US Expat Estate Planning 2026: Avoiding Double Estate Tax

If you're a US citizen living abroad with assets exceeding $2 million, you need estate planning for US expats- not someday, not eventually, but now. The reasons for this are several: your estate could face taxation by both the United States and your country of residence, potentially losing 50-60% of its value to combined estate and inheritance taxes. Your non-citizen spouse could face immediate taxation on inherited assets without proper trust planning. Your heirs might pay taxes twice on the same property because your executor doesn't understand estate tax treaties. Your family could spend years and tens of thousands in legal fees untangling an estate that crosses multiple jurisdictions.

The stakes increased in 2026. The One Big Beautiful Bill Act permanently raised the US estate tax exemption to $15 million, eliminating federal estate tax for most Americans. However, this change doesn't eliminate foreign estate taxes, state estate taxes, or the need for proper planning to avoid double estate taxation US expats face. In fact, the higher exemption creates new planning opportunities, but only if you act before it's too late. This guide explains how estate tax works for US expats and what triggers taxation, and estate tax exemption limits for US expats in 2026. 

How does estate tax work for US expats?

The United States imposes estate tax on the worldwide assets of US citizens and green card holders, regardless of where they live or where assets are located. If you're a US citizen living in France with property in Spain, investments in Singapore, and bank accounts in Switzerland, all these assets count toward your US taxable estate.

The estate tax applies to the fair market value of your entire estate at death. Your estate includes real property, financial accounts, business interests, life insurance death benefits if you own the policy, and personal property. The tax rate reaches 40% on amounts exceeding the exemption threshold.

Estate tax exemption limits for US expats 2026

The One Big Beautiful Bill Act signed on July 4, 2025, permanently increased the estate and gift tax exemption to $15 million per individual effective January 1, 2026. For married couples, the combined exemption reaches $30 million. This exemption is now permanent and will continue to adjust annually for inflation.

This represents a dramatic increase from the $13.99 million exemption in 2025 and eliminates the previous sunset provision that would have reduced the exemption to approximately $7 million in 2026.

Portability for married couples

The estate tax exemption is portable between spouses. If one spouse dies having used only $5 million of their $15 million exemption, the surviving spouse can use the remaining $10 million plus their own $15 million exemption, for a total of $25 million.

To claim portability, the executor must file Form 706 even if no estate tax is owed. This election must be made within nine months of death (or 15 months with an extension).

Foreign estate and inheritance taxes

Many countries impose estate taxes, inheritance taxes, or succession taxes on assets located within their borders or on their residents. France imposes inheritance tax up to 60%. The United Kingdom charges 40% on estates exceeding £325,000. Germany's inheritance tax reaches 50%. Spain charges inheritance tax exceeding 30% in some regions. Italy imposes succession tax up to 8%. Japan charges inheritance tax up to 55%. These foreign taxes often apply in addition to US estate tax, creating double estate taxation US expats must navigate.

What estate tax changes should expats expect in 2026?

Several significant changes to estate taxation take effect in 2026 that particularly benefit Americans living abroad.

Permanent $15 million exemption

The most significant change is the permanent increase to $15 million per individual ($30 million for married couples) beginning January 1, 2026. Unlike prior law, which included sunset provisions, this exemption is permanent and will adjust annually for inflation. For the first time in decades, families can proceed with long-term estate planning under a structure that is not scheduled to expire.

Generation-skipping transfer tax aligned

The generation-skipping transfer tax exemption aligns with the estate and gift tax exemption at $15 million per person, indexed for inflation. This allows grandparents to transfer significant wealth directly to grandchildren without triggering additional taxes.

Annual gift tax exclusion

The annual gift tax exclusion remains at $19,000 per recipient for 2026. The annual amount that may be gifted to a non-citizen spouse increases to $194,000 in 2026.

State estate taxes continue

Some US states impose their own estate or inheritance taxes with exemptions ranging from $1 million to $13 million. Even if you live abroad, state estate tax may apply if you haven't properly terminated state domicile. States with estate taxes include Connecticut, Hawaii, Illinois, Maine, Maryland, Massachusetts, Minnesota, New York, Oregon, Rhode Island, Vermont, and Washington.

How to avoid double estate taxes

Preventing double estate taxation US expats face requires understanding and utilizing several planning tools.

Estate tax treaties

Estate tax treaties provide the primary mechanism for avoiding double taxation when both the US and a foreign country impose estate or inheritance tax on the same assets. The United States maintains estate and gift tax treaties with 15 countries, including Australia, Austria, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Netherlands, South Africa, Switzerland, and the United Kingdom.

These treaties typically provide that the country where the deceased was domiciled can tax all property worldwide, while the other country can tax only specified property types located within its borders. The treaties include credit provisions to prevent double taxation.

Example: Margaret is a US citizen domiciled in the UK with worldwide assets of $8 million, including a London home worth $2 million. Under the US-UK estate tax treaty, the UK can tax the London home while the US taxes her worldwide estate. The treaty provides credits to eliminate double taxation on the same assets.

Foreign death tax credit

If no estate tax treaties exist with your country of residence or the treaty doesn't cover all assets, you can claim a foreign death tax credit on Form 706. The credit provides a dollar-for-dollar reduction of US estate tax for foreign estate, inheritance, or succession taxes paid.

