US Estate Tax for Non-Resident Aliens (US-Situs Assets)

The $60,000 Exemption a Non-Resident Gets

Here is the fact that surprises almost every foreign owner of US property. A US citizen or US resident can pass roughly $15 million at death before any federal estate tax applies. A non-resident alien, someone who is neither a US citizen nor a US domiciliary, gets an exemption of only $60,000 on their US-situs assets. That is not a typo. The same $2 million Florida condo that is comfortably inside the exemption for an American is almost entirely exposed for a foreign owner.

"Situs" simply means where an asset is treated as located. A non-resident is taxed only on assets with US situs, not on their worldwide estate. But for the assets that do count, the exposure is real and it starts at a very low number. The good news is that what counts as US-situs is something you can plan around, and how you hold the asset, whether a treaty applies, and whether you carry life insurance all change the final bill. The sections below walk through the math, the situs rules, and the moves that work.

How the Tax Is Actually Computed

You will read in a lot of places that the non-resident estate tax is "40%." That overstates it, and the difference is large enough to matter. The rate is graduated under US law, the same bracket structure a citizen faces, climbing through lower rates and reaching 40% only on the portion above $1,000,000. The $60,000 exemption is delivered as a tax credit, not as a slice taken off the top before the rate applies.

Put real numbers on it. On a $2,000,000 US-situs estate, the graduated tax on the full amount comes to roughly $733,000 after the credit that exempts the first $60,000 is applied. That is about a 37% effective rate, not 40%, and not the $800,000 you would get by wrongly multiplying the whole $2 million by a flat 40%. The takeaway is not that the bill is small, it is large, but that you should model it correctly before you decide a structure is worth its cost. We run that model at three values and three holding periods so the decision is concrete rather than a scary round number.

What Counts as a US-Situs Asset

Because a non-resident is taxed only on US-situs assets, the entire planning question turns on which of your assets land on the taxable side of the line. Here is the working cheat-sheet.

• US-situs (taxed): US real estate, tangible property physically kept in the US, and shares of US corporations. The stock counts even if you hold it in a foreign brokerage account, because situs follows the company, not where the certificate sits.
• Not US-situs (not taxed): stock in a foreign corporation, foreign real estate, US life insurance on your own life, and certain US bank deposits and qualifying portfolio debt.

Two of those non-situs items are planning tools, not accidents. Because shares of a foreign corporation are not US-situs, a foreign company that owns US real estate converts the asset into foreign stock for estate-tax purposes. Because US life insurance on your own life is not US-situs, a policy can pass to your heirs free of US estate tax even from a US insurer. The bank-deposit rule is narrower than people assume, so a large US account is worth checking rather than waving off. If you also sell US real estate, a separate withholding regime applies at closing, which we cover in our guide to FIRPTA withholding.

Planning: Blockers, Debt, and Life Insurance

There is no single move that wins on every measure, so planning is about matching the tool to your facts. The main levers:

• A foreign-corporation "blocker." A foreign company holds the US real estate, so what you own is foreign stock (not US-situs) instead of a US asset. This can take the estate tax to zero, but it brings its own income-tax cost when the property is sold and its own reporting, so it earns its keep mainly on investment property above a meaningful value. Larger structures are co-counseled with an international tax advisor.
• Debt against the property. A mortgage can reduce the taxable value, but only a non-recourse loan nets dollar-for-dollar. A standard recourse mortgage is deductible only in proportion to your US assets against your worldwide estate, so a big loan can shelter far less than its face amount.
• Life insurance. Because a policy on your own life is not US-situs, term insurance sized to the expected tax lets your heirs receive cash to pay the bill without selling the property. For a personal-use vacation home, this is often the cleanest answer.
• Lending instead of owning. If what you actually want is US real-estate income rather than the property itself, a clean fixed-rate mortgage loan into the deal, structured correctly under current law, earns interest free of US income tax and sits outside your US estate entirely. See our guide to the portfolio interest exemption.

One trap drives the choice between a structure and insurance: if you actually use the property as a vacation home, a "naked" foreign-corporation blocker can be pulled back into your estate as if the company did not exist, unless you pay arm’s-length rent on every stay and run the entity as a real business. That is why, for a home you use, direct ownership plus life insurance frequently beats an elaborate structure. For an investment property held at arm’s length, the blocker math often wins. The right call depends on use, budget, and whether US-resident family will inherit. A coordinated US trust can also help heirs avoid a second probate; see our note on the Florida community property trust for the basis-planning side.

Gift Tax Is Different: US Real Estate vs Stock

Many owners assume that if they give the property away during life, they sidestep the estate tax. For a non-resident, the gift-tax rules cut both ways, so the answer depends on what you give.

For gift tax, the situs rules are narrower. Intangibles, including shares of a US corporation, are not US-situs for gifts, so a non-resident can generally give away US stock during life free of US gift tax. US real estate is the opposite: it is US-situs for gifts, so giving away a US condo during life is fully gift-taxable above the annual exclusion, and a non-resident gets no lifetime gift exemption to soften it. In plain terms, giving the condo away during life can cost roughly the same as the estate tax you were trying to avoid.

The smarter sequence is usually to gift cash held abroad, which is not US-situs, and let the recipient or their structure buy the US property. The order of operations is the planning. This is exactly the kind of thing to settle before a purchase rather than after.

