What U.S. Citizens Living Abroad Need to Know About Estate and Gift Tax

The United States taxes the worldwide estate of every U.S. citizen, wherever that citizen lives and wherever the property sits, so moving abroad does not move your estate out of the U.S. system.

Citizenship is the trigger, not residence. A house in Tokyo, a pension accrued in London, shares in a company organized in Singapore, and the bank account opened the month you landed are all in the U.S. gross estate, and the return that reports them is due nine months after death.

What living abroad changes is the machinery rather than the exposure. Whether your spouse’s citizenship shuts off the marital deduction, whether the trust signed in California is still a domestic trust, whether your will is valid where your property sits, and whether the state you left still counts you as a resident are all live questions, and they resolve in a particular order.

Living Abroad Does Not Remove You From the U.S. Estate and Gift Tax System

The gross estate of a U.S. citizen includes all property owned at death, wherever that property is situated, under §2031(a). A foreign address changes nothing about what gets taxed.

The gift tax reaches just as far. It applies to any transfer by a citizen or resident. The property it reaches can be real or personal, tangible or intangible, and its location is irrelevant. A narrow situs exception exists for certain intangibles, but it belongs to nonresidents who are not citizens and does nothing for a citizen abroad.

That exception is worth understanding because it marks the line this reader is on the wrong side of. The mirror-image regime for nonresident aliens who own U.S. assets taxes only property situated in the United States. A noncitizen who never lived here and owns a California rental is taxed on the rental and nothing else. A U.S. citizen who has lived in Tokyo for eleven years is taxed on everything.

So the practical inventory is broader than most people expect: foreign real property, a foreign pension or retirement interest, shares in a foreign operating company, foreign brokerage and bank accounts, and any interest in a foreign trust all count toward the taxable estate. Foreign situs affects valuation and credits. It does not affect inclusion.

The deadline does not move either. The estate tax return is due nine months after the date of death under §6075(a), and a six-month extension is available. Neither the executor living abroad nor the assets sitting abroad extends that clock.

The 2026 Exemption Is $15 Million per Person

The basic exclusion amount for 2026 is $15,000,000 per person under §2010(c)(3)(A), as amended by P.L. 119-21 §70106.

Above that amount the federal estate tax applies at rates reaching 40 percent. The tax is paid by the estate before anything is distributed, rather than collected from each beneficiary afterward, which is why the liquidity to pay it is a planning question in its own right when the assets are a foreign house and a private company.

The amendment did more than raise a number. It replaced the $5,000,000 base figure with $15,000,000, reset the cost-of-living base year to calendar year 2025, and struck the temporary subparagraph that had housed the doubled amount enacted in 2017. Nothing was extended and no sunset was postponed. The provision scheduled to expire was deleted outright, which is the reason the $15,000,000 figure does not carry an expiration date the way the prior amount did. Indexing resumes for years after 2026.

The change applies to the estates of decedents dying and to gifts made after December 31, 2025. A planning projection showing a 2026 exemption below $15,000,000 was built on the pre-amendment schedule, and the numbers underneath it need to be rerun before anyone relies on them.

A married couple reaches $30,000,000, but only if the first spouse’s unused exemption is actually preserved. Portability is an election, and it requires a timely filed estate tax return under §6018 even when the estate owes nothing. Families who assume no tax means no filing are the ones who lose the second exemption, and how Form 706 works and when it is required is worth understanding before that deadline arrives rather than after.

Take a hypothetical client. She is 58, holds both U.S. and Japanese citizenship, and has lived in Tokyo for eleven years. She runs a consulting company there, still owns a rental property in Orange County that she moved into a California revocable trust in 2014, and has two adult children, one in California and one in Tokyo. Her husband is a Japanese national who has never held a green card. Her net worth is roughly $18 million, most of it in the Tokyo company and the Tokyo apartment.

Against a $15,000,000 exemption, her taxable exposure is around $3 million, which is a manageable number. What makes her situation worth working on is that the assets pushing her over the line are the two she thinks of as Japanese rather than American, and the documents she considers settled are the ones that need attention.