The executor must file Form 706-CE (Certificate of Payment of Foreign Death Tax) for each country where foreign death taxes were paid. The form must include certification from the foreign taxing authority that taxes were actually paid, converted to US dollars.

The credit is limited to the lesser of the foreign death tax paid or the US estate tax attributable to the foreign-situs property. File Form 706-CE within four years after filing the estate return.

Qualified Domestic Trust for non-citizen spouses

If you're married to a non-US citizen spouse, special rules apply. The unlimited marital deduction that allows US citizen spouses to transfer unlimited assets to each other tax-free does not apply to non-citizen spouses. Transfers to non-citizen spouses are limited to $194,000 annually.

A Qualified Domestic Trust (QDOT) solves this problem. A QDOT allows you to transfer unlimited assets to your non-citizen spouse while deferring estate tax until distributions are made from the trust or the surviving spouse dies.

QDOT requirements include that at least one trustee must be a US citizen or domestic corporation, the trust instrument must require that no distribution of corpus can be made unless the US trustee has the right to withhold estate tax, and the executor must make an irrevocable election on Form 706.

Example: David is a US citizen married to Marie, a French citizen. His estate is worth $20 million. Without a QDOT, transfers to Marie exceeding his $15 million exemption would be subject to 40% estate tax. By establishing a QDOT, the entire $20 million can pass to Marie tax-deferred.

Strategic lifetime gifting

Reducing your estate size through strategic gifting during your lifetime eliminates assets from your taxable estate. You can gift up to $19,000 per recipient annually without using any lifetime exemption. You can gift up to $15 million during your lifetime without paying gift tax, though lifetime gifts reduce your estate tax exemption at death.

Gifts to non-citizen spouses are limited to $194,000 annually. Gifts to US citizen spouses are unlimited. Gifts made more than three years before death generally aren't included in your estate, except gifts of life insurance policies.

Life insurance planning

Life insurance death benefits are included in your taxable estate if you own the policy at death. Transferring policy ownership to an Irrevocable Life Insurance Trust (ILIT) removes the death benefit from your estate if the transfer occurs more than three years before death.

The ILIT can provide liquidity to pay estate taxes without forcing heirs to sell assets. For expats facing both US and foreign estate taxes, life insurance can provide funds to cover the combined tax burden. However, some foreign countries also tax life insurance death benefits, requiring careful structuring.

Trust planning

Various trust structures help minimize estate taxes. Credit shelter trusts maximize use of both spouses' exemptions. Qualified Personal Residence Trusts transfer home value at discounted values. Grantor Retained Annuity Trusts transfer appreciation tax-free.

Expats must consider how trusts are taxed in both the US and their country of residence. Some countries don't recognize trusts or tax them unfavorably. Consult with advisors familiar with both US and foreign trust taxation.

Common mistakes in expat estate planning

Understanding common mistakes helps you avoid them in your estate planning for US expats.

Mistake #1: Assuming high exemption eliminates planning needs

While the $15 million exemption eliminates federal estate tax for most Americans, you still need wills, powers of attorney, and healthcare directives. You may face state estate taxes with lower exemptions. Foreign countries may impose estate taxes regardless of US exemption levels.

Mistake #2: Ignoring foreign estate taxes

Many expats focus solely on US estate tax and ignore foreign death taxes that can exceed 50%. Research estate and inheritance tax rules in your country of residence. Determine whether estate tax treaties exist. Calculate potential combined tax burden from both countries.

Mistake #3: Not utilizing estate tax treaties

Expats living in treaty countries often don't utilize treaty provisions to prevent the double estate taxation US expats face. Review the specific treaty between the US and your country of residence. Understand which country has primary taxing rights for different asset types. Structure asset ownership to maximize treaty benefits.

Mistake #4: Failing to plan for non-citizen spouse

The unlimited marital deduction doesn't apply to non-citizen spouses. Without a QDOT, transfers exceeding the exemption amount are taxable immediately. Establish a QDOT before the estate tax return deadline. Consider whether the non-citizen spouse should naturalize as a US citizen.

Mistake #5: Not addressing state estate tax domicile

Expats often don't properly terminate state domicile, leaving their estate subject to state estate taxes with exemptions as low as $1 million. Obtain a foreign driver's license and surrender a US state license. Cancel voter registration. File part-year resident state tax return in your departure year.

How NSKT Global helps with estate planning for US expats

NSKT Global specializes in estate planning for US expats, helping Americans abroad navigate complex cross-border estate tax rules while minimizing tax burdens on their heirs.

Our services include estate tax analysis calculating potential US federal, state, and foreign estate taxes, treaty analysis evaluating estate tax treaties to prevent double estate taxation US expats face, QDOT planning for expats married to non-citizen spouses, foreign death tax credit planning and Form 706-CE preparation, gift planning strategies to reduce estate size, trust planning incorporating US and foreign tax considerations, and estate tax return preparation including Form 706.

Whether you're concerned about estate tax exemption limits for US expats in 2026, trying to understand what estate tax changes US expats should expect in 2026, or need comprehensive estate planning for US expats that prevents double taxation, NSKT Global provides the expertise to protect your wealth.