Non-Resident Estate Tax USA: How the IRS Taxes Foreign Nationals' US Assets

The $60,000 Threshold

When a non-resident non-citizen (NRNC) dies owning assets that are US-situs under federal estate-tax rules, the estate may owe US federal estate tax on those assets. The filing threshold is $60,000 — a fraction of the approximately $15 million credit available to US citizens and residents in 2026.

That $60,000 figure catches many families off guard. A single US brokerage account, a rental condo in Florida, or shares in Apple stock can push the estate over the line.

What Counts as US-Situs Assets

The IRS defines US-situs assets broadly for non-resident estates:

• Real property in the United States — houses, condos, land, timeshares (yes, timeshares are real estate)
• Tangible personal property physically located in the US — furniture, art, vehicles, jewelry stored in a US location
• Stock issued by US corporations — this is the big one. If the deceased owned shares of any company incorporated in the US, those shares are US-situs property even if held through a foreign brokerage account

The situs treatment of bank deposits, life insurance proceeds, and debt obligations depends on the exact asset and applicable tax rules. Confirm their classification with US estate-tax counsel before treating any asset as excluded.

The Tax Rates

The statutory unified credit for an NRNC is $13,000, which shelters exactly $60,000 of asset value. Every dollar above that is taxed at graduated rates starting at 18% and reaching 40% at values above roughly $1 million.

For comparison, the unified credit available to a US citizen's estate is approximately $15 million in 2026. The disparity is enormous, and it's the primary reason bilateral estate tax treaties exist.

Treaty Benefits: The Pro-Rata Credit

The US has active estate and gift tax treaties with 16 countries: Australia, Austria, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Netherlands, Norway, South Africa, Switzerland, and the United Kingdom.

Several of these treaties — including those with the UK, Canada, Germany, and France — allow the NRNC's estate to claim a prorated portion of the full US citizen credit. The formula:

Prorated Credit = Full US Citizen Credit x (Value of US-Situs Assets / Value of Worldwide Assets)

If a UK citizen dies with $2 million in worldwide assets, $500,000 of which are US stocks, the prorated credit equals approximately $15 million x ($500,000 / $2,000,000) = roughly $3.75 million. Since the US-situs assets ($500,000) fall well below that prorated credit, no US estate tax is owed.

Without the treaty, the $13,000 NRNC credit shelters $60,000 of US-situs asset value; the estate could owe tax on the taxable amount above that threshold under graduated rates.

To claim this benefit, the executor must file Form 706-NA with Form 8833 (Treaty-Based Return Position Disclosure) attached, reporting the full worldwide estate value.

IRS Schedule P: Foreign Death Tax Credit

If a foreign country also taxes the same assets that the US is taxing, Schedule P of Form 706 provides a credit for foreign death taxes paid. This prevents the same property from being taxed twice — once by the US and once by the country where the deceased lived.

The credit is subject to limits based on the foreign tax paid and the US tax attributable to the same property. It can reduce double taxation, but the result depends on which assets each country taxes and any applicable treaty.

The W-8BEN Form

US financial institutions and stock transfer agents require foreign executors and beneficiaries to complete Form W-8BEN (or W-8BEN-E for entities) to establish non-US status. This form reduces withholding taxes on US-source income (dividends, interest) under applicable treaty provisions.

The form must be completed and signed under penalty of perjury. If you're a foreign executor dealing with US brokerage accounts or securities transfer agents, expect to fill this out as part of the account transfer process.

Filing Mechanics

Form 706-NA is due 9 months from the date of death. An automatic 6-month extension is available through Form 4768, but must be filed before the original deadline.

US financial institutions will typically freeze US-based accounts until the executor presents an IRS-issued Transfer Certificate (Form 5173), confirming that all estate tax liabilities are settled. Don't expect to move any US assets until this clears.

The filing requires a complete listing of all US-situs assets at date-of-death fair market values, and — if claiming treaty benefits — a full disclosure of worldwide assets. Working with a US-based international tax advisor is strongly recommended for any estate that triggers the 706-NA filing requirement.

The International Estate toolkit includes a cross-border tax compliance checklist covering Form 706-NA, FBAR, Form 3520, and treaty benefit claims, with worked examples for each common scenario.