BY Margaux Buridant Vice President, Senior International Wealth Strategist, Bank of the West

Apr 12th 2020

International Perspectives

What Expats Should Know about US Estate Taxes

Things non-citizens should know to protect their assets.

Apr 12th 2020

Many people think of the estate tax as something that only applies to the very wealthy, but couples of all income levels can be hit hard by this tax, especially if one or both spouses are not US citizens. That’s because the exemptions available to US citizens are not always applicable to non-citizens, which means estates as modest as $60,000 can be hit with estate taxes.

For this reason, it’s crucial to understand how estate taxes are assessed so one can plan appropriately.

US Citizen Couple

When both spouses are US citizens, the federal estate tax only applies to those with an excess of $11.58 millionas of 2020 (expected to shrink to $5.49 million2 in 2026). But it’s possible to avoid paying estate taxes (even on larger estates), since a US citizen can bequeath an unlimited amount to a US citizen spouse without incurring any tax whatsoever.

For example, a person with a $15 million estate could bequeath $11.58 million to various relatives and charities and leave the rest to his or her spouse and owe $0 in federal estate tax.

Non-US Citizen Spouse

A US citizen with a non-citizen spouse retains the $11.58 million exemption from the example above but loses the unlimited marital deduction. So, the hypothetical $15 million estate that was tax-free incurs a federal tax of $1.368 million (40 percent x $3.42 million), no matter how the estate is distributed.

Non-US Citizen Couple

This is where the situation gets thorny. For couples where neither spouse is a US citizen, the crucial factor is the subjective concept of “domicile” within the United States. For federal estate tax purposes, a “US resident decedent” is defined as a person who had his or her domicile in the United States at the time of death “with no definite present intention to live elsewhere.”

In practice, a person’s nonimmigrant visa status (as opposed to their tax status) is often the deciding factor in determining whether they qualify for US domicile treatment, as shown in these examples.

  • A non-US citizen with US domicile (e.g., a person with permanent residency, also known as a green card) will be entitled to the federal basic exemption of $11.58 million. Only the unlimited marital deduction will not be applicable if the spouse is not a US citizen.
  • A non-US citizen without US domicile (e.g., a foreign-born person who has lived in the US for a few years under a visa with an expat contract) will not be granted the federal basic exemption. Since this person has a temporary work authorization, it is assumed that the person has an intent to live elsewhere in the future. Therefore, the estate will only get a $60,000 exemption, and the spouse won’t be entitled to the unlimited marital deduction.

In this case, the hypothetical $15 million estate would incur a whopping $5.976 million in federal estate tax ($14.94 million x 40 percent).

And it gets worse! If the surviving spouse is a non-US citizen, all jointly owned assets are considered to belong 100 percent to the spouse that passed away, meaning it could be necessary to sell the surviving spouse’s primary residence just to pay the estate tax on it.

So how can one get around the estate tax dilemma? Here are some possible strategic workarounds.

  1. Explore obtaining US citizenship. The non-citizen spouse can explore obtaining US citizenship. This is an option even after the death of the spouse with US citizenship, as long as the other spouse attains citizenship by the due date for filing the estate-tax return (typically nine months after death).
  2. Gradually reduce the taxable estate. During life, one can make substantial gifts to a non-citizen spouse on an annual basis. Such gifts are eligible for a larger-than-normal annual gift tax exclusion3 of $157,000 (as of 2020) for a non-citizen spouse, compared to the $15,000 exclusion for gifts to all other people.
  3. Establish a qualified domestic trust (QDOT). The QDOT can be formed by the terms of the will, the executor of the estate, or the surviving spouse. Basically, the inherited assets go into the QDOT, and the federal estate tax is deferred until the spouse withdraws principal from the QDOT or dies. Or, if the surviving spouse becomes a citizen at some point in the future, he or she can take all the assets in the QDOT, and the deferred tax bill will disappear.

With roughly 1.7 million people4 living in the United States on temporary work visas at any one time, the risk of triggering a high estate tax is very real for many people. Even worse, most wrongly assume they would be entitled to the much higher deduction available to US citizens.

Fortunately, with awareness and advanced planning, it is usually possible to minimize estate tax burdens and avoid leaving your loved ones with a huge tax bill.


  1. IRS, Estate Tax.
  2. IRS, Treasury, IRS: Making large gifts now won’t harm estates after 2025.
  3. IRS, Frequently Asked Questions on Gift Taxes for Nonresidents not Citizens of the United States.
  4. National Conference of State Legislatures, Snapshot of US Immigration 2019.


All content provided on the Bank of the West Blog is for informational purposes only. It is not financial, investment or tax advice. If you need financial, investment or tax advice, you should contact a qualified professional.

To comply with the Internal Revenue Service and other applicable tax practice standards, any tax information and advice contained in this blog is not intended or written to be used, and may not be used, for purposes of avoiding tax penalties imposed under the United States Internal Revenue Code or for the purpose of promoting, marketing or recommending to another party any tax-related matters

Bank of the West, including any of its affiliates and subsidiaries, does not provide tax or legal advice. Please consult your tax or legal advisors to determine how this information may apply to your own situation.

This information is given without regard to the specific investment objectives, financial situations, or particular needs of any person who may review this article. The discussions and information contained herein should not be construed or used as a specific recommendation for the investment of assets of any customer of Bank of the West or its affiliates and is not intended as an offer, or a solicitation of an offer, to purchase or sell any security or financial instrument, nor does the information constitute advice or an expression of the Bank’s view as to whether a particular security or financial instrument is appropriate for you and meets your financial objectives. Investors should seek financial advice regarding the appropriateness of any securities or strategies mentioned here. Bank of the West does not guaranty the results obtained from use of any information contained in this blog and will not be liable for any investment decision based in whole or in part on the information contained herein. Bank of the West nor its affiliated entities shall be held liable for any content, regardless of cause, or the lack of timeliness of, any information contained in this article. THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO THE ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION IN THIS BLOG OR FROM ANY “LINKED” WEB-SITE.

Investing involves risk, including the possible loss of principal and fluctuation in value.

Diversification and asset allocation does not ensure a profit or guarantee against loss.

Bank of the West Wealth Management offers products and services through Bank of the West and its various affiliates and subsidiaries.

Securities and variable annuities are offered through BancWest Investment Services, a registered broker/dealer, Member FINRA/SIPC, and SEC Registered Investment Adviser. These products are offered by Financial Advisors who are registered representatives of BancWest Investment Services.

BancWest Investment Services is a wholly owned subsidiary of Bank of the West. Bank of the West is a wholly owned subsidiary of BNP Paribas.

Investment and Insurance Products:

International PerspectivesRead Next