Estate Planning When You Live in a Foreign Country

Transcript of Podcast Episode 378

Hello, this is Bill Rainaldi, with another edition of Security Mutual’s SML Planning Minute. In today’s episode: estate planning when you live in a foreign country.

When it comes to federal estate taxes, most Americans have nothing to worry about. The federal exemption for 2026 is $15 million per person, a number far higher than most people will ever accumulate. However, there are twelve states that have a state estate or inheritance tax, and one, Maryland, that has both.  For state estate tax purposes, the exemption can be significantly lower, such as Massachusetts, where the exemption is $2,000,000.[1]

Keep in mind that by default, the U.S. imposes estate and gift taxes on its citizens, no matter where they live. In other words, you can’t get around your U.S. taxes just because you moved to a foreign country.[2] But everything could change if you die outside the U.S. Your estate could end up getting taxed in the U.S., as well as another country where the laws, rules, regulations, exemptions and rates vary significantly. The U.S. may have treaties with other countries to avoid double taxation but that may not be true with every country.

Also, other common estate planning documents such as living wills, powers of attorney, trusts and so forth, may or may not be valid in another country.

So, what do you need to look out for if you’re going to spend an extended period of time in a foreign country? We’re not talking about simply a vacation. It should surprise no one to learn it’s… complicated. A recent article published by Charles Schwab and Co. gives us an in-depth look of some of the things you need to know.

There are a few big issues that someone may have to deal with if they become seriously ill—or die—outside the U.S. For one thing, your American estate documents are generally not valid in another country.[3] If you become incapacitated, things like health care proxies and powers of attorney may be useless. You may need to sign legal documents that are in compliance with the laws of that country, while making sure that these new documents don’t conflict with the ones you have in the U.S.[4]

Domiciliary rules apply in many foreign countries in a similar fashion to the way they do in the U.S. for estate or inheritance tax purposes. Domicile is generally defined as where your permanent home is with a subjective intent to remain indefinitely. Residency is where you are currently residing and can be measured by the number of days spent in that place. In the U.S., this has a bearing on state income taxation, but other countries may apply it for estate tax purposes too. [5] This can be important because if you spend the majority of the year in a particular jurisdiction, in many cases, all of your worldwide assets could be taxable in that jurisdiction.[6]

There may also be legal hurdles in other countries that prevent you from doing what you want. For example, in most European countries, there are “forced heirship” laws that may require you to leave 50 percent or more of your assets to your children, whether you want to or not.[7] In the U.S., you can disinherit your children.

This provision can become a major hurdle with jointly owned property. Let’s say you have a valuable home in another country, and you share ownership jointly with your spouse. In the U.S., after your death, your half of the home would automatically pass to your spouse, making your spouse a 100 percent owner. That may not be true in another country because of forced heirship rules. A portion of the property may end up passing to your children, whether you want that or not.

You may have another option if you’re residing in one of the countries in the European Union. Most of those countries, except for Denmark and Ireland, have what’s called the “European Succession Regulation.”[8] This allows U.S. citizens the option to let U.S. law stipulate their estate distribution. It can be a way around the forced heirship rules, but it takes planning. The choice must be made clearly in the estate planning documents.

There’s an additional wrinkle to consider. When someone dies in the U.S., if there are any state or federal estate taxes due, those taxes are paid by the estate itself. In most foreign countries, estate taxes are paid by the heirs.[9] In some cases, for example, if one of your children is inheriting a piece of real estate, it could result in a forced liquidation of the property, simply because they don’t have the cash to pay the taxes.

Finally, note that many countries friendly to the U.S. have estate and gift tax treaties with the U.S. These laws clarify which country gets the right to tax your assets, thus preventing your assets from being taxed in both countries. If you do end up under U.S. jurisdiction, keep in mind that all your assets, even those held in foreign countries, are considered taxable in the U.S., regardless of where they are held.

Do any of these rules apply to you? If you’re going to be living in any foreign jurisdiction for an extended period of time, it’s a good idea to check with a qualified legal professional who is familiar with the laws in both countries. There may be additional documents required.

[1] The American College of Trust and Estate Counsel. “State Death Tax Chart.” Actec.org. https://www.actec.org/resources-for-wealth-planning-professionals/state-death-tax-chart/ (accessed March 12, 2026).

[2] Trust & Will. “What Happens if an American Citizen Dies in Another Country.” Trustandwill.com. https://trustandwill.com/learn/dying-abroad (accessed March 12, 2026).

[3] Jarvis, Austin. “How Living Abroad Can Complicate Your Estate Plan.” Schwab.com. https://www.schwab.com/learn/story/how-living-abroad-can-complicate-your-estate-plan (accessed March 11, 2026).

[4] Id.

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9] Id.

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