International & Cross-Border Estate Planning

Who This Is For: Four Cross-Border Situations

Cross-border planning starts with one question that drives everything: where do you and your assets sit relative to the US tax system? Most people who need this page fall into one of four situations, and each has a different trap.

• You are a US citizen or green-card holder married to a non-citizen. The usual "leave everything to my spouse tax-free" rule does not apply to a non-citizen spouse. See the QDOT below.
• You live abroad and own a Florida condo or US stock. You are a non-resident alien, and the US taxes that property at death with only a $60,000 exemption.
• You are a US citizen living overseas (including American olim in Israel). The US still taxes your worldwide income and estate, and the reporting rules are where families get hurt.
• You are a foreign buyer or seller of Florida real estate. FIRPTA withholding and situs planning decide what you keep.

These issues bite well below the roughly $15 million federal exemption that most US families never have to think about. A non-citizen spouse and a non-resident owner both have real exposure at far lower numbers.

Your Non-Citizen Spouse and the QDOT

If your spouse is not a US citizen, the unlimited marital deduction does not apply, so a taxable estate can owe federal estate tax at the first death instead of deferring it. The fix is usually a Qualified Domestic Trust (a QDOT): your assets pass into the trust, your spouse receives the income for life, and the estate tax is deferred until the trust pays out principal or your spouse dies. Your spouse can also solve it by becoming a US citizen before the estate-tax return is due.

Two more points catch people: lifetime gifts to a non-citizen spouse are capped (at $194,000 for 2026, not unlimited), and a marital trust drafted under another state's standard form usually is not a valid QDOT. We screen this for every mixed-citizenship couple, even below the federal exemption, because citizenship status can change the answer. Read the full QDOT and non-citizen guide →

Non-Resident Aliens: The $60,000 Estate-Tax Trap

A non-resident alien (someone who is neither a US citizen nor a US domiciliary) is taxed only on US-situs assets, but the exemption is brutal: just $60,000, with roughly 40% applying above that, and Form 706-NA due nine months after death. There is no portability and no lifetime gift exemption beyond the annual exclusion.

What counts as US-situs matters enormously. US real estate, tangible property located here, and shares of US corporations are US-situs. Stock in a foreign corporation, foreign real estate, and US life insurance on your own life are not. That gap is the heart of the planning: a foreign company can hold the US real estate so the asset becomes foreign stock, US life insurance can pass free of US estate tax, and a non-resident can even gift US stock free of US gift tax (intangibles are not US-situs for gifts). These structures carry real traps (a single share of US stock can taint a trust forever), so the larger ones are co-counseled with an international tax advisor. A US estate or gift tax treaty, where your country has one, can raise the exemption or shift the taxing right. For the full investor playbook, what is US-situs, how the graduated tax really computes, blockers, and Form 706-NA, see our guide to US estate tax for non-resident aliens. If you are moving to the US rather than investing from abroad, see pre-immigration tax planning.

FIRPTA: Foreign Owners of US Real Estate

FIRPTA is the law that makes sure a foreign person pays US tax on the gain from selling US real estate. It does this by forcing the buyer to withhold 15% of the gross sale price at closing and send it to the IRS, regardless of your actual gain. On a sale where the real tax is far lower, that withholding can tie up a large amount of your money for a year or more.

You are not stuck with it. By applying for a withholding certificate (Form 8288-B) before or at closing, you can reduce the withholding to your actual expected tax, and you recover any excess by filing a US return. There are also residence rules that help: if the buyer will use the property as a home, withholding drops to zero on a sale of $300,000 or less, and to 10% instead of 15% on a sale between $300,000 and $1,000,000. The key is to plan the sale before the closing, not after the money is already withheld. For foreign buyers, how you take title in the first place affects both this and your eventual estate tax. For the full mechanics, the 8288-B timeline, and the residence exemptions, see our guide to FIRPTA withholding.

