If you own assets in the United States and you are not a U.S. citizen or permanent resident, one concept shapes nearly every decision in your estate plan: situs. In international estate planning, situs determines the legal location of an asset, which in turn determines whether the U.S. can tax it, which country’s succession laws apply to it, and what your heirs will need to do to access it after you are gone.
This blog is for foreign nationals, non-resident aliens (NRAs), expats, and cross-border families who hold assets in the U.S. or across multiple countries. By the time you finish reading, you will understand what situs means in plain terms, how it applies to different types of assets, and why the composition of your portfolio matters just as much as its total value when it comes to U.S. estate tax exposure.
The rules here are technical, but the stakes are personal. Getting situs wrong can mean unexpected tax bills, frozen accounts, and years of legal complications for the people you are trying to protect.
What Is Situs and How Is It Determined?
Situs comes from the Latin word for “place.” In estate and tax law, it refers to the legal location of an asset for purposes of determining which country’s laws govern it, whether it can be taxed by a particular jurisdiction, and which succession rules apply when the owner dies.
Here is the part that trips people up: situs is not always the same as the physical location of an asset. Different asset types follow different rules, and those rules are set by each country’s domestic law. That means two countries can reach conflicting conclusions about where the same asset is legally situated.
Under U.S. law, the situs rules for the most common asset types break down like this:
- Real property is situated where it is physically located. A Brooklyn brownstone has U.S. situs. An apartment in Milan has Italian situs.
- Tangible personal property, including jewelry, artwork, and vehicles, is situated wherever it is physically present at the time of death.
- Bank accounts are generally situated at the branch where the account is maintained. A deposit at a U.S. branch of a foreign bank has U.S. situs. A deposit at a foreign branch of a U.S. bank generally does not, which creates a meaningful planning distinction for non-resident aliens.
- Stock in a U.S. corporation has U.S. situs regardless of where the shareholder lives or where the certificates are held. Stock in a foreign corporation generally does not.
- Retirement accounts like IRAs and 401(k)s are treated as U.S.-situated assets because they are held at U.S. financial institutions under U.S. regulatory frameworks.
- Debt obligations are situated where the borrower is located. A bond issued by a U.S. company or the U.S. government has U.S. situs.
Understanding where each asset sits legally is the starting point for any cross-border estate plan.
How Does Situs Affect Estate Taxes for Non-Resident Aliens?
For non-resident aliens, situs is the foundational concept that determines the entire scope of U.S. estate tax exposure. The U.S. only taxes NRAs on U.S.-situated assets. Every analysis of whether a particular asset falls inside or outside the taxable estate begins with a situs determination.
The practical implications are significant. Assets with U.S. situs are subject to federal estate tax above the $60,000 exemption threshold, at rates up to 40%. Assets without U.S. situs fall completely outside the U.S. estate tax system, regardless of their value.
This means two non-resident aliens with identical net worths can face dramatically different U.S. estate tax bills depending entirely on how their assets are structured and where they are legally situated.
One of the most significant and least understood situs rules involves U.S. corporate stock. A non-resident alien who holds shares in any U.S. publicly traded company has U.S.-situated assets subject to U.S. estate tax. The brokerage account may be held at a foreign institution in a foreign country, but the underlying stock has U.S. situs regardless. Many international investors accumulate substantial U.S. equity portfolios without any awareness that those holdings create estate tax exposure for their heirs.
There is also an important exception worth knowing. Most U.S. bank deposits held by non-resident aliens are exempt from U.S. estate tax under Internal Revenue Code Section 2105(b), even though they technically have U.S. situs. This exemption applies to deposits at U.S. banks and U.S. branches of foreign banks, but not to deposits held at foreign branches of U.S. banks. This distinction allows non-resident alien clients to hold cash at U.S. institutions without triggering estate tax exposure, even while U.S. corporate stock held at the same institution would be fully taxable.
New York imposes its own estate tax on real and tangible property located within the state, impacting both residents and non-residents. For 2026, the New York exemption is $7.35 million.
Contrary to common belief, non-residents are entitled to this exemption; however, the tax rate is determined by the value of their entire global estate. Most importantly, New York features a “tax cliff”: if the total estate exceeds the exemption by just 5%, the exemption vanishes entirely, and the state taxes the property from the very first dollar. For a non-resident alien owning a high-value Manhattan apartment, this “cliff” often eliminates the state-level protection, resulting in a significant and often unexpected tax liability. This is one of the most important and least discussed points for families navigating cross-border estate decisions in New York.
Can Situs Be Changed Through Planning?
In many cases, yes. For NRA clients with significant U.S. asset exposure, restructuring the situs of certain assets is often one of the most valuable things an international estate planning attorney can help accomplish. That said, situs planning must be approached carefully and implemented as part of a long-term strategy rather than a last-minute maneuver.
The most well-established technique involves holding U.S. corporate stock through a foreign corporation rather than directly. Because the situs of stock follows the country of incorporation of the issuing company, shares in a foreign corporation have foreign situs even if all of that company’s underlying assets are U.S. stocks. A non-resident alien who holds U.S. equities through a properly structured foreign holding company no longer holds U.S.-situated assets directly.
This structure is legitimate and widely used, but it comes with conditions:
- The foreign corporation must have genuine substance and not be a shell created solely for tax avoidance.
- Transferring U.S. assets into a foreign corporation may trigger gift tax if those assets have U.S. situs at the time of transfer, so careful sequencing is required.
- Income generated by U.S. assets held inside the foreign corporation may be subject to U.S. withholding tax, which creates an ongoing cost to weigh against the estate tax savings.
Real property situs generally cannot be changed because it follows the physical location of the land. A non-resident alien who owns a Manhattan apartment cannot change the situs of that property through any planning structure. What can be changed is the form of ownership. Holding real estate through a foreign corporation or a properly structured LLC may reduce direct U.S. estate tax exposure, though these arrangements require careful drafting and have faced increased IRS scrutiny in recent years.
Lifetime gifting is another avenue. Because the U.S. gift tax for non-resident aliens applies only to transfers of U.S.-situated tangible property, a non-resident alien can transfer U.S. corporate stock as a lifetime gift without triggering U.S. gift tax, even though that same stock would be subject to estate tax if held at death. This planning window does not exist for U.S. citizens and is one reason why reviewing your estate plan well before a major life transition is so important for international clients.
Situs planning is most effective when it is built into a comprehensive estate plan from the start. Changes made too close to death, without proper documentation, or without genuine economic substance risk being challenged and unwound by the IRS.
Frequently Asked Questions
What does situs mean in estate planning?
Situs refers to the legal location of an asset for tax and succession purposes. It determines whether the U.S. can tax an asset, which country’s laws govern it, and what your heirs must do to access it. Situs is not always the same as the physical location of an asset, and the rules vary by asset type.
Does the U.S. tax non-resident aliens on all of their assets?
No. The U.S. only taxes non-resident aliens on U.S.-situated assets. Assets without U.S. situs fall completely outside the U.S. estate tax system regardless of their value. The composition of a non-resident alien’s portfolio, not just its total value, determines their U.S. estate tax exposure.
Can a non-resident alien reduce U.S. estate tax by restructuring how they hold assets?
In many cases, yes. Holding U.S. corporate stock through a properly structured foreign corporation is a well-established technique for removing those assets from the U.S. estate tax base. Lifetime gifting of certain assets is another option. These strategies require careful planning and should be implemented well in advance as part of a comprehensive estate plan.
