Inheriting From the United States While Living Abroad

Inheriting From the U.S. While Living Abroad: Gift or Gotcha?

This article addresses a common but poorly understood scenario for U.S. expats: what happens if someone in the United States dies and leaves you an inheritance while you’re living abroad?  Will you owe tax in the foreign country where you live, and how do bilateral treaties affect the outcome?

This article is aimed at an American abroad who expects to inherit U.S.-based assets from a U.S.-based resident (for example, cash, brokerage accounts or other non-real estate U.S. situs assets). Its goal is to help the inheriting American abroad determine if, and to whom, inheritance taxes or estate tax may be due and when cross-border planning is needed.

For broader context, you may also want to read:

• The Challenges of Receiving a U.S. Inheritance While Living Abroad
• Inheriting Money as a U.S. Expat: Key Tax and Reporting Questions
• Estate and Inheritance Tax Transfer Rules for U.S. Expats

U.S. Estate and Inheritance Transfer Tax Regime

The United States doesn’t impose a federal inheritance tax; it imposes a federal estate tax on the decedent’s estate. The 40% maximum federal estate and gift tax rate applies only after an individual has used up their unified federal estate tax and gift tax exemption — scheduled to be about $15 million per person in 2026, adjusted annually for inflation (roughly $30 million for a married couple). 

In practice, this means the 40% maximum federal estate tax rate only applies to the portion of a decedent’s estate that exceeds this very high exemption amount. For many American families, there’s little or no U.S. federal estate tax exposure, so the primary transfer-tax risk for an American expat heir often arises in the foreign country where they reside, not in the United States.

State‑level estate tax or inheritance tax may still apply, depending on where the decedent lived or owned property. For more detail on state rules, see 2025 State Estate and Inheritance Taxes and Don’t Fall Victim to This Devastating U.S. Estate Tax Trap.

What Is an Inheritance Tax? 

Inheritance taxes are imposed on the person inheriting rather than on the estate itself. The tax is triggered once the beneficiary is deemed legally entitled to receive a transfer at death — in other words, when the heir has the right to receive an asset, not necessarily when they actually receive it.

In many countries, a beneficiary can reject or disclaim this right to receive an inheritance, which may eliminate or reduce any related inheritance tax liability. The rules can differ based on whether you inherit cash, property (such as real estate) or other assets, so understanding your local regime is critical.

International Estate and Gift Treaty Guidance for Inheriting Americans Abroad

While many countries levy some form of estate tax or inheritance tax, most don’t tax an inheritance simply because it originates in another country. The primary question for a U.S. expat inheriting from the United States is usually:

• Does my country of residence impose its own inheritance tax on my foreign inheritance? And if so, is there a bilateral estate tax or estate and gift tax treaty that may provide a tax credit, exemption or other relief?

The following table (Table 1) summarizes, for select countries, whether inheritance tax may apply in your country of residence and whether relevant U.S. estate or estate and gift tax treaties exist. It’s not exhaustive, but it offers a helpful starting point for understanding potential cross-border tax implications.