If Your Spouse Is Not a U.S. Citizen, the Unlimited Marital Deduction Does Not Apply

The estate tax marital deduction is denied entirely when the surviving spouse is not a U.S. citizen, unless the property passes to a qualified domestic trust, under §2056(d)(1). The same provision switches off the rule that would otherwise treat jointly held spousal property as half the decedent’s under §2040(b), so holding title jointly does not solve it either.

Two exits exist, and they belong in the same breath as the rule. Property that passed outright to the surviving spouse still qualifies if it is transferred or irrevocably assigned to a qualified domestic trust before the estate tax return is filed, under §2056(d)(2)(B). The disallowance does not apply at all if the surviving spouse becomes a U.S. citizen before the return is filed and was a U.S. resident at all times from the date of death, under §2056(d)(4).

For the Tokyo client, this is the provision that turns a modest number into a structural problem. Her husband is a Japanese national with no green card, so the deferral a citizen spouse would receive automatically is unavailable to her estate. Tax comes due at her death on everything above her exemption rather than at the survivor’s death, and the assets that would have to be sold to pay it are a Tokyo apartment and shares in a private Japanese company.

QDOT Requirements: A U.S. Trustee, Withholding Rights, and an Election

A qualified domestic trust must name at least one trustee who is a U.S. citizen or a domestic corporation, must give that trustee the right to withhold the tax on distributions, and must be elected by the executor on the estate tax return, under §2056A(a).

The trust defers rather than eliminates. Distributions of principal to the surviving spouse during life, and the value remaining at that spouse’s death, are subject to estate tax under §2056A(b)(1), computed using the rates and unused exemption of the first spouse’s estate. Income distributions are not taxed under that provision, which is why these trusts are usually built to distribute income and preserve principal.

Security is where the structure becomes concrete. Once the trust holds more than $2 million, one of three arrangements must run continuously: a U.S. bank serves as trustee, a bond covers 65 percent of the trust assets, or a letter of credit covers 65 percent, under Treas. Reg. §20.2056A-2(d). An election is available to exclude up to $600,000 of a personal residence, foreign or domestic, from both the $2 million test and the security calculation.

Below that threshold the constraint shifts to asset composition. For a trust holding $2 million or less, no more than 35 percent of its assets may be foreign real property. For a client whose wealth sits in a Tokyo apartment and a Tokyo operating company, that percentage and the 65 percent bond are usually the two figures that change the planning conversation.

Repairing a Plan After Death: Four Routes, All Tied to the Return Deadline

Qualified domestic trust status is tested when the estate tax return is made, not on the date of death, under §2056(d)(5)(A). A plan signed years earlier without a noncitizen spouse in mind is therefore not automatically a lost deduction.

A trust that does not meet the requirements can be judicially reformed, provided the proceeding is commenced on or before the return due date determined with regard to extensions actually granted, under Treas. Reg. §20.2056A-4(a)(2). While the reformation is pending, the trust is treated as a qualified domestic trust, which means filing Form 706-QDT and paying the tax in the meantime.

Property that passed outright can be moved in. A transfer, or an irrevocable written assignment enforceable under local law, works if it is completed before the return is filed, under Treas. Reg. §20.2056A-4(b)(1). An asset assigned but not yet conveyed must be conveyed before the estate administration closes, or within one year after the return due date including extensions where there is no administration, under §20.2056A-4(b)(6). Missing that conveyance loses the deduction.

Naturalization is the cleanest route where it is realistic. If the surviving spouse naturalizes later, after a qualified domestic trust is already funded, the tax stops going forward and prior taxable distributions can be treated as taxable gifts instead, under §2056A(b)(12).

A missed or defective election is the hardest of the four. The election is made on the return, is irrevocable, and cannot be made on a return filed more than one year after the due date including extensions, under §2056A(d). Inside that window, the IRS has granted extensions of time to make the election under the relief standard at Treas. Reg. §301.9100-3, which turns on whether the taxpayer acted reasonably and in good faith and whether relief would prejudice the government. That relief is discretionary and is not something a plan should be built to rely on.

