The 2025 Estate and Gift Tax Guide for Foreign Investors

Being a nonresident alien (NRA) of the United States has its perks.

First, if you’re not a fiscal resident, you aren’t subject to the U.S.’ onerous global tax obligations. Unlike U.S. citizens, who must pay taxes on income from anywhere in the world (“from whatever source derived); you as an NRA need only to pay U.S. taxes on income earned within the United States, and on assets that are sitused (basically, “located”) in the U.S.

If you don’t have U.S.-sourced income, you aren’t required to file a U.S. income tax return.

These and similar benefits are the reasons why many foreign nationals in the U.S. carefully avoid staying in the country for too long, and accidentally end up losing their NRA status by getting classified as a resident alien under the complicated substantial presence test.

But there are important disadvantages to NRA status, too—especially when it comes to estate, gift and transfer taxes.

Does Your Country Have a Tax Treaty With The U.S.?

Tax Treaties are beyond the scope of this article, but some countries have negotiated treaties with the United States that beat the U.S. Code. These treaties give citizens of those countries favorable tax treatment. For example, these treaties may allow you to use more of the U.S. exemption or avoid double taxation.

You can find details on your country’s tax treaty with the U.S. here.

The Nonresident Alien Estate Tax Trap

The first and possibly the biggest tax trap nonresidents need to be aware of is the lower estate tax exemption.

Normally, when someone who owns assets in the United States dies, the Internal Revenue Service imposes a steep estate tax of 40%, which must be paid within 9 months or you’ll incur penalties.

U.S. citizens and legal residents, however, get an exemption of $13.99 million, under current law. Married couples effectively get twice that. That means that the 40% estate tax only applies to amounts in excess of the exemption.

The OBBBA, a recently-passed sweeping tax and spending reform bill signed into law in July 2025, makes these high exemptions permanent. They’ll be adjusted each year for inflation. As a result, only a few wealthy families in the U.S. need to worry about estate taxes. But if you’re a nonresident alien, the estate tax exemption remains the same $60,000. That means your U.S. assets could be taxed at up to 40% if you do not plan accordingly. Unfortunately probate courts will not release your U.S. estate to your heirs until this tax is paid.

How To Lower Your Tax Bill as a Nonresident Alien

Here are several practical, actionable things you can do as a nonresident alien to lower your gift and estate tax exposure.

  • Avoid or Limit Ownership of U.S.-Sitused Assets

Foreign real estate, non-U.S. company shares, and offshore bank accounts aren’t subject to U.S. estate or gift tax. Investing in these asset classes can keep your estate outside the U.S. tax system.

  • Own U.S. Real Estate Within a Foreign Corporate Structure.

Individuals pass away. But corporations don’t.

You may use a foreign corporation in conjunction with a US domestic entity to own your US-sitused real estate and other property to it. The US tax code doesn’t consider your shares in a foreign corporation to be part of your taxable estate.

This tactic is not advised for resident aliens and US citizens, because U.S. residents and citizens must declare ownership of all assets anywhere in the world, which is different for non-residents.

  • You May Gift your Children an Advance On Your Will.

You can give up to $19,000 per person per year without triggering U.S. gift tax. So can your spouse, if you’re married. That’s true whether or not the recipient is in the U.S. gifts of more than the above amount are not offset by the “lifetime exemption” and are therefore subject to the U.S. gift tax.

If your spouse isn’t a U.S. citizen, you can gift him or her up to $185,000 in 2025. Gifts of more than this amount would be subject to U.S. gift tax, as non-resident aliens are not entitled to a “lifetime exemption.” But there’s no limit if your spouse is a U.S. citizen.

Gifts of non-U.S. situs property are not subject to U.S. gift tax at all.

  • Use a Foreign Non-Grantor Trust.

A foreign non-grantor trust is a legal structure established outside the United States that is treated as a separate tax entity—not “owned” by the person who created it (the grantor) for U.S. tax purposes.

If you’re a nonresident alien, you may be able to use a foreign non-grantor trust to hold your wealth—especially U.S.-situs assets—outside of your taxable U.S. estate. Therefore, U.S. estate tax would not be imposed on these assets. However, if the NRA has certain specified retained powers or interests in the foreign trust. U.S. situs assets would be included in the NRA’s gross estate for U.S. tax purposes.

As long as you’re still a nonresident alien, there’s generally no gift tax on transfers of foreign assets to a foreign non-grantor trusts. However, transfers of the U.S. situs real estate or tangible property are subject to U.S. gift tax. You will need to engage an attorney in the foreign jurisdiction to set up the trust.