If you are a foreign national with assets in the United States, or a family member trying to settle an estate that crosses borders, understanding U.S. estate tax for foreign nationals is one of the most important and least straightforward parts of the planning process. Whether a tax treaty exists between the U.S. and your home country determines how much of your estate is protected, how much may be taxed, and what your heirs will actually receive.
This blog is for foreign nationals living in or connected to New York who want to understand how U.S. estate tax treaties work, which countries are covered, what happens when no treaty exists, and why a plan that made sense several years ago may no longer be adequate today. The answers have real financial consequences for families, and several of them are not what most people expect.
Which Countries Have Estate Tax Treaties with the United States
Most people assume that if their home country has a tax treaty with the U.S., they are protected. That assumption is correct for income taxes, where the U.S. has treaties with over sixty countries. For estate taxes, the protection is significantly narrower.
As of 2026, the U.S. has estate tax treaties with only sixteen countries:
Australia, Austria, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, the Netherlands, Norway, South Africa, Sweden, Switzerland, and the United Kingdom.
That list leaves out a significant portion of the world, including many countries directly relevant to New York’s international community. Notable absences include Colombia, Mexico, Brazil, China, India, Israel, South Korea, the Philippines, the Dominican Republic, Nigeria, Poland, and Portugal.
For families from non-treaty countries, the standard U.S. estate tax rules for non-resident aliens (“NRAs”) apply in full, including the $60,000 exemption threshold and estate tax rates reaching up to 40% on U.S.-situated assets above that amount.
One absence on that list deserves particular attention: Spain. The U.S.-Spain estate tax treaty was terminated in 2021, and this is one of the most underreported developments in international estate planning. Prior to termination, Spanish nationals and residents with U.S. assets could claim treaty benefits that meaningfully reduced their U.S. estate tax exposure. That protection no longer exists. Families with Spanish connections who have not revisited their estate plans since 2021 may be operating under assumptions that are no longer accurate.
Caution. New York does not recognize international tax treaties. Even if a federal treaty protects you, you may still owe New York State estate tax if your New York-situated property exceeds the state’s specific exemption threshold.
How Treaties Actually Affect What Heirs Receive
For families from treaty countries, the benefits can be significant. The specific provisions vary by treaty, but most fall into a few categories worth understanding.
Expanded exemption amount: Many treaties allow the estate of a non-resident alien from a treaty country to claim a prorated share of the full U.S. estate tax exemption, rather than being limited to the standard $60,000 threshold. The proration is based on the ratio of U.S.-situated assets to the decedent’s worldwide estate.
For example, if a decedent from a treaty country had a worldwide estate of $5 million and $500,000 of that was in U.S. assets, the prorated exemption would be approximately 10% of the full U.S. exemption, or roughly $1.36 million in 2026. That would likely eliminate U.S. estate tax on those assets entirely. Without the treaty, the same estate would face a significant tax bill above the $60,000 threshold.
Marital deduction extension: Some treaties extend marital deduction benefits to surviving spouses who are citizens of the treaty country. The U.S.-Germany and U.S.-France treaties, for example, include provisions that can benefit surviving spouses in ways that domestic U.S. law alone does not provide. This can reduce or, in some cases, eliminate the need for a QDOT trust, which families dealing with estate planning as a non-citizen spouse would otherwise require.
Elimination of double taxation: Without a treaty, the same assets can be taxed by both the U.S. and the decedent’s home country. Treaties establish which country has primary taxing rights over specific asset types and provide foreign tax credits to prevent the same assets from being taxed twice. For families managing estates across multiple jurisdictions, this can make a substantial difference in what heirs ultimately receive after all taxes are settled.
One point that must be understood by our readers: treaty benefits are not automatic. They must be claimed. If a Form 706-NA is filed without invoking the applicable treaty provisions, the estate will be taxed under standard domestic rules as if no treaty existed at all. This is a 0meaningful and unfortunately common oversight when families attempt to work through the process without specialized legal guidance.
