine whether the estate owes US federal estate tax, whether a foreign government also has a claim, and what forms someone has to file. The US does not impose a tax on the recipient of an inheritance, but it does tax estates, and it requires US heirs of foreign estates to report what they receive.
Who Has the Right to Tax an Estate
Governments use three main hooks to reach an estate: the decedent’s domicile, their residency status, and the location of their assets.
Domicile is where a person considers their permanent home, the place they intend to return to even when living elsewhere. Residency is more mechanical. The US applies a substantial presence test that counts 183 weighted days across a three-year window: every day in the current year counts fully, each day in the prior year counts as one-third, and each day two years back counts as one-sixth.1Internal Revenue Service. Substantial Presence Test Someone can qualify as a US resident under this test without ever intending to stay, which is why domicile and residency often point to different countries for the same person.
Asset location, or situs, decides which country has the primary right to tax a specific piece of property. Real estate is taxed where the land sits. Tangible personal property like vehicles, jewelry, and artwork generally follows where the item is kept. Intangible assets like stock and bank deposits are harder: some countries look to where the issuer is incorporated, others to the owner’s domicile at death. The overlap is exactly why the same estate can face bills from two governments.
US Estate Tax When the Decedent Was a Citizen or Resident
The federal estate tax applies to the worldwide assets of anyone who was a US citizen or domiciliary at death. Rates start at 18% on the first $10,000 of taxable estate and top out at 40% on amounts above $1 million.2Office of the Law Revision Counsel. 26 USC 2001 – Imposition and Rate of Tax
The unified credit shelters most estates entirely. For 2026, the basic exclusion is $15 million per individual, or $30 million for a married couple using portability. The One Big Beautiful Bill Act made this figure permanent, with inflation adjustments beginning in 2027.3Office of the Law Revision Counsel. 26 USC 2010 – Unified Credit Against Estate Tax The 40% top rate is unchanged.4Center on Budget and Policy Priorities. The Federal Estate Tax For international families with substantial wealth, the tax is real; for most others, the exclusion covers everything.
US Estate Tax When the Decedent Was a Non-Resident Alien
The rules flip for someone who was neither a US citizen nor domiciled here at death. Only property situated in the US is taxed, but the threshold is punishing. Non-resident alien estates must file Form 706-NA once US-situated assets exceed $60,000, and that figure is not indexed for inflation.5Internal Revenue Service. Estate Tax for Nonresidents Not Citizens of the United States
The statutory unified credit for these estates is only $13,000, which offsets roughly $60,000 in taxable value.6Office of the Law Revision Counsel. 26 USC 2102 – Credits Against Tax A non-resident alien who dies owning a $500,000 US vacation home and $300,000 in US stock can face a six-figure estate tax bill on assets a citizen would pass tax-free.
Which Assets Count as US Situated
For a non-resident alien estate, situs decides what the IRS can actually tax. Some classifications catch executors off guard:
- Real estate located in the US is always US-situated property.
- Shares issued by a US corporation are US-situated regardless of where the certificates are held or where the decedent lived.7Office of the Law Revision Counsel. 26 USC 2104 – Property Within the United States
- Bonds and notes issued by US persons, the federal government, or state and local governments are generally US-situated.7Office of the Law Revision Counsel. 26 USC 2104 – Property Within the United States
- Vehicles, artwork, jewelry, and similar tangible items physically in the US at death are US-situated.
- Deposits in US bank accounts are generally exempt from estate tax for non-resident aliens under a specific statutory exception.
A foreign national holding Apple or Microsoft shares through an overseas brokerage still owns US-situated property. How you hold US investments matters a great deal.
Treaty Relief
Estate tax treaties soften the low threshold for nationals of certain countries. Where a treaty applies, the estate may claim a prorated version of the full US unified credit, calculated by multiplying the citizen-level credit by the ratio of US-situated assets to total worldwide estate.8Internal Revenue Service. 4.25.4 International Estate and Gift Tax Examinations If US assets are a small fraction of a global portfolio, this can drive the effective US tax close to zero. The US maintains estate and gift tax treaties with a limited group of countries, including the United Kingdom, Germany, and France.9Internal Revenue Service. Estate and Gift Tax Treaties (International) Each treaty differs, so the executor must read the applicable one rather than rely on a template.
The Non-Citizen Spouse Problem and the QDOT
US law normally allows an unlimited marital deduction, so a spouse can inherit everything tax-free. That deduction disappears when the surviving spouse is not a US citizen. The concern is that a non-citizen spouse could take the assets abroad and put them beyond IRS reach.
A Qualified Domestic Trust, or QDOT, is the workaround. If assets pass into a properly structured QDOT, the marital deduction is preserved and no estate tax is owed at the first death. At least one trustee must be a US citizen or domestic corporation, and that trustee must have the right to withhold estate tax from any distribution of principal. Income distributions to the surviving spouse are free of estate tax; distributions of principal trigger tax as if the first spouse’s estate were being taxed at that moment. If the trust falls out of compliance, the tax is due immediately as though the surviving spouse had died on that date.10Office of the Law Revision Counsel. 26 USC 2056A – Qualified Domestic Trust For international couples, failing to set up a QDOT when needed can turn a deferred tax into an immediate one.