Table 1. Estate and Inheritance Transfer Tax Rules

U.S. Citizen Beneficiary’s* Country of Residence	Is there an inheritance tax on U.S. assets bequeathed by the U.S. decedent to me in the country where I live?	How long does it take before I am subject to inheritance tax in my country of residence** abroad?	Is there a bilateral U.S. estate tax or estate and gift tax treaty in place?	Is there an exemption or tax credit available by treaty or by other legal source?
Australia	None	N/A	Estate and gift	Yes, by Estate & Gift Treaty; by tax code
Austria	None, but a gift tax regime applies, requiring notice filing	Subject to notice filing requirement after six months’ residency	Estate and gift	Yes, by Estate and Gift Treaty
Canada	None, but possible capital gains tax via deemed disposition	N/A	None	Yes, by U.S.-Canada Income Taxation Treaty
China (PRC)	None	N/A	None	N/A
France	None by treaty — the decedent’s domicile is the determining factor	N/A	Estate and gift	Yes, by Estate & Gift Tax Treaty
Germany	Yes	Earlier of domiciled in Germany or deemed domiciled (e.g., 10 years’ residency) for inheritance tax purposes	Estate and gift	Yes, by Estate & Gift Treaty
Hong Kong	None	N/A	None	N/A
Ireland	None if kept in the U.S. and a U.S. situs asset	N/A	Estate only	Yes, by U.S.- Ireland Double Income Taxation Treaty (Capital Acquisitions Tax Exemption)
Italy	None — situs of assets and the decedent’s domicile are the determining factors	N/A	Estate and gift	Yes, by Estate and Inheritance Tax Treaty
Japan	Yes	If one has jusho4 in Japan or 10 years or more in Japan	Estate and gift	Yes, by Estate & Gift Treaty
The Netherlands	None — rules focus on domicile of decedent as determinative	N/A	Estate only	Yes, by Estate Treaty
Singapore	None	N/A	None	N/A
Switzerland	Possibly — it depends on regional canton and degree of lineal proximity; does trigger wealth tax	When one has habitual residence (presumably after 90 days)	Estate only	Yes, by U.S.-Switzerland Income Tax Treaty and by Swiss tax code
South Korea	None, but gift tax may apply if bringing assets into the country	More than five years as a resident in South Korea	None	Yes, by federal tax code and foreign tax credit regime
Spain	Yes, federal or regional inheritance tax applies	N/A	None	No
Sweden	None	N/A	None	N/A
United Kingdom	None	N/A	Estate and gift	Yes, by Estate & Gift Treaty

*We assume the heir beneficiary is a U.S. citizen and not also a citizen of the country of residence. **Transfer tax residency isn’t the same as income tax residency, although some countries use the income tax residency rules to determine if one is subject to death transfer taxes. 

As you can see from Table 1, the estate and inheritance transfer tax rules and bilateral treaties of many countries focus on the decedent’s and/or the beneficiary’s principal residency/domicile (modern approach) or on the location of the assets (older “situs” approach).

A few high‑level patterns from Table 1 include:

• Some countries (such as Australia, Canada and Singapore) don’t impose a separate inheritance tax but may tax capital gains or apply other rules when you receive or later dispose of foreign inheritance assets.
• Others (such as Germany, Japan and Spain) do impose inheritance taxes, often using residence, domicile or a “tax tail” to determine when you’re in their inheritance tax net.
• In several countries, U.S. estate and gift tax treaties or income tax treaties provide relief, often via a foreign tax credit or partial exemption to mitigate double taxation.

For more background on cross‑border estate planning frameworks, see our Guide to International Estate Planning for Cross-Border Families.

What Is “Situs” and Why Does It Matter?

“Situs” refers to the legal location of an asset — in other words, where it’s deemed situated for tax purposes. Not all U.S.-located assets are considered U.S. situs assets under U.S. estate tax laws.¹ For example, some publicly traded bonds (such as certain U.S. Treasury obligations or U.S. government agency bonds) may fall outside U.S. situs rules for non-U.S. persons.

Assets that are clearly situs-based, such as real property located in a country or shares in a local company, are typically taxable where they’re deemed situated. Most tax treaties combine situs-based rules with residency/domicile rules to allocate taxing rights between countries.

For non‑U.S. persons who own U.S. situs assets, separate rules apply; see the IRS guide Some Nonresidents With U.S. Assets Must File Estate Tax Returns.

How Inheritance Tax Treatment and Terminology Vary by Country

The terminology used for inheritance tax isn’t always straightforward:

• Some countries (for example, Austria and South Korea) treat inheritance under a gift tax regime, which may require notice filings or treat certain transfers as gifts.
• Others (like Cananda) may not have a separate inheritance tax but may apply capital gains tax on a deemed disposition at death, effectively taxing the estate or heirs.
• Some countries (for example, Japan and, more recently, the United Kingdom) impose a tax “tail” — a trailing tax regime whereby inheritance tax can follow citizens or long-term residents even after they’ve left the country.