Every one of these routes runs off the estate tax return’s due date, which means the clock starts at death and the repair window is measured in months.

Where the QDOT Security Instrument Gets Filed

Treasury modernized the qualified domestic trust regulations effective July 10, 2026, under T.D. 10050, 91 Fed. Reg. 42661. The bond or letter of credit is now filed separately with the IRS Estate Tax Advisory Group rather than attached to Form 706, due by the later of the return’s filing date or its due date. The update also rewrote the test for when an asset’s value is finally determined and cleared out cross-references to a temporary regulation that no longer exists.

Gifts to a Noncitizen Spouse Are Capped Each Year

The gift tax carries its own version of the same restriction. Lifetime transfers to a spouse who is not a U.S. citizen do not qualify for the unlimited marital deduction, and an annual exclusion applies in its place, set at $194,000 for 2026 under §2523(i).

That figure looks generous beside the $19,000 annual exclusion available for gifts to anyone else under §2503(b). It is also easier to exceed than most couples expect, because the transfers that trigger it are rarely thought of as gifts.

The common versions are administrative. Retitling a foreign residence into joint names, adding a spouse to a brokerage account, or funding a joint account abroad out of one spouse’s earnings can each be a completed gift for U.S. purposes. A couple who has lived overseas for a decade generally holds property the way local practice and local banks suggest, and that pattern rarely tracks U.S. gift tax lines.

Marital property characterization complicates the arithmetic further. Property acquired by a married couple while domiciled in California is community property under Cal. Fam. Code §760, and a couple who accumulated assets abroad and later moves back to California picks up the quasi-community property rules as well. Whether a transfer was a gift at all can turn on which regime applied when the asset was acquired, which is not something the title reveals.

Gifts arriving from the other direction carry reporting rather than tax. A U.S. person who receives more than $20,573 during 2026 from a nonresident alien individual or a foreign estate has to report it under §6039F, and the gift tax rules that apply to foreign donors and recipients set out how that threshold works and who is treated as a foreign person.

Your Will May Not Do What You Think It Does Where You Live

A will that is valid where it was signed can still be overridden where the property sits, because many countries reserve a fixed share of an estate for children and a surviving spouse.

Forced heirship rules of that kind are common in civil law countries and in jurisdictions applying Islamic law. They operate on the property rather than on the document, so a clause leaving everything to a spouse can be reduced to whatever share local law allows.

Within the European Union, a person may elect the law of his or her nationality to govern succession rather than the law of habitual residence, under Regulation (EU) No 650/2012. For a U.S. citizen, that election comes with a complication. The United States has no single body of succession law, so the choice has to identify a particular state’s law, and getting that wrong is as costly as not electing at all. The election also has to appear in the will itself, so a document drafted in California years ago will not have made it.

France, whose civil code reserves a fixed share of the estate for children, has since narrowed what that election accomplishes. For deaths on or after November 1, 2021, where the deceased or one of their children is a national of an EU member state or habitually resident in one, and the chosen foreign law reserves nothing for children, each child may claim a compensatory levy against assets located in France, under the amended Article 913. An American living in France with children should not assume that electing U.S. law removes the reserved share from French property.

A client who owns assets in more than one country generally needs a separate will for each jurisdiction, each one drafted to govern only the assets located there. The failure point is the revocation clause. A standard clause revoking all prior wills, dropped into the second document as a matter of routine, can cancel the first one and leave the assets it covered passing under intestacy instead.

Formal validity is the easier half of the problem. Many civil law countries are parties to the 1961 Hague Convention on the form of testamentary dispositions, which treats a will as formally valid if its execution satisfied the law of the place of execution, or the law of the testator’s nationality, domicile, or habitual residence.

California is comparatively forgiving about execution. A written will is valid if its execution complied with California law, with the law of the place where it was executed, or with the law of the testator’s domicile, place of abode, or nationality either when the will was signed or at death, under Cal. Prob. Code §6113. A California-domiciled client who signs a will in Tokyo or London is not automatically exposed on formality grounds, and that same section recognizes the international will form adopted through the Uniform International Wills Act.

