Moving abroad is often about embracing change — new cultures, new opportunities, and a new lifestyle. For most people, thoughts about what happens after their death are the last thing they want to consider. Yet, for US citizens and those with US assets, understanding how estate tax rules apply internationally is critical to protecting your legacy.
At Blacktower Financial Management, we work with expatriates across the globe to help them make sure their assets are structured efficiently and passed on according to their wishes. In this article, we explore what happens to US-based assets when you live abroad — and the potential pitfalls you need to be aware of.
Why Your US Assets Still Matter When You Live Abroad
If you are a US citizen or hold assets in the United States, your estate can still be subject to US federal estate tax when you pass away — regardless of where you live. Even if you have been out of the US for decades, the location of your assets, your citizenship status, and the residency of your beneficiaries all determine how your estate will be treated.
Key factors that influence the tax treatment include:
- Type of assets held (e.g., 401(k), IRA, property, stocks)
- Your citizenship and residency status at death
- Citizenship or residency of your heirs
- Location of the assets themselves
Retirement Accounts: What Happens When You Die Abroad?
Let’s say you have a 401(k) while living outside the US, and your spouse — also not American — lives abroad as well.
If you pass away:
- Some US providers will not open an inherited or spousal rollover account for a non-US resident.
- Others may require you to close your account entirely if you live overseas, or may refuse to work with beneficiaries without a US Social Security number or address.
- In some cases, they may liquidate the account and send a cheque — which can trigger unnecessary tax liabilities and currency conversion costs.
This is why working with an adviser who understands both US retirement account rules and the regulations in your country of residence is essential. Without careful planning, you risk leaving your beneficiaries with fewer options and higher taxes.
The Estate Tax Trap for Non-Residents
US investment platforms are attractive because they tend to be cost-effective, offer low trading fees, and provide strong market access. Many expatriates choose to leave money in the US for convenience and security. However, this decision can have major tax implications.
While the current US federal estate tax exemption for citizens is around $13 million, non-residents do not benefit from the same generous allowance. In fact:
- The exemption for non-resident, non-citizens is just $60,000.
- Any US-sited assets above this amount are taxed at up to 40%.
This lower threshold applies to:
- US real estate
- Tangible personal property located in the US (excluding some art)
- Shares of US corporations, even if certificates are held abroad
For non-citizens who acquired US assets before moving overseas, this can be a nasty surprise.
Worldwide Assets Still Count for US Citizens
If you are a US citizen or green card holder, the US federal estate tax applies to your worldwide assets, no matter where you reside. That means even if you have lived abroad for years, your overseas property, investments, and bank accounts could all be within scope.
This is a key difference between the US system and many other countries. For example:
- In the UK, assets generally transfer tax-free between spouses.
- For US assets such as 401(k)s, the tax-free spousal transfer does not apply in the same way — US estate tax can be due immediately upon death.
Double-Taxation Risks
A major concern for cross-border families is the potential for double taxation. You could face:
- US estate tax on the asset value
- Inheritance tax in your country of residence for the same asset
The good news is that the US has estate or gift tax treaties with several countries, including the UK, France, Germany, and Canada. These treaties:
- Allocate taxing rights between countries
- Provide credits to offset tax paid in one jurisdiction against liabilities in another
- Offer specific provisions for spousal transfers and domicile rules
However, these treaties are complex and country-specific. For example:
- UK–US treaty: Can cap US estate tax to what would apply if the deceased were US-domiciled, often eliminating US tax for UK domiciliaries.
- France–US treaty: Allocates taxing rights and allows credits to avoid duplication of inheritance tax.
- Canada–US treaty: Includes estate tax provisions within the income tax treaty, offering enhanced credits and marital benefits.
Planning Ahead to Protect Your Legacy
For US citizens abroad and non-citizens with US assets, effective estate planning can mean the difference between a smooth inheritance process and costly, time-consuming complications.
Steps to consider:
- Review all US-sited assets — including pensions, property, and investments.
- Understand your exposure — determine whether US estate tax will apply based on your citizenship and residency.
- Check treaty provisions — see if a tax treaty can reduce or eliminate exposure.
- Plan for beneficiary eligibility —heirs can legally hold inherited assets without forced liquidation.
- Coordinate across jurisdictions — align estate plans with local inheritance tax rules to minimise double taxation.
Why Cross-Border Advice Is Essential
Domestic US advisers are highly skilled in the US tax system but may have no visibility into how your host country will treat the same assets. Likewise, a local adviser in your new home may not be familiar with the US rules that still apply to you.
At Blacktower, we specialise in helping expatriates:
- Structure assets to minimise cross-border tax liabilities
- Beneficiaries can inherit efficiently, regardless of location
- Integrate US and local estate planning requirements
- Work with trusted tax professionals in multiple jurisdictions
Don’t Let Complexity Delay Action
The rules around US estate tax, inheritance, and cross-border planning are complicated — and they can change. Leaving these issues until later can mean missed opportunities to protect your wealth and your heirs.
Whether you are:
- Planning your first move abroad
- Already living overseas with US assets
- Reviewing your estate plan for retirement
…now is the right time to address these questions.
Speak to Blacktower Today
Since 1986, we have been helping expatriates across the globe protect their wealth, navigate cross-border complexities, and plan their legacies. Our advisers understand the unique challenges of US estate tax and can help you build a plan tailored to your goals.
📞 Contact Blacktower Financial Management for a confidential consultation and start securing your cross-border estate plan.
Disclaimer:
This article is for general informational purposes only. Investment advice and investment advisory services offered and provided through Blacktower Financial Management US, LLC. This communication is for informational purposes only based on our understanding of current legislation and practices which are subject to change and are not intended to constitute, and should not be construed as, investment advice, tax advice, tax recommendations, investment recommendations or investment research. You should seek advice from a professional before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.
This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.
Investment advice and investment advisory services offered and provided through Blacktower Financial Management US, LLC. This communication is for informational purposes only based on our understanding of current legislation and practices which are subject to change and are not intended to constitute, and should not be construed as, investment advice, tax advice, tax recommendations, investment recommendations or investment research. You should seek advice from a professional before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.