US Estate Tax: What Foreign Property Owners Must Know
Foreign nationals who own US real estate are subject to US federal estate tax upon death — with an exemption of only $60,000. Proper structuring before purchase can eliminate or significantly reduce this exposure.
Financing & Taxes · Sea to Sky Realty
The US Estate Tax Basics
The US federal estate tax applies to the worldwide assets of US citizens and permanent residents, and to the US-situated assets of foreign nationals. For foreign nationals, only assets located in the United States — including real estate — are subject to US estate tax.
The $60,000 Exemption Problem
US citizens and permanent residents benefit from a federal estate tax exemption of over $12 million (subject to legislative changes). Foreign nationals, however, receive only a $60,000 exemption on their US-situated assets.
A German national who owns a $500,000 Florida property has $440,000 of US taxable estate exposure. At the top estate tax rate of 40%, that represents a potential tax liability of up to $176,000 — payable by the estate within nine months of death.
Tax Treaties
The United States has estate tax treaties with a limited number of countries that provide higher exemptions or other relief for their nationals. Germany, Austria, and Switzerland each have an estate tax treaty with the US that may provide partial relief — but the specifics depend on the treaty terms and individual circumstances. A qualified cross-border tax attorney should review your situation.
Structuring to Reduce Estate Tax Exposure
The most common strategy for foreign buyers is to hold Florida real estate through a properly structured entity rather than in personal name. Common approaches include:
- US LLC owned by a foreign corporation or holding company
- Foreign corporation owning the US LLC
- Irrevocable trust structures
- Life insurance wrappers
Each structure has different tax, liability, and operational implications. The right choice depends on your country of residence, intended use of the property, estate plan, and exit strategy. This is not a one-size-fits-all decision.
FIRPTA Interaction
Entity structuring also affects your FIRPTA obligations when you eventually sell. Some structures can simplify FIRPTA compliance; others can create additional complexity. It is important to consider both estate tax and FIRPTA implications together — ideally before purchase, not after.
Act Before You Buy
Estate tax structuring must be in place before the property is purchased and titled. Transferring an already-purchased property into an entity after the fact may trigger gift tax or other consequences. The time to plan is before you close — not after.
How We Help
Sea to Sky Realty coordinates with qualified US and international tax attorneys to ensure our foreign buyer clients address estate tax exposure before closing. We do not provide tax or legal advice directly, but we ensure you have the right professionals in place. Contact us at info@bradentonbroker.com to discuss your situation.
Buying as a Foreign National?
Estate tax planning should happen before you close — not after. We connect you with the right professionals from day one.