Inheritance Tax for Expats: A Framework for Cross-Border Estates

For internationally mobile individuals with assets and family members across several countries, these connecting factors can overlap. More than one jurisdiction may therefore claim taxing rights over the same estate or inheritance, creating potential double taxation and making coordinated planning important.

This article explains the principal factors that determine cross-border inheritance and estate tax exposure, including the UK’s residence-based inheritance tax rules introduced on 6 April 2025, and provides a framework for reviewing your position.

Factors That Determine Your Inheritance Tax Liability

While the criteria regarding inheritance and estate taxation differ from one jurisdiction to another, several principal factors are used internationally:

One or more of these factors may be used to assess an individual’s status and determine tax exposure. This explains why multiple jurisdictions can claim taxation rights over the same estate, resulting in double taxation. This makes it important to establish which jurisdictions may have taxing rights and whether treaties or domestic reliefs can reduce overlapping liabilities.

For US nationals in particular, estate tax residence should not be confused with income tax residence. For federal estate tax purposes, residence is determined by domicile. A non-US citizen who is not domiciled in the United States may still face US estate tax on certain US-situs assets.

Estate Tax vs Inheritance Tax: Who Is Taxed?

Where jurisdictions impose a specific estate or inheritance tax, two common structural approaches are estate-based taxation and beneficiary-based taxation:

1. Estate-based system (United Kingdom, United States, Denmark, South Africa)
2. Beneficiary-based systems (Luxembourg, Spain, Italy, Greece, Netherlands, Japan)

Countries that utilise estate-based taxation impose tax on the deceased’s estate before assets are distributed. The tax is calculated based on the taxable value of the estate and is typically paid out of the estate itself before beneficiaries receive their inheritance.

If an estate-based system is in place, beneficiaries’ status may still be relevant to particular exemptions or reliefs. For instance, in the UK, transfers between spouses and civil partners are generally exempt from IHT, but the exemption can be restricted where the transferor is a long-term UK resident and the recipient spouse or civil partner is not. In those circumstances, the exemption is generally limited to the nil-rate band applying at the date of transfer, subject to the detailed rules and any relevant election.

Beneficiary-based systems tax each beneficiary on the value of what they receive. Consequently, the tax liability and the applicable rate can vary, depending on:

• Relationship with the deceased
• Beneficiary’s residence
• Amount received

Spouses, civil partners and direct descendants may receive exemptions, allowances or preferential rates, while unrelated beneficiaries can face higher rates depending on the jurisdiction.

Does Moving to a Country With No Inheritance Tax Remove Your Exposure?

Many countries do not levy estate or IHT tax, including:

• Australia
• Canada
• Cyprus
• United Arab Emirates (UAE)
• Singapore
• Hong Kong
• Gibraltar
• Bahamas
• New Zealand
• Guernsey
• Cayman Islands
• Bermuda
• Monaco

However, the absence of an IHT does not mean that the transfer of wealth at death is free of tax or other costs. Depending on the jurisdiction, death or succession can trigger capital gains or deemed disposal rules, transfer duties, registration fees or other charges. Such liabilities may also depend on where particular assets are located.

While tax-free countries are often popular relocation destinations for high-net-worth individuals, assuming that moving to a tax-free jurisdiction will provide full protection from IHT is a common estate planning error.

UK Inheritance Tax for Expats: The Residence Rules From 6 April 2025

The UK’s inheritance tax system historically relied heavily on domicile to determine whether overseas assets fell within the scope of IHT. For internationally mobile individuals, establishing a non-UK domicile could therefore have a significant effect on the treatment of non-UK assets, subject to the former deemed-domicile rules.

As of 6 April 2025, the domicile-based framework for determining the IHT treatment of overseas assets has been replaced by a long-term UK residence regime. To assess your assets’ exposure, it is essential to consider the requirements introduced under the new rules:

1. Long-term residence (LTR) test
2. Tail period
3. Treatment of trusts
4. Transitional rules

Long-Term Residence (LTR) Test

The new system utilises the Long-Term Residence (LTR) test to determine whether overseas assets can fall within the scope of UK IHT. Broadly, you are considered a long-term UK resident if you have been UK tax resident for the previous 10 consecutive tax years or for at least 10 out of the previous 20 tax years before the tax year in which the chargeable event, including death, occurs. Residency in each of those years is determined using the Statutory Residence Test (SRT).

If you meet the LTR criteria, your non-UK assets can generally fall within the scope of UK IHT alongside your UK assets. On death, IHT is generally charged at 40% on the taxable estate after applicable exemptions, reliefs and nil-rate bands.