FBAR, FATCA, and the Reporting Minefield

For Americans with anything abroad, the reporting rules cause more damage than the actual tax. The main ones:

• FBAR (FinCEN Form 114): required if your foreign financial accounts together exceed $10,000 at any point in the year. Penalties are steep and, for willful failures, can reach a percentage of the account balance.
• FATCA (Form 8938): a separate IRS report of foreign financial assets above higher thresholds. You can owe both an FBAR and an 8938 for the same accounts.
• Foreign companies (Form 5471) and foreign trusts and large foreign gifts (Forms 3520 and 3520-A): their own filings. Foreign-company and foreign-trust failures carry penalties that start at $10,000, while an unreported large foreign gift is penalized at 5% a month, up to 25% of the gift.

If you are behind, there are real fixes scaled to fault. The Streamlined Filing Compliance Procedures resolve most non-willful cases with a small penalty or none; willful cases use the Voluntary Disclosure Program. The one move to avoid is a "quiet disclosure," where you simply file old forms and hope: the IRS flags it and it can turn a fixable problem into an enforcement case. We screen willful versus non-willful first, because that single question decides the path. For the full map of which form each foreign asset triggers, and how to fix a late filing, see our guide to foreign account and asset reporting. Go deeper on each: Form 8938 vs the FBAR, the streamlined procedures to fix late filings, FBAR penalties, reporting a foreign inheritance, the Form 5471 foreign-corporation return, the Form 3520 foreign-gift penalty, the FATCA and Form 8938 filing rules, and how the US taxes a foreign trust (Forms 3520 and 3520-A).

Cross-Border Loans and the Profit-Participation Trap

Here is a trap that catches foreign investors and the people who borrow from them. A foreign lender who makes a clean, fixed-rate loan into US real estate or a US business is usually taxed at zero on the interest and files nothing in the US. That clean result vanishes the moment the loan also hands the lender a share of the upside. Tie the return to the borrower's profits, cash flow, distributions, or the property's appreciation, an equity kicker, a profit share, a right to convert into shares, and the deal is no longer treated as a simple loan.

Once that line is crossed, the consequences stack up. The interest can lose its tax-free status and be taxed at the full US rate, and a tax treaty usually only softens that, it rarely restores the zero. If the loan shares in the upside of US real estate, the whole loan can be pulled into FIRPTA, the regime that taxes foreign owners of US property. And if the deal looks enough like ownership, the IRS can treat the loan as equity outright, so the interest becomes a taxable distribution. US tax follows the substance of the deal, not the label on the document, and even a small participation feature can taint the entire loan.

The filings are unforgiving, and they land on the US borrower as much as the foreign lender: a US payer who gets the withholding wrong can be left personally liable for the tax it failed to collect, plus penalties, even on a loan it believed was tax-free. The mirror image bites in the other direction too, a US person who lends to or takes a stake in a foreign company runs into a separate set of US filings and can owe current tax on that company's earnings. Either way, the difference between a clean cross-border loan and a costly trap lives in how the loan is structured and worded, before anyone signs or wires the money, not patched up afterward. We spot the issue and co-counsel an international tax advisor on the structure. For the full lender playbook, the four requirements, the estate-tax win, and the Florida mechanics, see our guide to the portfolio interest exemption.

Americans Abroad and Olim

If you are a US citizen living overseas, including the many Americans who have made aliyah to Israel, the US still taxes your worldwide income and your worldwide estate, even on money that never touches the country. Two gaps cause the most trouble. First, the reporting above (FBAR, FATCA, 3520) follows you abroad, and years of innocent non-filing are common and fixable through the streamlined route. Second, a US will or trust often cannot transfer your foreign home, and many countries apply forced-heirship rules or do not recognize trusts at all, so your foreign assets can need a separate probate and may not pass the way you intended.

The cure is to coordinate both sides: keep the US reporting current, and use a local will or structure for foreign property, vetted against that country's law before you rely on it. We do this regularly for Americans in Israel. See the American-in-Israel paperwork guide → and estate planning for olim → Americans holding Israeli investment funds also face the PFIC tax trap, and their Israeli retirement money carries a separate US tax and reporting problem.

Giving Up Citizenship or a Green Card

Expatriating (renouncing US citizenship or giving up a long-held green card) is not just a trip to a consulate. If you are a covered expatriate, broadly someone with a net worth of $2 million or more, a high average income-tax bill, or who cannot certify five years of US tax compliance, the §877A exit tax treats almost everything you own as sold the day before you leave and taxes the built-in gain. Worse for your family, a later gift or bequest from you to a US person can carry its own transfer tax under §2801.