For the client in Tokyo, the question is narrower than it first sounds. The Orange County rental passes under her California trust. The Tokyo apartment does not, and whether her California documents reach it, and what her children could claim under Japanese law regardless of what those documents say, are the two answers she needs before anything else in the plan gets adjusted.

Powers of Attorney, Healthcare Directives, and Trusts Often Do Not Travel

A will is read after death, when there is an executor, a lawyer, and time to sort out whatever went wrong with it. The documents that matter while you are alive get read by a bank clerk or a hospital admissions desk, on the day you need them, with nobody standing by to fix them.

A foreign bank, land registry, or notary is looking for a locally executed instrument in a form it already recognizes. A California durable power of attorney is not that, however valid it is at home, which is why U.S. financial powers of attorney are frequently rejected abroad. The person holding it usually discovers this at the moment it is needed, which is also the moment the principal can no longer sign a replacement. A locally drafted power, executed in the country where the account or the property sits, is the ordinary answer.

Medical decision-making carries the same gap and a shorter fuse. Standard U.S. healthcare directives often have no legal weight outside the United States, so the spouse or adult child named as agent in a California document may hold no recognized authority at the hospital that admits the principal. Whether the treating institution looks instead to a local instrument, to next of kin, or to a court is a question of where the reader lives, answered long before anyone thinks to ask it.

Trusts present the deepest version of the problem, because it is conceptual rather than procedural. Many civil law countries do not recognize trusts established under U.S. law at all, since their property systems have no equivalent to the split between legal and beneficial ownership. A revocable trust can be fully effective in California, close to invisible in the country where its trustee administers it, and consequential for U.S. tax purposes in both at once. Reconciling those three answers is most of what cross border estate planning consists of, and it is a documents problem before it is a tax problem.

A U.S. Trust Can Become a Foreign Trust Without Anyone Moving It

A trust is domestic only while a U.S. court can exercise primary supervision over its administration and U.S. persons control all substantial decisions, under §7701(a)(30)(E). Those two conditions are the court test and the control test. A trust that fails either one is foreign.

Both tests look at people rather than paperwork. Nothing has to be moved, re-registered, or re-domiciled for the classification to flip. The regulations supply a safe harbor for the court test and define substantial decisions broadly, covering distributions, investment choices, the removal and replacement of trustees, and whether to bring or settle litigation, under Treas. Reg. §301.7701-7.

This is where the client in Tokyo has a problem she does not know about. Her 2014 California revocable trust names her brother as successor trustee, and he moved to Singapore in 2022. A trustee who relocates, or a successor who was already abroad when the document was signed, can take the control test out from under a trust without a single page changing.

Classification as foreign changes the reporting rather than the validity of the trust. Foreign trusts with U.S. owners or U.S. beneficiaries carry annual information reporting, and reporting foreign trusts, inheritances and gifts on Form 3520 sets out which obligations fall on the trust and which fall on the person receiving distributions.

The income tax consequence runs through §679. A U.S. person who transfers property to a foreign trust with a U.S. beneficiary is treated as the owner of that portion of the trust. A domestic trust that becomes foreign is treated as making a fresh transfer on the date the change occurs, under §679(a)(5), which is the provision that reaches a trust nobody intended to move.

The rule runs the other way as well. A nonresident alien who funds a foreign trust and then becomes a U.S. resident within five years is treated as having transferred the property as a U.S. person. A couple planning a move to the United States after years abroad should look at any existing foreign structure before the residency clock starts, not after.

Penalties are what make the reporting question urgent rather than administrative. The Second Circuit upheld the 35 percent penalty under §6677(a)(2) against a beneficiary who filed Form 3520 late in Wilson v. United States, 6 F.4th 432 (2d Cir. 2021).

The rules here are also in motion. Treasury proposed regulations in May 2024 addressing transactions with foreign trusts and the reporting of large foreign gifts, and as of September 2026 they remain pending with no final action, so the statute and the existing regulations govern.