When Two Countries Tax the Same Estate
If a treaty does not resolve the conflict, 26 USC 2014 provides a credit against US estate tax for death taxes paid to a foreign government. The credit covers estate, inheritance, or succession taxes actually paid to another country on property that is both located there and included in the US gross estate.11Office of the Law Revision Counsel. 26 USC 2014 – Credit for Foreign Death Taxes It is capped at the lesser of the foreign tax paid or the portion of US tax attributable to that foreign property, so the total burden lands at whichever country’s rate is higher rather than the sum of both.
To claim it, the executor files Schedule P with Form 706 and attaches Form 706-CE to document the foreign payment. IRS instructions ask for certification by the foreign tax authority, though the statute itself requires only that the executor establish the payment amounts and dates to the IRS’s satisfaction.12Internal Revenue Service. Instructions for Form 706 The credit must be claimed within four years of filing the estate tax return, or within 60 days of a final Tax Court decision on a deficiency, whichever is later.
Gift Tax Works Differently for Non-Resident Aliens
Gifts of intangible property by a non-resident alien are entirely outside US gift tax. The statute expressly excludes transfers of intangibles by non-citizens.13Office of the Law Revision Counsel. 26 USC 2501 – Imposition of Tax A non-resident alien parent can gift US corporate stock or bonds to their children with no US gift tax, even though the same assets would be taxable in the parent’s estate if held until death.
Tangible US property is treated differently. Gifts of US real estate, vehicles, or artwork physically in the country are subject to gift tax, with the 2026 annual exclusion set at $19,000 per recipient, the same figure that applies to citizens. The asymmetry between intangibles and tangibles creates a genuine planning opening: transferring US shares during life can remove them from the estate entirely.
If You Are a US Heir Receiving a Foreign Inheritance
The US does not tax the recipient of an inheritance, so a US person inheriting from abroad owes no income or estate tax on the bequest itself. Reporting is another matter. When bequests from a non-resident alien or foreign estate exceed $100,000 in a tax year, the recipient must file Form 3520.14Internal Revenue Service. Form 3520 – Annual Return to Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts It is an information return with no tax attached, but the penalties for missing it are steep.
If the decedent held foreign bank accounts and the estate has a US-connected executor, FBAR rules pull in as well. Any US person with a financial interest in or authority over foreign accounts whose aggregate value crossed $10,000 at any point in the year must file FinCEN Form 114.15Internal Revenue Service. Report of Foreign Bank and Financial Accounts (FBAR) An estate acting through its executor counts. The FBAR is filed separately from the tax return through the BSA E-Filing system and carries its own deadline.
Deadlines, Extensions, and Late-Filing Penalties
The federal estate tax return is due nine months after the date of death.16Office of the Law Revision Counsel. 26 USC 6075 – Time for Filing Estate and Gift Tax Returns The same deadline applies to Form 706 for citizens and residents and to Form 706-NA for non-resident aliens with US-situated assets above $60,000.17Internal Revenue Service. About Form 706-NA An automatic six-month extension is available by filing Form 4768 before the original due date, taking the total to 15 months.18Internal Revenue Service. About Form 4768 The extension covers filing only; interest on unpaid tax runs from the original nine-month date.
International estates usually need the full extension. Documentation typically includes a certified death certificate, a certified translation and apostille under the Hague Convention if the original is not in English, appraisals of foreign property in local currency at date of death, and bank, brokerage, and property records from every relevant country. Form 706-NA calls for a detailed listing of each US-situated asset with location, value, and identifying account or parcel numbers. Beneficiaries without a Social Security number will need an ITIN, obtained by filing Form W-7.19Internal Revenue Service. About Form W-7
Missing the deadline is expensive. The failure-to-file penalty is 5% of unpaid tax per month or partial month, capped at 25%. For returns due after December 31, 2025, the minimum penalty is $525 or 100% of the unpaid tax, whichever is less.20Internal Revenue Service. Failure to File Penalty A separate failure-to-pay penalty of 0.5% per month runs alongside, though the filing penalty is reduced by the payment penalty during the first five months. Each foreign jurisdiction also has its own deadlines, and a missed filing in one country can hold up clearance certificates needed to release assets elsewhere.
State Death Taxes Are a Separate Layer
The federal estate tax is not the only US claim to worry about. Roughly 18 states and the District of Columbia impose their own estate or inheritance taxes with exemption thresholds well below the federal level, ranging from $1 million in Oregon to over $13 million in Connecticut, with many between $2 million and $7 million. An international family holding US real estate in one of these states can owe state tax even when nothing is due federally.
Some states levy an inheritance tax rather than an estate tax, meaning the recipient pays. Rates often depend on the beneficiary’s relationship to the decedent, with spouses and direct descendants taxed lightly or exempted and unrelated beneficiaries taxed more heavily. A foreign beneficiary inheriting US property in one of these states cannot rely on the federal exemption to shield them from state-level tax.