U.S. citizens are subject to federal gift and estate taxes on transfers of their assets during life (via gift tax) or at death (via estate tax). However, they enjoy certain exemptions, such as exclusions and deductions. Married couples can take advantage of the unlimited marital deduction. Under this deduction, asset transfers to a spouse are generally exempt from gift and estate taxes if the spouse is a U.S. citizen.

If you or your spouse isn’t a U.S. citizen, traditional estate planning tools may not adequately minimize your gift and estate tax exposure. To avoid costly tax traps, it’s important to understand how the U.S. gift and estate tax laws apply to noncitizens.

What does “domicile” mean?

Noncitizens can become subject to U.S. gift and estate taxes if they’re domiciled in the United States. Under IRS guidelines, an individual becomes domiciled in a country “by living there, for even a brief period of time, with no definite present intention of later removing therefrom.”

Obvious factors the IRS considers in determining a person’s “present intention” are the amount of time the individual spends in the United States and his or her green card or visa status. Other factors that may come into play include the locations of the individual’s:

• Business interests and residences,
• Health care providers, jobs, places of worship and community ties,
• Vehicle registrations and driver’s licenses,
• Voter registrations,
• Friends and family members.

Noncitizens who are deemed to be domiciled in the United States are subject to U.S. gift and estate taxes on transfers of their worldwide assets, much like U.S. citizens. And, like U.S. citizens, they’re eligible for the federal gift and estate tax exemption ($13.99 million for 2025, up from $13.61 million for 2024) and the annual gift tax exclusion ($19,000 per recipient for 2025, up from $18,000 per recipient for 2024).

Is the marital deduction an option?

A significant difference between U.S. citizens and noncitizens, and a potential tax trap for the unwary, is that the marital deduction isn’t available for transfers to noncitizens. There are other options, however.

For example, a spouse can make tax-free transfers to his or her noncitizen spouse up to the transferor’s unused gift and estate tax exemption. Or, he or she can make annual exclusion gifts. The annual exclusion for gifts to a noncitizen spouse is $190,000 for 2025 (up from $185,000 for 2024).

Potential tax traps for nonresident aliens?

A person who’s neither a U.S. citizen nor a U.S. domiciliary — that is, a “nonresident alien” — is subject to U.S. gift and estate taxes only on transferred assets that are “situated” in the United States. Examples include U.S. real estate and personal property located in the United States (with certain exceptions).

Intangible property — such as corporate stock, bonds or promissory notes — is deemed to be situated in the United States for estate tax purposes (but typically not for gift tax purposes) if it’s issued by a domestic corporation or by a U.S. citizen or the U.S. government.

Here’s where the potential tax trap comes into play: The exemption amount for U.S.-situated assets owned by nonresident aliens is only $60,000, compared with $13.99 million for U.S. citizens or domiciliaries in 2025.

What are the right strategies for you?

If your family’s makeup includes a noncitizen spouse, traditional estate planning strategies may not be applicable. Your estate planning advisor can help you understand your options and identify strategies for minimizing your tax liability.

*Special estate planning is necessary if you’re a non-U.S. citizen