Your Family is Global. Is Your Estate Plan?

In today's world, families often live across borders. One spouse may be a U.S. citizen while the other holds a foreign passport. Parents may live overseas while their adult children have settled in America. Family members may own homes, investments, or bank accounts in several different countries. While these arrangements are increasingly common, they can create estate planning problems that many families never anticipate.

The biggest misconception? Many people assume that because they are not wealthy, they don't need to worry about estate taxes. Unfortunately, when a family has connections to more than one country, that assumption can be extremely costly.

Consider two situations that can affect ordinary families:

1. A parent living overseas who owns a house in the United States, and 
2. A U.S. citizen married to a noncitizen spouse. Both can lead to unpleasant surprises if no planning has been done.

When a parent overseas owns a U.S. home

Imagine this situation.

Your mother lives overseas. She is not a U.S. citizen and has never made the United States her permanent home. Years ago, she purchased a small house in Washington state for $250,000 to use when visiting her children and grandchildren. Over the years, the property's value increased to $1,000,000.

Your mother isn't particularly wealthy. Most of her savings are tied up in her home and her retirement. She simply happens to own a valuable piece of American real estate.

When she dies, she leaves the house to her children. Naturally, the family assumes that they can inherit the property, keep it as a family vacation home, or eventually sell it.

Then comes the unexpected news: the property may be subject to a substantial U.S. federal estate tax.

Why does this happen?

Under U.S. federal estate tax law, a U.S. citizen or someone domiciled in the United States generally has a very large estate tax exemption—$15 million in 2026. But someone who is neither a U.S. citizen nor domiciled in the United States generally receives a dramatically smaller federal estate tax allowance for property located here.

That amount is effectively just $60,000.

You may have heard about a $10,000 threshold in cross-border tax matters, but that is not the current federal estate tax exemption for a nonresident, noncitizen parent. The $10,000 figure commonly relates to reporting foreign financial accounts, which is a separate issue.

For federal estate tax purposes, a nonresident, noncitizen parent's estate generally must file a U.S. estate tax return when U.S.-situated assets, together with certain taxable gifts, exceed $60,000.

Depending on the circumstances, estate tax rates can reach 40%. The fact that the parent lived overseas, paid taxes in another country, or left the property to U.S.-citizen children does not automatically eliminate this tax.

What does this mean in actual dollars?

Let's return to your mother's Washington house. Assume she owned it outright, there is no applicable estate tax treaty, and there are no debts or deductions to reduce the taxable value.

These estimates assume the deceased parent was neither a U.S. citizen nor domiciled in the United States, owned the property outright, and had no applicable estate tax treaty benefits, deductions, debts, or prior taxable gifts. Calculations reflect the standard $13,000 federal estate tax credit.

Think about what this means for an ordinary family. A family inheriting a $1 million house could face approximately $333,000 in federal estate taxes. If the property is worth $2 million, that tax bill could exceed $730,000.

That's roughly one-third of the property's value—money that may need to be paid even though the family has not sold the house or received any cash from the inheritance. Imagine inheriting your parents' home, only to discover that the estate owes hundreds of thousands of dollars to the IRS.

What if your family doesn't have that kind of money sitting in a bank account? The estate may have no practical choice but to sell the property to pay the tax. And that's before accounting for legal fees, probate expenses, and potentially other taxes.

This is why cross-border estate planning isn't just for the wealthy. Even a single U.S. property owned by a parent living overseas can create an enormous financial burden for the surviving family.

There may also be a deadline

If the U.S. estate tax return is required, the estate generally must file IRS Form 706-NA within nine months after the parent's death, unless an extension is granted.

Paying the tax may also be necessary before the estate can complete the transfer of assets. A grieving family may suddenly have to locate documents overseas, hire professionals in two countries, arrange an appraisal, navigate the U.S. probate process, and find cash to meet a substantial tax obligation.

Importantly, certain estate tax treaties can provide meaningful relief. But not every country has a treaty with the United States, and the rules differ from one treaty to another.

The lesson is simple: Owning U.S. real estate while living overseas requires estate planning, regardless of how wealthy the owner may be.

