Estate Planning for U.S. Expats: Protecting Assets and Heirs Across Borders

Moving overseas doesn’t remove your ties to the United States. Many U.S. citizens and green card holders living abroad continue to own real estate, maintain brokerage or retirement accounts, or appoint family members in the U.S. as trustees or executors. If you have children or elderly relatives in the United States, you may also name them as beneficiaries. Failing to plan for these connections can lead to serious tax consequences, probate delays, or even unintended disinheritance.

U.S. estate and gift taxes apply to citizens and residents on their worldwide assets. For nonresident aliens, only U.S.‑situated property is taxed, and the exemption is dramatically lower (historically $60,000). As of 2025, U.S. citizens enjoy a federal estate and gift tax exemption of $13.99 million, and the One Big Beautiful Bill Act, signed July 4 2025, permanently increases that exemption to $15 million per person (adjusted for inflation) beginning January 1 2026. State estate taxes, gift taxes and inheritance taxes may also apply, and many states have exemptions far below the federal level. For expats, coordinating tax regimes on both sides of the border is critical.

This article explores the major elements of estate planning for Americans living abroad. It covers fundamental documents, tax considerations, planning for real estate and businesses, beneficiary designations, and tips for working with fiduciaries across borders. We also discuss how to communicate with heirs and navigate property laws in foreign jurisdictions.

1. Confirm Your Estate Planning Documents

Wills and Multiple Jurisdictions

Every U.S. citizen should have a valid will. When you live abroad, you may need two wills: one to cover U.S. assets and another for assets located in your country of residence. Some countries do not recognize U.S. wills, and their probate processes can differ dramatically. A local attorney can determine whether your U.S. will is effective abroad or whether a separate will is advisable. Avoid provisions that conflict across documents; if you create multiple wills, ensure they explicitly reference each other and state which assets each governs.

A will typically names an executor (personal representative) to manage your estate. If your executor resides in the U.S. but your assets are abroad, courts in your country of residence may require the executor to post a bond or appoint a local representative. Conversely, if you name a foreign resident as executor for your U.S. estate, some states or banks may refuse to cooperate. Choosing alternate executors in each jurisdiction can prevent probate delays.

Trusts

Trusts are an essential tool for expats. A revocable living trust allows you to avoid probate in the U.S., maintain privacy, and facilitate management if you become incapacitated. However, be aware that some foreign countries do not recognize trusts or impose high taxes on foreign trusts. In Canada and the U.K., for example, the trust may be considered a separate taxpayer and subject to complex reporting rules. Consult with an attorney licensed in your country of residence to determine whether a revocable or irrevocable trust is appropriate.

When using a trust to hold a vacation home or other real property, ensure that the trust’s use and expense provisions align with local law. Parents should discuss with their children who wants the property, who can afford it, and how decisions will be made. A properly drafted trust can set guidelines for use, maintenance and expense sharing, and a cross‑border attorney can adjust the language to satisfy both U.S. and foreign requirements.

Powers of Attorney and Health Care Directives

A durable power of attorney authorizes someone to manage your finances if you become incapacitated. A health care directive specifies your medical wishes and appoints an agent to make health decisions. U.S. forms may not be recognized overseas, so create equivalent documents in your country of residence. At the same time, maintain U.S. versions if you have assets or accounts there. Name agents who reside in the jurisdiction where the documents will be used.

2. Understand U.S. Estate and Gift Tax Rules

U.S. tax rules depend on your domicile and citizenship. The U.S. taxes citizens and domiciliaries on their worldwide estate, regardless of where they live. Nonresident aliens (NRAs) are taxed only on U.S.-situated property, which includes real estate, tangible personal property, certain securities, and business interests. However, the exemption for NRAs is only $60,000 (not adjusted for inflation), compared to $13.99 million for citizens in 2025 and $15 million starting in 2026. Transfers above that threshold are taxed at 40 percent.