Treaty Relief, and Why Israel Has None

The $60,000 exemption is the default, and a treaty can override it. The US has estate or gift-tax treaties with only a small number of countries, such as the United Kingdom, Germany, France, Canada, and Japan. Where one applies, it can raise the exemption well above $60,000 or re-allocate which country gets to tax the asset, so a buyer from a treaty country may have far more room than the default suggests.

Israel is not on that list. The US and Israel have an income-tax treaty, in force since 1995, but no estate or gift-tax treaty. So an Israeli owner of US property gets no treaty cushion at all and faces the full $60,000 default. It is harsher still because Israel itself imposes no estate or inheritance tax, which means there is nothing on the Israeli side to credit the US tax against. Every dollar of US estate tax is a pure loss. That combination, the worst US default with no offset at home, is why structuring before a purchase matters so much for Israeli buyers. If a non-citizen spouse is part of the picture, the QDOT rules are their own topic; see our guide to estate planning for non-US citizens.

Form 706-NA: Who Files and the 9-Month Clock

When a non-resident who was not a US citizen dies owning US-situs assets worth more than $60,000, their estate must file Form 706-NA, the US estate-tax return for non-residents. It is due nine months after the date of death. A six-month extension of time to file is available, but the tax itself is due at the nine-month mark, so an extension to file is not an extension to pay.

The deadline is not the only pressure. The IRS issues a transfer certificate that releases the US assets, and banks, brokers, and title companies often will not move the property until it clears. That process can take many months, which means a US account or condo can sit frozen while the family waits. Planning ahead, whether through a holding structure, a funded US trust, or life insurance to cover the tax, is what keeps the heirs from being stuck with both a tax bill and a year-long hold on the very asset they need to pay it. We handle the 706-NA filing in coordination with an international tax advisor when a return is required.

How We Work, and When We Co-Counsel

Cross-border work covers a wide range, so we are honest about where our role sits. A straightforward plan, direct ownership paired with life insurance sized to the tax, the Florida-side documents, FIRPTA planning at sale, and the screening that tells you what you actually face, is handled here on a fee quoted up front once we see the facts. For foreign-corporation blockers, two-tier holding structures, treaty positions, and the Form 706-NA mechanics, we co-counsel with an international tax advisor so the structure is built, documented, and filed correctly.

Almost all of this is done remotely, by phone and video, which fits clients who are out of the country. If a US purchase is on the horizon, the highest-leverage moment is before you close, when ownership is still a clean choice. Our international and cross-border hub maps how the estate tax, FIRPTA, and reporting forms fit together. If you are about to become a US person yourself, see our guide to pre-immigration tax planning.

Frequently Asked Questions

Common Situations

The Sunny Isles condo in a personal name. A family in Tel Aviv buys a $2 million Florida condo in their own names, as a friend did. They do not realize that at death the US would tax it with only a $60,000 exemption, roughly $733,000, with no US-Israel treaty to soften it and nothing on the Israeli side to credit. Because they use the unit themselves, a blocker would collapse, so the fit is direct ownership paired with term life insurance to fund the tax, plus a US plan so the family avoids a year-long title hold.

The investment building. An overseas investor buys a Florida rental building purely as an investment, held at arm’s length with third-party tenants. Here a foreign-corporation or two-tier holding structure can take the estate-tax exposure toward zero, because the §2036 personal-use trap does not apply. We screen the facts and co-counsel an international tax advisor to build and file the structure.

The US brokerage account. A non-resident holds $1.5 million of US company shares in a foreign brokerage and assumes that because the account is abroad, it is safe. It is not: US stock is US-situs no matter where the account sits. The planning conversation is whether to gift the shares during life (often free of US gift tax) or restructure how they are held.

Sources of Law

• Non-resident alien estate tax: IRC §§2101 to 2108; graduated rates under §2001(c) reaching 40%; the $60,000 exemption equivalent delivered as the $13,000 unified credit under §2102(b)(1). irs.gov
• US-situs lists: IRC §2104 (US-situs, incl. US real estate and US-corporation stock), §2105 (non-situs, incl. foreign-corporation stock, life insurance on the decedent’s life under §2105(a)(1), and certain non-business bank deposits); §2104(b) retained-string taint; Treas. Reg. §§20.2104-1, 20.2105-1.
• NRA gift tax: IRC §§2501 to 2524; intangibles (incl. US stock) non-situs for gifts; US real estate situs for gifts; no NRA lifetime gift exemption beyond the annual exclusion.
• FIRPTA on sale of US real estate: IRC §897, §1445 (15% default gross-price withholding; residence tiers 0% if buyer-occupied and price $300,000 or less, 10% from $300,001 to $1,000,000); Forms 8288 and 8288-B.
• Form 706-NA: United States Estate (and Generation-Skipping Transfer) Tax Return, Estate of nonresident not a citizen of the United States; due nine months after death; transfer-certificate process. No US-Israel estate-tax treaty (income-tax treaty in force since 1995 only). (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 tax and Florida law, not legal or tax advice, and does not create an attorney-client relationship. Non-resident estate tax, blocker structures, treaty positions, and Form 706-NA turn on your specific facts and on rules that change; for these we co-counsel an international tax advisor. Past results do not guarantee a similar outcome.