Married to a non-U.S. citizen spouse? The rules are different

Now consider another common situation. You are a U.S. citizen. Your spouse is not. 

Perhaps your spouse has a green card and has lived in America for 20 years. You own your house together, have retirement accounts, and have raised your family in the United States. You assume that if you die, everything can pass to your spouse without estate tax, just as it normally would between two U.S.-citizen spouses.

Not necessarily.

The unlimited marital deduction may not apply

Under U.S. federal estate tax law, someone who dies can generally leave an unlimited amount of property to a surviving spouse who is a U.S. citizen without triggering estate tax on that transfer. This is known as the unlimited marital deduction. However, if the surviving spouse is not a U.S. citizen, that deduction generally does not apply automatically—even if the spouse has lived in the United States for decades.

A green card is not the same as citizenship for this purpose.

That does not mean every family with a noncitizen spouse will owe federal estate tax. In 2026, a U.S. citizen generally has a $15 million federal estate tax exemption, so many estates will fall below the federal taxable threshold.

But for families with substantial assets, business interests, real estate, or significant life insurance, the difference can matter enormously. State-level estate taxes may also come into play.

What is a qualified domestic trust?

One potential solution is a qualified domestic trust, commonly called a QDOT. 

In simple terms, a QDOT is a specially designed trust that allows assets to benefit a surviving noncitizen spouse while generally postponing the federal estate tax that might otherwise be due at the first spouse's death.

However, a QDOT comes with strict requirements, and tax can become payable when certain funds are distributed or when the surviving spouse dies.

A QDOT is not necessary for every couple, but it is an important option to consider when an estate might otherwise be exposed to federal estate tax.

Even giving property to your spouse can be different

For a U.S.-citizen spouse, gifts to another U.S.-citizen spouse generally qualify for an unlimited gift tax marital deduction.

But gifts to a noncitizen spouse are treated differently.

In 2026, qualifying gifts to a noncitizen spouse generally have a special annual gift tax exclusion of $194,000. Larger gifts may require a gift tax return and may use some of the donor's lifetime exemption.

This can become relevant when transferring a house, making large financial gifts, or changing ownership of family assets. Simply adding a noncitizen spouse's name to a deed is not always the straightforward solution it appears to be.

Other cross-border estate planning problems often overlooked

The U.S. estate tax is only one piece of the puzzle. International families can encounter several other issues.

Your citizenship and where you live are not necessarily the same thing

For estate tax purposes, the United States generally looks at citizenship and domicile—a legal concept involving where someone lives and intends to make their permanent home.

A noncitizen who is domiciled in the United States may qualify for the same basic federal estate tax exemption as a U.S. citizen, even though the marital deduction rules for a noncitizen spouse remain different.

Meanwhile, a U.S. citizen living overseas can still be subject to U.S. estate tax rules on worldwide assets, including property held in another country.

These distinctions are important. Citizenship, immigration status, income tax residency, and estate tax domicile do not always line up.

A foreign inheritance may need to be reported to the IRS

Suppose your father lives overseas and leaves you $300,000 in a foreign bank account. 

As a U.S. citizen, you generally do not pay U.S. income tax simply because you received an inheritance. However, receiving more than $100,000 in gifts or inheritances from a foreign individual or foreign estate during a tax year generally triggers an IRS reporting requirement on Form 3520.

Failing to file a required information return can expose you to significant penalties, even when no income tax is owed on the inheritance itself.

Overseas bank accounts can create additional paperwork

U.S. citizens and certain U.S. residents may have to report foreign bank accounts when the combined value of their reportable foreign accounts exceeds $10,000 at any point during the calendar year. This is generally reported through an FBAR, a foreign bank account report.

Depending on the value and type of foreign assets, a separate IRS form, Form 8938, may also be required. These reporting rules can become relevant when inheriting overseas accounts, managing a deceased parent's finances, or holding joint accounts with family members abroad.

Two countries may both claim taxing rights

An inheritance can involve multiple tax systems. For example, one country might impose inheritance tax because the deceased lived there. Another might tax real estate located within its borders.

The United States may also impose its own estate tax depending on the deceased person's citizenship, domicile, and assets. Some international tax treaties and foreign tax credit rules can help reduce double taxation, but relief is not always automatic or complete.