Most people who discover this are not facing a crisis. They are facing a filing question, and it usually has a clean answer. The IRS streamlined procedures exist for taxpayers whose failure to file was not willful, and the IRS streamlined filing compliance procedures explain who qualifies. If you want to know whether your trust is currently domestic or foreign, and what that means for returns already filed, a consultation with Evolution Tax & Legal is the place to sort it out.

The 40 Percent Tax on What You Receive From a Covered Expatriate

A U.S. citizen or resident who receives a gift or bequest from someone who gave up U.S. citizenship as a covered expatriate owes a 40 percent tax on it, under §2801. The tax falls on the recipient, not on the person who left and not on that person’s estate.

That is the reverse of how every other transfer tax works, which is why almost nobody sees it coming. The provision has been in the Code since 2008 and sat unusable for years, because Treasury had issued no regulations and the IRS had no form to file. Both now exist. The final regulations took effect January 14, 2025, under T.D. 10027, and Form 708 was released with instructions in December 2025.

The tax is computed on the net covered gifts and bequests received during a calendar year, reduced by an exclusion that tracks the ordinary annual gift exclusion, $19,000 for 2026. Form 708 is due the fifteenth day of the eighteenth month after the close of that calendar year, which is a far longer runway than any other transfer tax return and exists because the information is hard to get.

The difficulty is structural. Whether the transferor was a covered expatriate turns on that person’s income tax history and net worth at expatriation, and nobody is obliged to hand a beneficiary those records. The regulations respond by presuming the transferor was a covered expatriate unless the recipient establishes otherwise, and by allowing a protective filing while the question is open, under Treas. Reg. §28.2801-7.

You are more likely to meet this provision from the receiving end than from the leaving end. The people around a long-term expat, a spouse’s family, a business partner, a parent who naturalized elsewhere, are the ones most likely to expatriate, and the tax follows what they give to whoever is still a U.S. person. What happens when someone gives up U.S. citizenship and the exit tax a covered expatriate pays on the way out cover the other side of the same transaction.

Nothing further has issued since the final regulations. 2026 is the first year the form has actually existed for a full filing cycle, so there is no settled practice to follow and no body of guidance to lean on.

Double Taxation Relief: The Foreign Death Tax Credit and the Fifteen Treaties

A credit is available against U.S. estate tax for death taxes actually paid to a foreign country on property situated in that country, under §2014.

The credit is limited twice, and the smaller limit controls. It cannot exceed the foreign tax attributable to the property, and it cannot exceed the portion of the U.S. estate tax attributable to that same property. The claim also has a four-year window running from the filing of the estate tax return, a deadline that often arrives while a foreign administration is still open.

Fifteen countries have estate or gift tax treaty provisions with the United States: Australia, Austria, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, the Netherlands, South Africa, Switzerland, and the United Kingdom. Canada is the outlier, because its provisions sit in Article XXIX B of the income tax treaty rather than in a separate transfer tax treaty. Six of the fifteen reach gift tax as well as estate tax: Australia, Austria, France, Germany, Japan, and the United Kingdom.

The older treaties allocate taxing rights by situs, asking where the property is. The newer ones allocate by domicile, asking where the decedent actually lived. That distinction decides which country taxes what, and it is the reason a treaty can still help a citizen abroad even though citizenship alone keeps the United States in the picture.

The most common misunderstanding in this area is worth stating plainly. The United States imposes no inheritance tax at the federal level, so the U.S. side of the analysis always looks to the estate. Most countries do the opposite and tax the heir. A foreign inheritance tax that a child pays on receiving property is not a death tax paid by the parent’s estate, so it frequently generates no credit in that estate at all. The result is foreign tax and U.S. tax on the same property with nothing offsetting either, which is the gap the treaties exist to close and the reason the treaty question has to be answered while the plan can still be changed.

Where a treaty does apply, the mechanics are country-specific and the interaction can be intricate. How the U.S. estate tax and UK inheritance tax overlap for Americans in Britain works through one of the harder examples in detail.

California Has No Estate Tax, but It Does Not Let Go of Domicile

California does not impose its own estate tax or an inheritance tax. It does tax income, and a California domicile follows you abroad.