The 10-out-of-20 residence test should be distinguished from the former deemed-domicile regime. Before 6 April 2025, an individual could generally become deemed UK domiciled for IHT purposes after being UK resident for at least 15 of the previous 20 tax years. Common-law domicile operated separately from that test.

Tail Period

The exposure to UK IHT on overseas assets may continue after you leave the UK. A sliding tail period can continue to bring a departing long-term UK resident within the regime after they leave the UK.

The length of the tail period is determined based on the number of years you were classified as a UK resident in the previous 20 years:

Ten consecutive tax years of non-residence generally reset the long-term residence test. However, this does not necessarily remove UK IHT exposure on UK-situs assets. If you become a UK tax resident again before the relevant period expires, your position should be reassessed using your residence history at the time of the chargeable event.

Treatment of Trusts

The previous system generally looked to the settlor’s domicile when determining whether foreign settled property could qualify as excluded property. From 6 April 2025, the treatment of non-UK assets held within a trust can instead depend on the settlor’s LTR status at the relevant time.

Where the settlor is alive, foreign settled property will generally be excluded property when the settlor is not a long-term UK resident at the relevant chargeable event. Where the settlor dies on or after 6 April 2025, their LTR status immediately before death can determine the subsequent treatment of foreign settled property.

Assessing whether your trusts are within the scope is not straightforward, with the treatment potentially depending on:

• The date of establishing the trust
• Your LTR status at the relevant IHT event
• Whether the settlor is alive at the time of the charge
• The timing of the IHT charge
• The type of trust and interests held by beneficiaries
• Any transitional protections applicable to your circumstances

Given the number of interacting variables, existing trust structures should be reviewed, preferably with a cross-border adviser. Financial specialists at Titan Wealth International can review your investment portfolio and work alongside your tax and legal advisers to assess how existing structures fit within your wider cross-border planning.

Transitional Rules

The new IHT rules generally apply to relevant chargeable events on or after 6 April 2025. Events before that date remain subject to the rules that applied at the time.

Separate transitional provisions can apply to certain individuals who were non-UK resident in the 2025/26 tax year. Their position can depend on their domicile or deemed-domicile status before the reform and their previous UK residence history.

In particular, special rules apply to some individuals who were non-domiciled or deemed domiciled under the previous regime and remained non-UK resident in 2025/26. Individuals who subsequently return to UK residence may instead become subject to the new LTR rules.

These transitional provisions can materially change the length of time for which overseas assets remain within UK IHT scope. If they may apply to your situation, seek estate planning advice before assuming either the old domicile rules or the new LTR rules produce a particular result.

How To Review Your Global Inheritance Tax Exposure

For an initial assessment, map the connections that could bring each jurisdiction into the inheritance or estate tax analysis:

• Your current residence and residence history
• Your citizenship and domicile or equivalent legal status
• The situs and legal ownership of each significant asset
• The residence of your beneficiaries and their relationship to you
• Any trusts, companies, foundations or other entities through which wealth is held

For example, a British national who has spent several years in the UK and the US, now lives elsewhere, owns property in two countries and has beneficiaries resident in a third may need to consider several different connecting factors at the same time. Residence history, citizenship or domicile, asset situs and beneficiary circumstances can each bring a different jurisdiction into the analysis.

Once these connections have been identified, the relevant tax rules, treaties and domestic reliefs can be reviewed to determine where overlapping claims may arise.

Current and Historic Residence, Citizenship or Domicile

Primarily, you should identify which connecting factors are used by each relevant jurisdiction. These may include your current and historic residence, citizenship, domicile where relevant, and the location of your assets. Unlike citizenship or domicile of origin, which is typically acquired at birth, domicile can change.

Where a jurisdiction uses domicile as a connecting factor, the applicable domicile rules must be considered. Under common-law concepts of domicile, a domicile of choice generally depends on residence together with an intention to make a country your permanent or indefinite home.

In addition to domicile, review your residence history. Several countries assess inheritance tax liability with reference to residence or other connections over a specified retrospective period, including the UK and Germany. Confirm whether your relevant countries apply such a rule, and if they do, document:

• Current tax residence and the number of days you spend there annually
• Prior residence in relevant countries
• Any additional citizenship you have
• Your domicile or equivalent legal status in another country, where relevant, and whether that status has concluded

Your residence history should be established from relevant tax filings, immigration records and other documentation, particularly where your status has changed across several jurisdictions.

For US citizens and internationally mobile families with US connections, this exercise should also distinguish between citizenship, income tax residence and domicile for federal estate and gift tax purposes. These concepts can produce different results.

