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U.S. estate tax on non-resident aliens

• I am looking to find a definitive source (preferably an IRS document or a legal opinion from a qualified tax attorney) that spells out the terms under which a non-American who lives outside of the U.S. will be subject to U.S. estate tax when he dies. There are many different types of assets a person may own in the U.S., from real estate to stocks, from bonds to bank deposits, and many more. I would like to know which assets are subject to estate tax and at what rates. Also, if assets are held in joint name (for example, with a spouse), and one of the spouse's die, are the assets subject to U.S. estate tax? I am curious if there are legitimate techniques to avoid this tax so that non-resident aliens (NRAs) can invest in the U.S. without worrying about their principal being taxed when they die.

• Answer:

  Property subject to United States estate taxes "...includes real estate (vacation homes, condos, etc.) situated in the US, tangible personal property physically located in the United States, or stock in any US corporation. Cash, bonds, partnership interests and other intangibles are generally not subject to the tax." "How the US Estate Tax Applies to Nonresident Aliens" by Jeffrey A. Baskies, Smart Pros (2000) http://www.smartpros.com/x22102.xml "If the surviving spouse is not a U.S. citizen before the estate tax return is due; or where the property is [not] transferred to a Qualified Domestic Trust Joint-owned property is treated differently for aliens than for U.S. citizens: -where the surviving spouse is an alien, the entire value of the property is presumed to be included in the decedent's gross estate for estate tax purposes; -there is an exclusion only for the portion that the survivor can demonstrate their actual contribution to the purchase price or acquisition." "Estate Planning" by Albert W. Ferreira http://www.a-fera.com/en_estplan.html "Marital deduction. Unless a treaty allows otherwise, you may only take a marital deduction if the surviving spouse is a U.S. citizen or if the property passes to a qualified domestic trust (QDOT)...." "Instructions for Form 706-NA" Internal Revenue Service (2003) http://www.irs.gov/pub/irs-pdf/i706na.pdf The estate tax can be avoided by investing only in assets not subject to it, or by avoiding ownership of US situs taxable property by employing trusts, corporations, or partnerships. You would most likely need an attorney to accomplish the latter. A tax rate table can be found in the first reference above. However, tax treaties between your country and United States may alter the amount of tax owed. For additional information, see "Form 706-NA" Internal Revenue Service (2003) http://www.irs.gov/pub/irs-fill/f706na.pdf Sincerely, Wonko