You report the expatriation on Form 8854. Because the exit tax turns on your status on the day you expatriate, the planning (gifting down, timing, fixing compliance gaps so you are not "covered") has to happen before you renounce. After is too late. For the three covered-expatriate tests, the green-card 8-of-15 trap, and the retirement-account hit, see our full guide to the US exit tax. And if the expatriate is your parent or grandparent, the exposure is yours: the Section 2801 forever tax puts a 40% tax on the US family member who receives their gifts and bequests, for life.

How We Work, and When We Co-Counsel

Cross-border work covers a wide range, so we are honest about where our role sits. The estate-planning documents, the Florida side, FBAR and disclosure cleanup, FIRPTA, foreign-gift and trust reporting, and the screening that tells you what you actually face: that is handled here, on flat fees quoted up front for document work. For high-net-worth inbound "blocker" structures, treaty positions, and expatriation tax modeling, we co-counsel with an international tax advisor so you get the right depth without paying for the wrong tool.

Most of this is done remotely, by phone and video, which fits clients who are out of state or out of the country. If you are moving to Florida, the first step is usually to establish Florida domicile and re-do your plan under Florida law. And when the question is tax structure rather than the estate plan itself, lending, funds, pensions, a move in or out of the US, start at our international tax planning hub.

Frequently Asked Questions

Common Situations

The Israeli condo buyer. A family in Tel Aviv buys a Naples vacation condo in their own names. They do not realize that at death the US would tax it with only a $60,000 exemption, and that selling later triggers 15% FIRPTA withholding. Planning the ownership structure up front fixes both.

The green-card holder with a non-citizen spouse. A couple assumes the survivor inherits everything tax-free. Because the surviving spouse is not a citizen, a taxable estate would owe at the first death. A QDOT (or a path to citizenship) defers it.

The American in Israel with old accounts. An oleh discovers eight years of unfiled FBARs on ordinary Israeli bank and pension accounts. Because the failure was innocent, the Streamlined Filing Compliance Procedures clear it with little or no penalty, and a quiet disclosure would have made it worse.

Sources of Law

• Non-citizen spouse and QDOT: IRC §2056(d), §2056A; Treas. Reg. §20.2056A-2; 2026 spousal gift exclusion $194,000.
• Non-resident alien estate tax: IRC §§2101 to 2108, §2104(b) (situs), §§2104 to 2105 (situs lists); $60,000 exemption; Form 706-NA. irs.gov
• FIRPTA: IRC §897, §1445; 15% withholding; Forms 8288 and 8288-B.
• Reporting: FBAR, 31 U.S.C. §5314 (FinCEN Form 114); FATCA, Form 8938; Form 5471; Forms 3520 and 3520-A.
• Cross-border loans and participation features: IRC §§871(h), 881(c) (portfolio-interest exemption and the §871(h)(4) contingent-interest carve-out for profit, cash-flow, or appreciation-linked returns); Treas. Reg. §1.897-1(d) (a loan sharing real-property upside is a USRPI, FIRPTA §§897, 1445); §385 and Estate of Mixon, 464 F.2d 394 (5th Cir. 1972) (debt versus equity); §7701(l), Treas. Reg. §1.881-3 (anti-conduit); §1461 (withholding-agent liability); Forms 1042, 1042-S, 8288. The outbound mirror: IRC §§951 to 951A, 957, 958 (controlled foreign corporation) and §6038 (Form 5471). Characterization follows economic substance, not the label.
• Expatriation: IRC §877A (exit tax), §2801 (covered-gift tax); Form 8854. (retrieved 2026-07-11)

Updated on July 16, 2026. Reviewed by Kevin D. Klagge, Esq., Fla. Bar No. 99502. Attorney Kevin Klagge represents families, businesses, and international clients in estate planning and international law, with a focus on Florida legal tools. He litigates estate and business issues in court. This article is general information about US and Florida law, not legal or tax advice, and does not create an attorney-client relationship. Cross-border tax is specialized; for high-net-worth structures, treaty positions, and expatriation we co-counsel an international tax advisor. Your result depends on your specific facts.