Someone domiciled in California who is outside the state for temporary or transitory purposes remains a California resident, under §17014(a)(2) of the Revenue and Taxation Code. Leaving is not the same as changing domicile, and an assignment abroad undertaken with an intention to return is close to the definition of temporary. Whether expats still owe state income tax depends far more on that distinction than on how long they have been gone.

A safe harbor exists, and it is narrower than it first appears. An individual who leaves California under an employment-related contract for an uninterrupted period of at least 546 consecutive days is treated as a nonresident, under §17014(d). Return visits of 45 days or less during the taxable year are disregarded, and a spouse who accompanies the individual for the full period qualifies on the same terms.

Two conditions take it away. The safe harbor fails if the individual has income from stocks, bonds, notes, or other intangible personal property exceeding $200,000 in any taxable year the contract is in effect, and it fails if the principal purpose of the absence is avoiding California tax. That $200,000 intangible income limit removes the safe harbor from precisely the reader most likely to go looking for it, because a portfolio generating that much is unremarkable at this level of wealth.

California also taxes trusts by reference to people rather than to place. Trust income is taxable based on the residence of the fiduciaries and of the noncontingent beneficiaries, under §17742. A California trustee or a California child can pull a trust into California tax regardless of where the settlor now lives, and where only some fiduciaries or beneficiaries are California residents, the income is apportioned rather than taxed or exempted in full. How those rules operate when a trustee or a beneficiary lives outside the United States is an open question, and the statute is the only guide.

For the client in Tokyo, both halves are live at once. Her daughter in California is a beneficiary of the revocable living trust she signed under California law in 2014, and her brother, now in Singapore, is its named successor trustee. One of those facts points toward California taxation of the trust’s income and the other points toward foreign trust classification, and neither can be resolved by reading the trust instrument.

This is the practical reason the tax side and the estate side have to be looked at together rather than in sequence. She came to the question worried about estate tax exposure and found a live California income tax issue inside a document she considered finished years ago.

How to Check Whether Your Estate Plan Still Works Abroad

Work in this order: confirm what is exposed, fix the spousal structure, then repair the documents.

1. Value the worldwide estate, foreign real property and business interests included, against the $15,000,000 exemption.
2. Confirm the surviving spouse’s citizenship position, and whether a qualified domestic trust is needed or naturalization is realistic.
3. Re-read the revocable trust’s trustee succession clause and identify any named successor who now lives outside the United States.
4. Check whether the will is valid where the property sits, and whether a situs will is needed.
5. Confirm the reporting position on foreign accounts, any foreign trust, and any gift received from a foreign person.
6. Confirm the state domicile position, and whether the safe harbor is genuinely available.
7. Revisit beneficiary designations, which pass outside the will and are the most commonly missed item in a cross-border plan.

The first two items decide how much the rest matters. An estate comfortably under the exemption with a citizen spouse has a document problem, which is solvable in a few months. An estate over the exemption with a noncitizen spouse has a structural problem, and the order above is the difference between planning and cleanup.

Where the estate is large enough that the exemption alone will not carry it, the conversation moves to the strategies high-net-worth families use to transfer wealth. The first allocation question is usually choosing between a SLAT and a GRAT, with a sale to an intentionally defective grantor trust as a third path.

Those structures work for a citizen abroad the same way they work for one at home, with one addition. Every trustee named in them gets tested against the court and control tests before funding, because a trust built to remove assets from a U.S. estate should not become a foreign trust on the day it is signed.

Where to Start

The common thread in all of this is that citizenship keeps the U.S. transfer tax system attached to you while everything else about your life moves. The exemption, the marital deduction, trust classification, and state domicile each answer to a separate rule, and those rules stop lining up the moment a spouse, a trustee, or a house sits outside the country.

Two answers determine everything that follows. The first is the distance between your worldwide estate and the $15,000,000 exemption. The second is whether a noncitizen spouse means the tax comes due at the first death instead of the second. Together they tell you whether what you have is a document problem, fixable in a few months, or a structural one that needs a trust built before anything else gets touched.