What Families from Non-Treaty Countries Need to Know
For families from the many countries not on the treaty list, the standard rules apply with no international treaty relief and requires advance planning was done through other structures.
The options for reducing your exposure to harsh U.S. taxation requires careful and proactive planning before a death occurs. Structures that can help include a QDOT trust for mixed-citizenship couples, foreign trusts, or holding U.S. assets through an LLC or other entity designed to reposition the asset for tax purposes. None of these are available after the fact. Once a death occurs and assets are frozen pending an IRS transfer certificate, the planning window has closed.
For families from Colombia, Mexico, India, China, or other non-treaty countries who own U.S. real estate, hold retirement accounts at U.S. institutions, or have significant U.S. investment portfolios, the exposure is real and planning should happen well before it becomes urgent.
Why Existing Plans May No Longer Be Adequate
The Spain treaty termination is the clearest recent example of why international estate planning cannot be written once and left alone. Families who had built their plans around Spanish treaty protections found themselves without those protections in 2021, with no transition period and no grandfather provision for existing arrangements.
New York adds another layer of complexity that federal treaties do not address. Several states impose their own separate estate taxes, and New York is one of them. New York’s estate tax has its own exemption threshold, approximately $7.35 million in 2026, and applies to New York-situated real property and tangible assets regardless of the decedent’s residency or citizenship. Federal estate tax treaties govern federal obligations only. They do not reduce or eliminate New York’s state estate tax.
For clients with Brooklyn, Queens, Long Island, or Manhattan real estate, that distinction is material. A family that has addressed federal exposure through treaty planning may still face a meaningful New York state tax bill if the state-level implications have not been specifically accounted for.
Periodic plan reviews matter for exactly these reasons. Treaties change. Exemption thresholds shift. State laws evolve. A plan that was thorough and accurate when it was drafted may have meaningful gaps today, and The Village Law Firm works with families to identify and address those gaps before they become costly.
If you are a foreign national with U.S. assets or a family managing an estate across borders, reach out to The Village Law Firm to schedule a consultation at book a call here.
FAQs
Do I need to do anything special to claim U.S. estate tax treaty benefits?
Yes. Treaty benefits are not a “default” setting; the IRS will not apply them for you. To receive these protections, the estate must proactively claim them on Form 706-NA (the U.S. Estate Tax Return for non-residents). This requires specific disclosures, often including Form 8833, to identify the treaty and the exact provisions being invoked.
If an estate is filed without these disclosures, the IRS will apply standard domestic rules. This means a non-resident could be taxed on everything above $60,000, even if a treaty would have legally sheltered millions of dollars in assets.
Does the U.S. still have an estate tax treaty with Spain?
No. This is a critical point that many families still overlook. The U.S.-Spain estate tax treaty was terminated in 2021. As of 2026, Spanish nationals and residents with U.S.-situated assets (like a Manhattan condo or U.S. brokerage accounts) are treated as “non-resident aliens” without treaty protection.
They are now subject to the standard $60,000 federal exemption, with tax rates jumping to 40% very quickly. If you have Spanish connections and haven’t updated your estate plan since 2021, your current plan is likely based on laws that no longer exist.
Does a federal estate tax treaty protect me from New York state estate tax?
No. This is one of the most common, and expensive, misconceptions in international planning. Federal treaties govern federal tax only. New York State does not recognize international tax treaties.
If you own real estate in Brooklyn, Manhattan, or the Hamptons, New York State will tax those assets if they exceed the state’s exemption (currently $7,350,000 for 2026). Furthermore, New York is famous for its “Tax Cliff.” If your New York assets exceed that exemption by even 5%, you lose the exemption entirely and are taxed on the very first dollar. For international clients, this means you may face a dual-taxation scenario: one at the federal level and another at the state level, regardless of what a treaty says.
