You may have already lived through the experience of the death of an American parent living in the US. In addition to the emotional impact of the loss of a dear one, you may have been involved in finalizing their estate. Maybe it was straightforward? Maybe it was complicated and exhausting to finalize? Regardless of which it was, be aware that if you as an American residing overseas for more than 10 year have US assets and non-American heirs, then the process of finalizing your estate and distributing to these heirs will likely be much more complicated. And remember the seminal words of Benjamin Franklin in 1789: “Nothing is certain except death and taxes!”
Maybe you have lived overseas for a few years or a few decades and maybe the heirs to your estate are not all American – or perhaps none are Americans. So what happens after you pass away? Let’s try to demystify the process to reduce any bad surprises for your loved ones.
First of all, as of 2026, if your worldwide assets are less than $15 million, there is no US estate tax and no need to file a US Estate Tax Return – however, there is still US-based work to be done to disburse your estate. The US-based work may be especially complicated for heirs who are non-American to complete, so you might want to consider identifying a US-based legal advisor in addition to a legal advisor in the country where you reside and if possible, have a meeting with the legal advisors from both countries together while you are still alive. (See the end of this article for valuable information if the deceased American has less than $60,000 in US-situated assets.)
Please note that assets may include: cash, securities, real estate, insurance, trusts, annuities, gifts above the gift tax exclusion for a given year (e.g. in 2025 the gift tax exclusion is $19,000 per person that you gift to) and business interests. After accounting for deductions such as mortgages, debts, administration expenses and property passing to a surviving spouse or qualified charities, then the remainder is the taxable estate.
Any assets above $15 million will be taxed, and a US Estate Tax Return will need to be filed.
It’s important to note that some states have estate tax. Therefore it is recommended that you check your local state tax laws to ensure that there are no tax surprises on a state level. Even if you have lived abroad for many years, you can still trigger state-level estate taxes if you’ve never formally severed domicile (i.e. voter registration, driver’s license, mailing address), or you own real estate, a business or other tangible property in the state. Some states are very aggressive when it comes to tax residency. Just because you moved out of the country doesn’t automatically stop state tax residency in some states, and states can even pull the taxpayer’s worldwide estate into the tax calculation. MA, NY, OR, WA, CT, IL, VT, HI, ME, RI, MD, MN, and DC all currently have state-level estate tax. PA, NE, IA, KY, and MD have inheritance tax.
Even with worldwide assets less than $15 million, let’s for example say that in your estate you have a US investment portfolio and/or US real estate – how does that get disbursed to your heirs?
The first step will be for someone to get a local death certificate and then to make a request from the nearest Embassy or Consulate for a Consular Report of Death for a US Citizen Abroad (CRODA) which will be written in English. The CRODA can be used in the US to settle estate matters. Be aware that the CRODA issuance process can take as long as 4 to 6 months in some countries.
Here are two paths to consider after the first step :
- Request a Transfer Certificate from the IRS:
- See the detailed list of steps for this path at this link: https://www.irs.gov/businesses/small-businesses-self-employed/transfer-certificate-filing-requirements-for-the-estates-of-nonresident-citizens-of-the-united-states
- If this path is chosen, then all worldwide assets in the estate will need to be listed and appraised. Any documents not in English will need to be “officially” translated to English.
- Once the Transfer Certificate is received by an investment firm, then they can disburse the funds to the heirs because the certificate ensures the investment firm that there are no outstanding US taxes to be paid.
- A Transfer Certificate is not required for property administered by an executor or administrator appointed, qualified and acting within the United States. (If this path is chosen, it will be necessary to have a US citizen based in the US to play this role vs. for example your non-American spouse or your children if they are non-American and not living in the US).
For both paths, be aware that it will likely take at least 1 year after your death before the disbursement of your US assets and it could even take several years. Depending on how and where your US estate is set up, all or some of your assets may or may not go through probate. According to the American Bar Association, “Probate is the formal legal process that gives recognition to a will and appoints the executor or personal representative who will administer the estate and distribute assets to the intended beneficiaries.” One way to avoid probate in the US for your estate is to set up a Revocable Living Trust. However, some countries of residence such as France require annual reporting of Trusts and do not hold Trusts with the same regard as the US. So prior to creating a Living Trust, it is important to seek legal counsel in your country of residence.
Retirement accounts, including IRAs or 401(k)s, typically do not go through probate. Inheritance in these accounts is done through beneficiary designations, not through probate or instructions left in a will. Non-spouse beneficiaries cannot roll over inherited accounts into their own IRAs. However, spousal beneficiaries may roll over the account into their own IRA or treat it as an inherited IRA. Inherited 401(k) and IRA accounts are generally taxable to the beneficiary which can be a surprise to many people. Distributions from an inherited 401(k) are generally included in the beneficiary’s gross income in the year they are received. A spouse can treat the inherited IRA as their own, allowing them to defer distributions until they reach age 73 or roll the account into their own IRA.
Be aware that if your beneficiary is not American and not based in the US, it may be challenging for them to claim the proceeds of your IRA. There may be challenges if your beneficiary does not speak English or is not available to contact the company who holds the funds during their working hours. One alternative to consider is to leave the remaining funds to a US-based charity.
Once the estate is settled, a request can be made to the IRS for an Estate Closing Letter. There is a $67 fee that goes along with this request. Why is this letter good to have? It provides finality, legal protection and peace of mind to executors, administrators and beneficiaries. Executors should ensure that all required documentation is submitted accurately and promptly to facilitate the issuance of the closing letter.
If any of this concerns your estate, we do recommend that you seek legal counsel to get advice on how best to proceed in your specific situation.
What if the deceased American lived outside the US for the 10 years prior to their death, was receiving US Social Security payments yet did not have US situated assets worth more than $60,000?
- The heir does not need to obtain a Transfer Certificate from the IRS to address the deceased taxpayer’s worldwide assets.
- According to the IRS, a Transfer Certificate is required only if the value of the decedent’s US-situated assets exceeds $60,000 at the date of death. US-situated assets include real estate located in the US, tangible personal property located in the US, and certain intangible assets such as stock in US corporations. Social Security payments are not classified as US-situated assets under these rules. Therefore, if the nonresident taxpayer has no US-situated assets, the transfer certificate requirement does not apply, even if they receive US Social Security payments.
- A Transfer Certificate is generally required for estates of nonresident decedents to release US-situated assets, such as US bank accounts, securities or real property. Since the deceased taxpayer had no US assets, there is no need to request a Transfer Certificate. This is supported by the IRS guidelines, which state that a Transfer Certificate is not required for property administered by an executor or administrator appointed, qualified and acting within the United States, or if there are no US-situated assets in the estate . https://www.irs.gov/businesses/small-businesses-self-employed/transfer-certificate-filing-requirements-for-the-estates-of-nonresident-citizens-of-the-united-states
- Social Security payments are not considered part of the decedent’s estate for estate tax purposes and do not trigger the need for a Transfer Certificate. https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax-for-nonresidents-not-citizens-of-the-united-states
We hope that this information is helpful to you and your loved ones. We encourage you to take your time to digest it and to also seek professional counsel for any questions that may arise after you read this.