If your estate includes property in more than one country, or your spouse is not a U.S. citizen, the place to begin is a review of what is actually inside the U.S. gross estate and which of your documents still function where you live. That review is international estate planning at its most basic. A consultation with Evolution Tax & Legal puts the tax analysis and the estate planning work in the same conversation, which is what a cross-border plan requires. Alton Moore, Esq, CPA practices in both, and these questions rarely separate cleanly.

Frequently Asked Questions

Do U.S. Citizens Living Abroad Pay U.S. Estate Tax?

Yes. Citizenship rather than residence determines whether the U.S. estate tax applies, and a citizen’s gross estate includes property wherever it is located. Decades abroad, tax paid to another country, and a second passport change none of that. What they can change is how much credit or treaty relief offsets the U.S. tax.

What Is the U.S. Estate Tax Exemption for 2026?

$15,000,000 per person, and $30,000,000 for a married couple that preserves portability. The amount comes from §2010(c)(3)(A) as amended by P.L. 119-21, and it applies to the estates of decedents dying and to gifts made after December 31, 2025. The temporary provision that would have cut the exemption roughly in half after 2025 was deleted rather than extended.

Can I Leave Everything to My Non-U.S.-Citizen Spouse Tax Free?

Not without a qualified domestic trust. The unlimited marital deduction is denied when the surviving spouse is not a U.S. citizen, so property passing outright is taxed in the first estate to the extent it exceeds the exemption. A qualified domestic trust defers that tax rather than eliminating it. The deduction is also available if the surviving spouse becomes a U.S. citizen before the estate tax return is filed.

Does My U.S. Living Trust Still Work If I Move Abroad?

It stays valid, and it can quietly become a foreign trust. A trust is domestic only while a U.S. court can supervise its administration and U.S. persons control all substantial decisions, so a trustee or a named successor living abroad can change the classification without a word of the document changing. The consequence is information reporting and grantor treatment rather than invalidity, and the usual fix is replacing the trustee.

Does My Foreign Property Count Toward the U.S. Estate Tax Exemption?

Yes. Your worldwide assets are counted, so a foreign residence, foreign retirement accounts, foreign bank accounts, and shares in a foreign company all sit inside the taxable estate alongside anything you own in the United States. Foreign situs changes the valuation work and the availability of foreign tax credits. It does not change whether the asset is counted.

What Is a QDOT, and Do I Need One?

A QDOT is a qualified domestic trust, and you need one if you want the marital deduction for property passing to a spouse who is not a U.S. citizen. The QDOT requirements include at least one U.S. trustee, the trustee’s right to withhold tax on distributions, and an election made on the estate tax return. Above $2 million in trust assets, the regulations also require continuing security in the form of a U.S. bank trustee, a bond, or a letter of credit.

How Much Can I Give My Non-Citizen Spouse Each Year?

$194,000 for 2026, and gifts above that amount are taxable rather than covered by the marital deduction. The ordinary annual exclusion of $19,000 applies to everyone else. Retitling a foreign home into joint names or adding a spouse to financial accounts can use the allowance without anyone intending to make a gift.

Will My U.S. Will Be Valid in the Country Where I Live?

Often yes as to form, and not necessarily as to substance. Many countries, and California by statute, treat a will as validly executed if it complied with the law of the place of execution or of the testator’s nationality or domicile. What a valid will cannot do is override forced heirship in a civil law country, which reserves a fixed share for children regardless of what your estate documents say.

Do I Owe Tax on an Inheritance I Receive From Someone Who Gave Up U.S. Citizenship?

You may, and the tax falls on you rather than on their estate. A U.S. citizen or resident who receives a covered gift or bequest from a covered expatriate owes 40 percent of its value, reported on Form 708. The regulations presume the transferor was a covered expatriate unless you can show otherwise, and they allow a protective filing while you work out whether the presumption applies.

This article is for informational purposes only and does not constitute legal or tax advice. Tax laws and regulations change frequently and may affect the accuracy of this information. Consult a qualified tax attorney or CPA before making any decisions based on the content of this article.