Gift Tax

U.S. gift tax applies to citizens and domiciliaries on worldwide gifts but does not apply to NRAs unless they make gifts of U.S.-situated property. If you are a U.S. citizen living abroad, you can still make annual exclusion gifts—$19,000 per recipient in 2025 (indexed for inflation)—without using your lifetime exemption. Gifts to a non-U.S. citizen spouse are limited to $175,000 per year (2025 figure). Gifts beyond those amounts will reduce your lifetime estate and gift tax exemption.

Unlimited Marital Deduction and Qualified Domestic Trusts (QDOTs)

U.S. citizens may leave unlimited amounts to a citizen spouse free of estate tax. However, if your spouse is not a U.S. citizen, the unlimited marital deduction does not apply. Instead, a Qualified Domestic Trust (QDOT) may be required to defer estate taxes. The trust must meet specific IRS requirements, including having a U.S. trustee and provisions for withholding tax on distributions. Establishing a QDOT should be done well before you need it because creating one after death can be complex, especially across borders.

State Estate and Inheritance Taxes

Don’t overlook state estate or inheritance taxes. Several states impose estate taxes with exemptions far lower than the federal level (e.g., Massachusetts and Oregon around $1 million). Inheritance taxes (e.g., Pennsylvania) may tax beneficiaries directly. Even if you no longer live in the U.S., owning real property in a high‑tax state could subject your estate to state taxes. If you plan to keep U.S. real estate, consider transferring it to a trust or an entity domiciled in a low‑tax state and evaluate whether selling the property and reinvesting in your new country is more efficient.

3. Coordinate with Foreign Laws

Forced Heirship and Community Property Rules

Many countries impose forced heirship, requiring a portion of your estate to pass to certain relatives regardless of your will. For example, in France, children have a fixed percentage of inheritance rights. Ignoring these rules can render your trust or will invalid for assets located overseas. Others, such as Germany, impose inheritance taxes on heirs based on their relationship to the decedent. Understand the local rules and structure your U.S. plan to complement them.

If you move from a common law state to a community‑property country, your property rights may change. Community property regimes treat assets acquired during the marriage as jointly owned. This can affect your ability to transfer assets to a trust and may change how your estate is taxed. A cross‑border attorney can help you transmute community property into separate property or craft agreements that clarify ownership.

Real Estate and Businesses Abroad

Owning a home or business abroad introduces additional complexity. Maintaining vacation property requires a plan for taxes, insurance and upkeep. If your property is located in another country, local inheritance, capital gains, and property transfer taxes may apply, and some countries restrict foreign trust ownership. Consult local professionals to ensure the trust or entity structure you choose is recognized and tax‑efficient.

If you plan to leave a U.S. property to heirs who live abroad, confirm that they can legally own it. Some countries restrict residents from owning foreign real estate or impose punitive taxes on foreign assets. You might need to sell the property and distribute proceeds instead.

4. Manage Beneficiary Designations and Retirement Accounts

Beneficiary designations on life insurance policies, IRAs, and 401(k)s override the instructions in your will. Keep these designations up to date. When living abroad, consider how beneficiaries in different countries will receive distributions. Some foreign jurisdictions levy inheritance tax on life insurance or retirement benefits. Coordinate with financial institutions to ensure they will make distributions to non-U.S. residents and understand any withholding tax obligations.

For IRAs and 401(k)s, required minimum distributions (RMDs) still apply to U.S. citizens abroad. Under the SECURE Act, most non-spouse beneficiaries must withdraw inherited retirement accounts within 10 years of the owner’s death, potentially causing a high tax bill. Trusts can be named as beneficiaries, but they must be carefully drafted to avoid accelerating distributions.

5. Address Reporting and Compliance

FATCA (Foreign Account Tax Compliance Act) and FBAR (FinCEN Form 114) reporting requirements apply to U.S. citizens and residents with foreign accounts over certain thresholds. Failure to report can lead to steep penalties. If your trust holds foreign assets or if you are a beneficiary of a foreign trust, additional reporting (Forms 3520 and 3520‑A) may be required. Ensure your trustee understands these obligations.

If you serve as a trustee or executor for a U.S. trust while living abroad, you may need to file Form 1041 (U.S. income tax return for trusts), and you may be considered a U.S. resident for tax purposes if you exercise substantial control over a U.S. trust. Professional administration may simplify compliance.