A will written in one country may not solve everything

A U.S. will may not work smoothly for property in another country, and a foreign will may create complications when dealing with American assets.

Some countries have laws requiring portions of an estate to pass to certain family members, regardless of what the will says. Other countries have different rules for spouses, children, trusts, and property ownership.

In some circumstances, having separate wills for different countries makes sense. But they must be coordinated carefully so that one does not unintentionally cancel the other.

Inheriting property and selling it are two different tax events

A foreign family member who inherits U.S. real estate may later face additional tax considerations when selling it. For instance, a foreign seller of U.S. real estate may be subject to special withholding requirements under rules commonly known as FIRPTA. 

This withholding is separate from the federal estate tax and is not necessarily the seller's final tax liability. Rental income, capital gains, and the property's tax basis can also affect the final outcome.

Trusts and LLCs are not automatic tax shelters

A common assumption is that placing a U.S. property into a living trust or limited liability company will eliminate estate tax.

That is not necessarily true.

A revocable living trust can help with probate but generally does not, by itself, remove a personally owned property from the owner's taxable estate. Similarly, an LLC can be useful for liability protection or business purposes, but its estate tax treatment depends on how it is structured and who owns it.

Some arrangements can even create new gift tax, income tax, or reporting problems. 

This is why ownership decisions should be reviewed before moving property—not after a death occurs.

What can international families do to protect themselves?

Fortunately, many cross-border estate planning problems can be anticipated and addressed before they become emergencies. Here are five practical steps worth considering:

1. Review how every major asset is owned. Identify who legally owns each home, bank account, investment, and business interest—and in which country the asset is located.
2. Understand the estate tax status of each family member. Do not assume that U.S. citizenship, a green card, or living overseas automatically determines how someone will be taxed.
3. Plan specifically for a noncitizen spouse. Review wills, trusts, property titles, beneficiary designations, and whether a QDOT or another planning arrangement may be appropriate.
4. Review U.S. property owned by parents living overseas. A parent does not need to be wealthy to face a significant U.S. estate tax problem. Investigate potential treaty benefits, ownership options, liquidity needs, and the tax implications of any proposed changes while the parent is still alive.
5. Work with professionals who understand both countries. A U.S. estate planning attorney or tax professional experienced in international matters should coordinate with advisers in the other country. Planning that works well under one country's laws can sometimes cause unexpected problems under another country's rules.

There is no one-size-fits-all solution. The right approach depends on where family members live, their citizenship, the countries involved, the value and type of their assets, and their long-term goals.

The real cost of waiting

Most families don't think about estate planning until something happens.

A parent becomes ill. A spouse dies unexpectedly. A property must be sold. Family members discover that assets are frozen while legal paperwork and tax filings are completed. At that point, many of the most useful planning options may no longer be available.

Consider the overseas parent who owns a $1,000,000 home in America. With proper advance planning, there may have been opportunities to evaluate ownership, treaty relief, and ways to provide cash for future taxes. Without planning, the surviving children could be left facing a six-figure tax bill and a difficult choice between selling the family home or finding money elsewhere.

The same principle applies to a U.S. citizen married to a noncitizen spouse. An estate plan prepared for a couple who are both U.S. citizens may overlook issues that become important when one spouse is not.

The financial consequences can be significant. But so can the emotional cost of dealing with unexpected taxes, legal complications, and family disagreements during an already difficult time.

Final thoughts: borders shouldn't put your family's future at risk

Cross-border estate planning isn't just for the ultra-wealthy.

It is for the U.S. citizen married to someone from another country. It is for the parents who live overseas but own a small vacation home in America. It is for adult children who expect to inherit family property abroad. And it is for families whose lives, homes, and savings span multiple countries.

The most important takeaway is this: A family that crosses international borders needs an estate plan that crosses those borders, too.

With thoughtful planning and the right professional guidance, families can often reduce avoidable tax exposure, simplify the transfer of assets, and protect more of what they have worked so hard to build.

This information is intended for educational purposes, and is not tax, legal, actuarial, or investment advice. It is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services.