Nonresident aliens who have property situated in the United States may be required to pay U.S. federal estate taxes even though they do not live in the U.S.
On What Property Does the U.S. Impose the Estate Tax?
Federal estate taxes are imposed on the transfer of property situated or deemed to be situated in the U.S at the time of the decedent's death. The tax is calculated at the same tax rate as the estate of a U.S. citizen. However, there are differences in some of the deductions and credits allowed for a nonresident alien.
Stocks issued by a U.S. corporation and U.S. federal and state government bonds are considered situated in the U.S.
Life insurance proceeds and certain bank deposits not connect to a trade or business in the U.S. are not considered situated in the U.S.
What Deductions Are Allowed for the Estate of a Nonresident Alien?
The estate of a nonresident alien is allowed the deductions for certain estate expenses, losses, and debts, the marital deduction, and the charitable deduction.
The expense and loss deduction is limited to the ratio of the portion of the estate situated in the U.S. over the entire worldwide estate.
Martial deduction is limited to the transfer of property situated in the U.S. that is passed to a spouse who is an U.S. citizen.
Charitable deduction is limited to transfer of property made to charitable organizations created and organized in the U.S.
Do I Need an Estate Planning Attorney?
Consultation with an attorney experienced in estate planning is essential to crafting an estate plan that is sensitive to both your needs and those of your loved ones. An estate lawyer will know which type of will or trust is right for you and will do their best to limit your tax liability.