 Understanding the US Federal Estate Tax

The United States imposes a federal estate tax on the transfer of assets at death, with a top marginal rate of 40%. In 2025, US citizens and US domiciliaries benefit from an estate tax exclusion of $13.99 million per individual (or $27.98 million for married couples).

In contrast, nonresident noncitizens who own property in the US are subject to a significantly lower exemption of just $60,000, or $120,000 for couples—unless a tax treaty with their home country provides otherwise.

Who Bears the Estate Tax Burden?

Typically, the estate itself is responsible for paying any tax due. However, complications can arise when:

• The estate lacks sufficient US-based liquid assets to cover the tax liability.

• The IRS cannot access foreign assets to collect the debt.

In such scenarios, the IRS has the authority to:

• Hold executors personally liable if they distribute assets before paying the tax.

• Hold beneficiaries liable if they receive distributions from an estate that has not satisfied its US tax obligations.

• Pursue US financial institutions—such as banks, investment firms, mutual funds, or cooperative housing boards—that transfer US-situs assets without ensuring estate tax compliance.

Further complications may arise for anyone purchasing US real property from a nonresident decedent. Federal and state estate tax liens can remain on the property, potentially affecting the buyer's title and delaying or preventing title insurance issuance.

The Beneficiary's Burden

It can take months or even years for the IRS to issue a formal estate tax closing letter or Transfer Certificate, confirming that no further tax is due. In the meantime, heirs may be unable to access their inheritance.

US financial institutions and property managers often require:

1. A US-based Executor or Administrator: Foreign executors must initiate ancillary probate proceedings in a US court to gain legal authority over the decedent's US assets.

2. An IRS Transfer Certificate: This document confirms that the estate has satisfied all applicable tax obligations and is often required to release funds or transfer assets.

Additional documentation—such as state-level tax releases or legal certifications—may also be necessary. This can create a bureaucratic impasse, where institutions refuse to release assets without IRS confirmation, but the IRS delays issuing the certificate until the taxes are paid.

Avoiding These Pitfalls

While keeping US accounts, investments, or real estate may seem prudent due to relative market stability and professional management, doing so can lead to prolonged delays, high legal costs, and administrative complexity for your heirs.

How to Transfer Your Assets and Avoid Inheritance Delays

If you're a US or non-US citizen planning to leave the United States, taking steps now can help your beneficiaries avoid costly delays and legal fees later. Consider transferring your assets to a reputable bank or investment firm outside the US to simplify the estate administration process. US Social Security benefits can also be directed to foreign bank accounts. If you plan to return for holidays or extended visits, explore alternatives to owning US property—such as short-term rentals—instead of purchasing cooperative apartments, condos, or homes that could complicate your estate.

Diane K. Roskies is a principal attorney at Offit Kurman in New York, and advises US and multinational citizens on US and international trust, estate planning, and administration, often involving multiple jurisdictions. Diane represents high-net-worth and ultra-high-net-worth individuals and their families, including those with assets valued at over USD 2 billion. Diane publishes the blog “Lost in Translation: Blunders in International Estate Planning”.

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