6. Communication and Family Dynamics

Expats often have relatives and assets in multiple countries. When planning for a vacation home, parents should talk to their children about who wants the property and who can afford to maintain it. This advice applies broadly to cross‑border planning. Discuss your intentions openly with heirs: Will they inherit a U.S. property or receive a cash equivalent? Do they have the resources to pay property taxes? Would they prefer proceeds instead of ownership? Early conversations prevent conflict and help you choose the right strategy—whether keeping property in trust, selling it, or using insurance to equalize inheritances.

Also consider appointing co‑fiduciaries: one in the U.S. to manage domestic assets and one in your country of residence for local matters. Co‑trustees or successor trustees should communicate regularly to coordinate tax filings, distributions, and investment strategies.

7. Real Estate Planning Strategies for Expats

Transferring a Vacation Home to a Trust

Putting U.S. property into a trust can avoid probate and provide continuity. Transferring a vacation property into a trust lets parents maintain control and set rules for usage and expenses. A cabin trust or family LLC can also establish rules for scheduling, maintenance costs and dispute resolution. When you live overseas, having these structures in place ensures the property is managed according to your wishes without requiring your physical presence.

Qualified Personal Residence Trust (QPRT)

A QPRT allows you to transfer a U.S. home to beneficiaries at a discounted value, reducing estate taxes. You retain the right to live in the home for a set term; after that, it passes to your heirs. We discussed QPRTs in detail in a prior article. This strategy is particularly useful if you intend to keep a U.S. residence but expect to return or rent it in the future.

Selling vs. Keeping Real Estate

Sometimes the simplest solution is to sell U.S. property before or shortly after relocating abroad. The U.S. capital gains exclusion on a primary residence—$250,000 for single filers or $500,000 for married couples—may still apply if you meet the use and ownership tests. Selling can provide liquidity, simplify your estate and avoid state taxes. Alternatively, you can lease the property to generate income, but you’ll need to file U.S. tax returns and possibly pay state taxes.

8. Business Interests and Investments

If you own a U.S. business or shares in a closely held corporation, understand how foreign laws treat ownership. Some countries tax foreign corporations heavily or restrict ownership of U.S. partnerships. A trust or holding company may be needed to manage the business if you die or become incapacitated. Also, U.S. S‑corporations generally cannot have nonresident alien shareholders, so your status as an expat may disqualify the corporation. Consider converting to a C‑corporation or restructuring ownership.

9. Life Insurance and Liquidity Planning

Life insurance can be a valuable cross‑border planning tool. Policies held in an Irrevocable Life Insurance Trust (ILIT) remove death benefits from your taxable estate and can provide liquidity for taxes, property upkeep or beneficiary support. If you live abroad, confirm that your insurer will pay benefits into a foreign account and that local tax authorities will not tax the proceeds. Some countries treat life‑insurance benefits as taxable income or require certain policy structures.

10. Keeping Plans Current

Estate plans are living documents. Review your plan every three to five years or after major events such as marriage, divorce, childbirth, relocation, or changes in tax law. The One Big Beautiful Bill Act permanently boosts the federal estate and gift tax exemption to $15 million per person starting in 2026, which reduces urgency for some large gifts but does not eliminate the need for planning. State tax laws, foreign inheritance rules and family circumstances also evolve. Regular reviews ensure your plan remains effective.

Conclusion

Cross‑border estate planning requires coordination between U.S. and foreign laws, sensitivity to family dynamics and careful tax analysis. If you live abroad but maintain U.S. connections—whether assets, beneficiaries or fiduciaries—you must address estate and gift taxes, state taxes, forced heirship rules and reporting obligations. Use the higher federal exemption while it lasts, but don’t neglect state taxes or the complexity of foreign laws.

Key steps include preparing valid wills and powers of attorney in each jurisdiction; using trusts and business entities appropriately; updating beneficiary designations; keeping thorough records for tax reporting; and communicating your plans with loved ones. Working with advisors who understand both U.S. and foreign law is essential. With proactive planning, you can protect your cross‑border assets, minimize taxes and ensure that the people you care about receive their inheritance with minimal stress.