Additional nuances include:

• Whether inheritance tax applies only if inherited assets are brought into (remitted to) the host country (for example, some rules in Ireland).
• Whether certain inherited assets (such as pension plans or life insurance) receive special treatment by treaty or under local tax law.
• How the degree of kinship (lineal heirs such as spouses and children versus distant relatives or unrelated heirs) affects rates and exemptions.

In all countries, there’s typically a time limit for claiming a tax credit for foreign transfer taxes paid. Applied inheritance tax rates frequently vary by your degree of lineal proximity to the deceased, with lineal heirs often benefiting from lower rates or higher exemptions and distant relatives or non-related heirs facing higher tax rates.

Trusts add another layer of complexity. Some jurisdictions treat a trust as breaking the direct family link (“you can’t be the relative of a trust”), denying preferential lineal‑heir treatment. Others adopt a “look‑through” approach, especially for revocable trusts, treating you as related to the original grantor for inheritance tax purposes.

How Treaties and Tax Credits Can Help — and Their Limits

The first thing to consider is the tax treaty itself. A bilateral estate and gift tax treaty (or, in some cases, an income tax treaty) may:

• Specify whether the credit method (a pro rata reduction for transfer taxes paid) or the exemption method (partial or full relief from tax) applies.
• Provide specific carve-out exceptions for certain assets, such as foreign pension plan assets or situs real estate (for example, a family home).
• Clarify how double taxation is avoided when the same asset could otherwise be taxed twice.

In practice, the tax credit is usually the primary treaty‑based relief available to expat Americans inheriting assets abroad. Many countries and some U.S. states allow credits or partial exemptions for transfer taxes already paid on the same asset, even in the absence of a formal treaty, to avoid taxing the same wealth twice.

For a full list of U.S. estate and gift tax treaties, see the IRS resource Estate & Gift Tax Treaties (International).

Estate Tax Versus Inheritance Tax: Why the Distinction Matters

An estate tax is imposed on the deceased person’s estate; an inheritance tax is imposed directly on the individuals inheriting. The distinction can produce very different outcomes for you as an heir, as outlined below:

• Under an estate tax regime, you generally receive inherited assets net of any estate tax already paid by the estate and its executor.
• Under an inheritance tax regime, you have a right to receive the asset but may owe inheritance tax personally, often at progressive rates based on the size of your share and your relationship to the decedent.

Because the United States uses an estate tax model at the federal level, a U.S. expat heir may receive their inheritance free of U.S. federal estate tax yet still face a significant inheritance tax bill in their country of residence.

Inheriting Abroad: An Illustrative Example

Consider U.S. citizen Jane, who has been living in Japan for 17 years. Her American parents die and leave her, their sole surviving immediate family member, a $3,000,000 inheritance in a U.S. brokerage account. Her parents have never been to Japan, own no assets there and have no Japanese ties.

Under the U.S.-Japan Estate and Gift Tax Treaty and Japanese law, the primary taxing jurisdiction for inheritance tax purposes is determined by whether the decedent or inheriting beneficiary is domiciled in Japan. Because Jane is domiciled in Japan (she has jusho, or long-term residence), Japanese inheritance tax laws apply to her inheritance even though the estate and assets are in the United States.

Japan applies a marginal inheritance tax regime with progressive rates, ranging roughly from 10% to 55% of the net taxable inheritance base. The higher the value of your inheritance, the more likely the top marginal rate will apply. Financial assets are valued at fair market value as of the parents’ date of death, and inheritance tax is generally due within about 10 months.

