US situs estate tax

An investor who is neither a US citizen nor domiciled in the US can still owe US estate tax. The charge falls on assets the US treats as situated there, valued at death, wherever the investor lives, unless an estate tax treaty changes the position. US shares held directly are a common exposure for internationally mobile families.

How it works

• What counts as US-situs. US real estate, tangible property in the US, shares in US corporations wherever the certificates are held, and debt obligations of US persons. Exceptions include bank deposits not connected with a US business and debt that qualifies for the portfolio interest exemption.
• The US$60,000 level. The estate has a credit of US$13,000 against the tax, which equals the tax on the first US$60,000. Where US-situs assets and adjusted taxable gifts exceed US$60,000, the executor must file Form 706-NA within nine months of death. The figure is not indexed for inflation.
• Rates. The tax uses the graduated table in Internal Revenue Code section 2001(c), reaching 40% on the amount above US$1m.
• Life insurance. Under section 2105(a), amounts receivable as insurance on the life of a non-resident non-citizen are not US property.
• Treaties. The IRS lists 15 countries with estate or gift tax treaties, among them the UK, Australia, South Africa and Switzerland; the UAE has none.

Worked example

Illustrative figures, not a forecast. An investor resident in a country with no US estate tax treaty dies holding US$5m of shares in US companies directly.

• Tentative tax: US$345,800 on the first US$1m, plus 40% of the remaining US$4m, gives US$1,945,800.
• Less the US$13,000 credit: US$1,932,800, before any deductions.
• The executor files Form 706-NA, and the tax is due from the estate.

In a PPLI structure

Under section 2104(a), shares owned and held by a non-resident non-citizen are US property if a US corporation issued them. Inside a properly structured PPLI, the insurer holds legal title to the US shares in the segregated account, the contract gives the policyholder no interest in them, and an investment manager approved by the insurer runs them. For a policyholder who is the life insured and, at death, is neither a US citizen nor US domiciled, the US shares belong to the insurer and the death benefit is not US property under section 2105(a), so the portfolio carries no US estate tax in their estate.

No IRS ruling addresses PPLI directly, and section 2104(b) can still treat US shares as US property where the way they were transferred in falls within sections 2035 to 2038, for example shares paid in as a premium shortly before death. The outcome rests on the insurer genuinely owning and controlling the assets; see investor control.

In an international IUL

For a non-US investor who keeps US shares or property directly, an IUL can provide the cash to pay the tax. Section 2105(a) places insurance on the life of a non-resident non-citizen outside US property, so the death benefit itself is outside the US estate. Held in a trust, it pays the trustees, and the family can meet the tax and keep the assets.

Common questions

Do non-US citizens pay US estate tax on US stocks?

Yes, where they are not domiciled in the US and hold shares in US corporations directly. Above US$60,000 of US-situs assets the estate must file Form 706-NA, and tax at up to 40% applies after the US$13,000 credit, unless a treaty changes the position.

Is US real estate subject to estate tax for non-residents?

Yes. US real estate is US-situs property for a non-resident non-citizen, valued at its fair market value at the date of death.

Go deeper: how PPLI works and family protection and estate planning.

Sources

• IRS: Estate tax for nonresidents not citizens of the United States
• IRS: Frequently asked questions on estate taxes for nonresidents not citizens of the United States
• IRS: Estate and gift tax treaties (international)
• 26 U.S.C. 2101: tax imposed on estates of nonresidents not citizens
• 26 U.S.C. 2102(b): unified credit of US$13,000
• 26 U.S.C. 2001(c): estate tax rate schedule
• 26 U.S.C. 2104: property within the United States
• 26 U.S.C. 2105: property without the United States, including life insurance proceeds
• 26 U.S.C. 2103: gross estate of nonresidents not citizens
• 26 CFR 20.2104-1: property within the United States

Last reviewed November 2026.