It generally is understood that those who are domiciled within the United States or those who are citizens of the United States are subject to U.S. Estate taxes. What is less clear to the layman is what it means to be domiciled within the U.S.
The general definition found in the Treasury Regulations of domicile is a place where a person resides without a present intention of moving therefrom. The question of where a person resides and whether a person has any intention of moving from there is a fact-intensive inquiry that looks at factors like length of time spent in the U.S. and other locations, type of homes owned and where, location of close family and friends, Visa status, location of business interests and so on.
Having established that the domicile of the person is outside the United States, the next inquiry is into which assets fall under the U.S. Estate Tax. The answer depends on whether the person resides in a country that has an estate tax treaty with the United States.
The general rule is that real and tangible personal property located in the United States, along with shares in U.S. companies, U.S. mutual funds and brokerage accounts are subject to the estate tax in the United States.
If the decedent was a domiciliary of a treaty country, the treaty will oftentimes redefine what is taxable. One example is the U.S. – Germany Estate Tax Treaty which provides for examples that corporate stock, bonds, brokerage accounts and most tangible property are not taxable within the United States.
It is important to note that Treaty Benefits are not automatic and must be affirmatively claimed by filing an Estate Tax Return with the appropriate treaty based disclosures.
Disclaimer: This Article is intended for general information purposes only and does not constitute legal advice.