Tom Zachystal is President of International Asset Management providing financial planning and investment advice for Americans living abroad.
As an American living overseas, your citizenship, asset locations and country of residence all affect your estate planning. You need to consider multiple legal and tax systems with sometimes conflicting rules. That’s why it’s important to understand how both the U.S. and your country of residence treat your assets.
Understanding U.S. Estate Tax Exposure
If you’re a U.S. citizen, your worldwide assets fall under U.S. federal estate tax rules, regardless of whether you live abroad. This means your total global asset values count toward your U.S. estate tax liability. Thankfully, the U.S. estate tax exemption threshold of $13.99 million per person in 2025 for U.S. citizens is generous compared to most other countries. Of course, if you own multiple properties, it can still add up, and above the threshold, 40% tax rates can apply.
Cross-Border Estate Planning Complications
When you’re an American living overseas, you live in two regulatory worlds. This is because most countries impose taxes and regulatory requirements on residents in the country, while the U.S. imposes them on all U.S. citizens worldwide.
While different countries have different rules, if your country of residence considers you as “domiciled” there, you’ll be subject to its inheritance and succession laws, often on your global assets too. Foreign real estate and other assets held abroad are often treated as subject to local inheritance tax rules even if you aren’t a tax resident or considered domiciled there.
Tensions arise when both countries believe they have first taxing rights or if their rules conflict. For example, many countries have a system called forced heirship, whereby you have to leave a specified portion of your estate to your spouse and children. This typically overrides any provisions set out in a will.
Tax Credits, Tax Treaties And ‘Situs’ Rules
Tax treaties can help clarify which country has the primary right to tax an asset, and they also typically specify claiming tax credits as the remedy if you or your heirs would otherwise have to pay inheritance or estate tax to both the U.S. and a foreign country. This helps avoid double taxation.
Where an item of property is located is known as its “situs.” U.S. real estate or tangible assets located in the U.S. are nearly always U.S.‑situs, and thus the U.S. has primary taxing rights. Foreign bank accounts, real estate or stocks may or may not be U.S.‑situs though, depending on local rules.
Trusts And Compliance Traps
In the U.S., it’s common to set up trusts as part of estate planning. However, many foreign countries don’t recognize the tax planning benefits of trusts, nullifying their benefits if they impose estate or inheritance taxes on your worldwide assets. If your country of residence does allow trusts, setting them up overseas can cause U.S. compliance complexities. As an expat, you need to ask: How will U.S. trusts be treated under local laws, and how will foreign trusts be treated under U.S. laws?
A Holistic, Cross-Border Strategy
If you have assets in multiple countries, you should design one overarching strategy that respects both jurisdictions. Often, the best way to ensure your intentions are respected when you pass is to have a will in each country where you have assets.
So, for example, your U.S. will would govern U.S.‑situated assets, and your host country might require a local will controlling foreign‑situs property. Without coordination, you risk conflicting instructions, probate headaches and double taxation. Consider working with attorneys in each country who both understand local inheritance laws and also have experience coordinating cross-border estate plans. Your power of attorney and healthcare documents also need to work across borders.
Gifting Early
Gifting while alive can be a good strategy to reduce your estate, but both U.S. gift tax rules and local rules in your residence country usually apply. In some countries, it may be possible to separate the use of a property from its ownership and gift the ownership part to your heirs while retaining the use for your benefit during your lifetime, which could result in lower taxation.
Build The Right Advisory Team
Cross‑border planning means working with a team of advisors who understand both sides. That means working with estate‑planning attorneys familiar with both U.S. rules and those in your country of residence, a tax advisor who understands both jurisdictions and a financial planner who grasps global assets.
How Tax Treaties Work
Suppose you’re a U.S. citizen living in the U.K. who also owns U.S. real estate. The U.S.–U.K. Estate and Gift Tax Treaty helps determine which country gets first claim to tax your assets. Under the treaty, the U.S. taxes assets located within its borders, so your U.S. property would be taxed there based on its situs. The U.K., because you are domiciled there, may also apply inheritance tax to your worldwide estate. To prevent double taxation, the treaty allows the U.K. to grant a credit for the U.S. estate tax already paid on that property.
Another example: A couple living in France built up assets in both France and the U.S. worth about $18 million in total before moving back to the U.S. permanently. France treated them as French-domiciled, but after the move, the treaty’s tie-breaker rules shifted their domicile to the U.S. for estate tax purposes. This meant France no longer taxed their worldwide estate, only the French “situs” assets located in France, and they benefited from the higher U.S. exemption, reducing their total estate tax bill dramatically.
These examples show how treaty rules can reduce tax, but only if you understand them, have wills where you have assets and apply tax treaty benefits proactively.
If you only have assets in your country of residence outside the U.S., you may only need a will in that country, but U.S. estate tax will still apply. If you have assets in the U.S. or in multiple countries and you live in a country that taxes residents globally, it’s helpful to consult advisors who understand cross-border U.S. estate planning so you can confirm how the rules apply to your situation.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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