What are the U.S. estate tax implications for non-resident aliens holding U.S. assets?

It is possible for a “non-resident alien” (i.e. a person who does not live in the U.S. and who is not a U.S. citizen, or U.S. permanent resident “green card holder”) to have a U.S. estate that is exposed to estate tax in the U.S., depending on the nature, location, and value of the assets held by them.

The types of assets that are exposed to estate tax include real estate located in the U.S., stock in a U.S. corporation, tangible personal property (e.g., collectibles) that are located in the U.S., and certain bank / deposit accounts.

For a non-resident alien, in the absence of an extension of the threshold under an applicable estate tax treaty between the U.S. and their country of residence, the exclusion threshold is just US $60,000 (see our blog Cross-border estate planning – what US is the applicable estate tax threshold?), whereas the 2020 threshold for U.S. persons is US $11.58 million per individual, or US $23.16 million for a married couple (where both spouses are U.S. citizens and where the “marital deduction” has been elected on the death of the first spouse).

If you are a non-resident alien with U.S. assets, you should address the distribution of your U.S. assets in your estate plan, either by dealing with them in your existing Will, or in a separate U.S. Will. There are pros and cons associated with each approach, depending on your specific residency, citizenship and family circumstances.

Our upcoming whitepaper International Estate Planning for U.S.-Australia cross-border clients which is due for publication in April 2020 provides an in-depth analysis of international estate planning issues.

If you have any questions, please contact:
Renuka Somers
Senior Tax Advisor
U.S. Australia Tax Desk