To compute Jane’s potential Japanese inheritance tax:

1. Determine the gross value of aggregate assets subject to inheritance tax.
2. Subtract allowable deductions, such as funeral and burial expenses.
3. Subtract basic exclusions and per-heir allowances; the greater the number of heirs, the higher the total exclusions.
4. Apply any additional lineal-heir deductions Jane is entitled to as an immediate family member.

The result is Jane’s net taxable inheritance base. Multiply that base by the applicable marginal inheritance tax rate to arrive at the inheritance tax due.

On the U.S. side, Jane won’t owe any federal estate tax, because her parents’ estate (assumed to consist solely of the $3 million brokerage account) falls well below the roughly $30 million combined exemption for a married couple in 2026.

The unintended consequence is timing. Jane may owe a substantial Japanese inheritance tax within 10 months of her parents’ deaths, even if the U.S. estate hasn’t yet distributed the inherited assets to her. That “$3,000,000 gift” can quickly feel like a gotcha if she must find six-figure U.S. dollar liquidity to pay the inheritance tax to Japan before receiving her inheritance.

This is where advanced estate planning and cross-border financial planning strategies become crucial — for example, adjusting parents’ estate plans, using different asset types, or planning liquidity and distribution timing to avoid cash flow crunches for heirs abroad.

For more expat-oriented planning ideas, see:

• Reviewing and Organizing Your Beneficiaries as a U.S. Expat
• Getting Started With Estate Planning for U.S. Expats

Determining If Inheritance Tax May Apply in a Treaty Country — and What to Do

How the law applies in cross-border estate and inheritance tax cases often turns on administrative practice, official interpretations and local guidance — areas where many countries offer limited clarity. This makes it difficult for an inheriting U.S. citizen abroad to know whether to pursue a tax credit claim or accept local taxes as a sunk cost.

Practical steps include:

• Consulting knowledgeable expat tax advisors who regularly work with Americans abroad and understand treaty-based credit claims.
• Engaging experienced local legal counsel to evaluate and advance any tax credit applications or appeals.
• Comparing the cost (professional fees, translation, record-keeping) of pursuing a tax credit against the potential benefit.

In some cases, the most practical options for an inheriting American abroad may one of the following:

• Disclaim the inheritance, thereby avoiding the inheritance-related tax liability in the host country.
• Pay the inheritance tax and, where possible, seek an estate-tax expense deduction in the U.S. or claim a foreign tax credit, if any U.S. federal estate tax is actually due.

Because today’s high U.S. exemption means many estates owe no federal estate tax, in practice a U.S. expat heir often gets little or no usable U.S. tax credit for foreign inheritance tax paid.

Can a Foreign Inheritance Tax Credit Apply Against a U.S. State Tax?

In general, the answer is no. Most bilateral U.S. estate and gift tax treaties apply at the federal level, not at the state level. However, some states and foreign countries allow pro rata credit for regional-level taxation paid, and some treaties explicitly address whether state-level taxes fall within their scope.

Reviewing the U.S.-foreign country estate tax treaties² and the host country’s inheritance, gift and estate transfer tax regimes is essential to understanding how any credit or relief might work in your situation.

Planning Ahead If You May Inherit While Living Abroad

Americans abroad can anticipate and plan for inheritance-related tax implications as part of broader cross-border estate planning and financial planning. If you or your family expect to transfer wealth across borders, strategies may include:

• Coordinating with loved ones who plan to leave you a bequest so that they understand how their estate plan and local rules interact with your host-country tax regime.
• Adjusting how and when assets are left (for example, using different asset types or structures, or planning around thresholds in the foreign tax regime).
• Aligning estate planning with your long-term residency/domicile decisions and potential future moves.

Doing this planning early can yield significant tax savings, reduce surprises and help you avoid regrets about missed opportunities. If you’re an American abroad with a potential inheritance issue, Creative Planning International can help you evaluate your unique family and international circumstances and design a coordinated plan. Schedule a call today.

For more on building or revising your estate plan, see Getting Started With Estate Planning and Five Reasons Why You Need an Estate Plan.