Estate planning is a critical process for anyone looking to secure their financial future and ensure that their assets are distributed according to their wishes. However, for non-citizens residing in the United States, estate planning, including gifts of property, investments and cash, can be a particularly complex and challenging endeavor. From higher estate tax liabilities to restrictions on property ownership, non-citizens face a range of disadvantages that may complicate their efforts to create a comprehensive estate plan. While U.S. citizens benefit from a range of estate planning techniques and exemptions, non-citizens may find themselves subject to more stringent requirements and limitations. As a result, it is essential for non-citizens to understand these disadvantages and take steps to mitigate their impact.
Residency and Domicile
A U.S. citizen is always considered a U.S. resident for U.S. income tax purposes, as is a U.S. lawful permanent resident (green card holder). An individual who spends enough time in the U.S. under the so-called “substantial presence” test that measures the days of the year that the person is physically present within the United States may also trigger U.S. income tax residency.
Unlike income tax, the application of U.S. gift and estate tax is dependent on an individual’s domicile rather than residency. Domicile is acquired by living in the U.S. without the present intention of permanently leaving at some later time. Residency, without the requisite intention to remain, will not create domicile. Permanent resident (green card) status will in most cases establish domicile, but not always. Non-resident aliens (NRAs) are not subject to U.S. estate tax, except for certain assets owned in the United States, primarily, real estate, tangible property physically located in the U.S., stock in U.S. companies, and U.S. mutual funds.
Gift Tax
A gift is a voluntary transfer of property or benefit without receiving full consideration in return. Gifts can be tangible or intangible, and can include money, real estate, services, or other items.
U.S. citizens and those who acquire domicile (“domiciliaries”) in the U.S. are subject to gift tax on all lifetime gifts, regardless of where the property is located. Non-U.S. domiciliaries are subject to U.S. gift tax only on transfers of real estate and tangible personal property located in the U.S. However, for NRAs, transfers of intangible property, such as stock in U.S. corporations, are not subject to gift tax.
US citizens, domiciliaries, and NRAs receive an annual exclusion for gifts of $19,000 per donee for 2025. “Gift Splitting,” allows married donors to exclude up to $38,000 per donee per year. However, gift splitting is not permitted if either spouse is a non-U.S. domiciliary.
Also, while an unlimited amount can be gifted to a spouse who is a U.S. citizen, allowing them to freely transfer assets to one another, gifts to a non-US citizen spouse, including a U.S. domiciliary, receive an annual exclusion of $190,000 for 2025 (indexed annually for inflation). Gifts in excess of the exclusion amount will be taxed.
Estate Tax
One of the most significant disadvantages faced by non-citizens in estate planning is the potential for higher estate tax liabilities. Under current tax law, U.S. citizens and domiciliaries are entitled to an estate tax exclusion, which allows them to pass a certain amount of assets to their heirs tax-free. As of 2025 , this exclusion stands at $13.99 million per individual.
NRAs, on the other hand, receive only a $60,000 exclusion from estate tax. Estates in excess of the exclusion may be taxed at a tax rate as high as 40%. The implications of this lower exemption can be significant. Without proper planning, those estates could face a hefty tax bill, leaving less for their heirs. This makes it crucial for non-citizens to explore strategies for minimizing their estate tax liabilities, such as establishing trusts or making lifetime gifts.
Additionally, surviving spouses, who are U.S. citizens may inherit an unlimited amount from their deceased spouse, thereby avoiding both federal and state estate taxes. They may also elect to claim their deceased spouse’s remaining estate tax exclusion, potentially doubling the federal estate tax exclusion available for the surviving spouse (i.e. $27.98 million for 2025). However, for non-citizens (including green card holders) no marital deduction applies unless assets are placed in a specific kind of trust, called a Qualified Domestic Trust (“QDOT”), which must include certain provisions of the Internal Revenue Code. Although the surviving, non-U.S. citizen spouse can receive the income of the QDOT without imposition of estate tax, distributions of principal (except in the case of hardship) will suffer the 40% estate tax. Any assets remaining in the QDOT at the surviving spouse’s death will also be subject to estate tax. The concern of the U.S. taxing authorities is that the non-U.S. citizen spouse will return to their home country after receiving a gift or after their spouse’s death, thereby removing the assets from the U.S. transfer tax system.
Foreign Treaties
Notwithstanding U.S tax laws, we have entered into treaties with other countries which modify these laws and may provide for some form of marital deduction.
As of 2024, the U.S. has entered into gift and/or estate tax treaties with: Australia, Finland, Ireland, Austria, France, Italy, South Africa, Canada, Germany, Japan, Switzerland, Denmark, Greece, Netherlands, and United Kingdom.
Ultimately, the key to successful estate planning for non-citizens is to seek the guidance of experienced legal and financial professionals who can help navigate the complex web of laws and regulations that apply. By working with knowledgeable advisors and taking a proactive approach to planning, non-citizens can ensure that their assets are protected and their wishes are carried out, no matter where they call home.