Situs and Legal Ownership of Each Asset

Situs can create tax exposure independently of residence, so even if you are a resident of one country, another country where you hold assets might have taxing rights over them. For that reason, significant assets should be mapped according to their situs and ownership under the rules of each relevant jurisdiction.

In addition to location, identify whether the asset is held:

• Personally
• Jointly
• Through a company
• Inside a trust

How the asset is held can affect its exposure. Holding property through a company, for example, can mean that the individual legally owns shares rather than the underlying property. However, this does not necessarily remove tax exposure in the country where the underlying asset is located, as local look-through, indirect ownership or anti-avoidance rules may apply.

If two countries have taxing rights over the same asset, first check whether there is a double taxation agreement between the two. If there is, the tax treaty may allocate taxing rights, provide credits or specify how particular assets are treated for treaty purposes.

Residence and Relationship With the Beneficiary

If you have relevant connections to countries with beneficiary-based systems, your heirs’ residence and relationship to you should be considered in estate planning.

For instance, a beneficiary who is resident in Germany for German inheritance tax purposes may be liable for German inheritance tax, even if the deceased never lived there.

By understanding how residence and relationships affect exposure, you can consider how different planning options would be treated. If an unrelated beneficiary would face a high inheritance tax rate in a specific jurisdiction, lifetime gifting may be one option to assess, but any gift should first be reviewed under the tax rules applying to both the donor and beneficiary.

Trusts or Entities Through Which Wealth Is Held

Trusts, foundations and holding entities can change how assets are legally owned and how they are treated for estate or inheritance tax, but their tax treatment differs significantly among jurisdictions, for example:

• UK: Since April 2025, the IHT treatment of non-UK assets in a trust can depend on the settlor’s long-term UK residence status. Where the settlor is alive, their status at the relevant chargeable event is generally important. Where a settlor dies on or after 6 April 2025, their LTR status immediately before death can affect the subsequent treatment of foreign settled property. Additional rules apply to certain trusts and transitional cases.
• France: France has specific tax and reporting rules for trusts. Depending on the circumstances, trust assets can be subject to ordinary succession treatment or specific trust taxation.

A structure favoured in one jurisdiction can be treated very differently in another, so every trust or holding entity should be reviewed against the rules of the relevant jurisdictions.

Double Taxation Agreements and Unilateral Reliefs

Once you determine which countries could assert taxing rights, check whether any have a reciprocal treaty or unilateral relief mechanisms. If they have an estate tax treaty in place, relief may include:

• Tax credit relief
• Treaty situs rules
• Domicile or residence tie-breaker provisions
• Specific treatment of transfers between spouses

The exact relief depends on the treaty concerned.

If no tax treaty exists, check whether unilateral relief is available in the relevant taxing jurisdiction. In some cases, tax paid to one country can be credited against liability in another. Such relief can reduce double taxation, but it does not guarantee that all duplication will be eliminated.

Carefully evaluating available reliefs, both through tax treaties and under domestic law, is important when assessing potential double taxation. To ensure that relevant relief is not overlooked, consult cross-border financial and tax specialists.

US Estate Tax Considerations for Internationally Mobile Families

US nationals need to consider a different set of connecting factors alongside the rules of their country of residence.

US citizens are generally within the scope of US federal estate tax on their worldwide estate, even when living abroad. For non-US citizens, domicile is important: an individual domiciled in the United States can be within the federal estate tax regime on worldwide assets, while a non-resident who is not a US citizen may still face US estate tax on certain US-situs property.

This distinction matters for expats because US income tax residence and estate tax domicile are not the same test. A residence analysis undertaken for income tax purposes should not simply be carried across to estate planning.

The status of a surviving spouse can also affect the outcome. In particular, the US federal estate tax marital deduction is generally restricted where the surviving spouse is not a US citizen unless the relevant requirements are met, which can include the use of a Qualified Domestic Trust (QDOT). Estate tax treaties can also modify the domestic result.

For individuals with both UK and US connections, the estate therefore needs to be tested under both systems, including the applicable treaty position, rather than assuming that residence in one country removes exposure in the other.

Cross-Border Inheritance Tax Planning Options

After determining your asset exposure, you can consider a range of inheritance tax planning options, including:

1. Lifetime gifts
2. Trusts
3. Spouse and charitable exemptions
4. Life insurance
5. Ownership restructuring
6. Coordinated wills

Lifetime Gifts

Transferring assets before death can reduce the value ultimately exposed to estate or inheritance tax, but the result depends on the rules of each relevant jurisdiction. Survival periods, retained-benefit rules, gift taxes, capital gains taxes and reporting requirements can all affect the outcome, so the gifting rules in your jurisdiction must be reviewed.

For instance, in the UK, many outright gifts to individuals are potentially exempt transfers and generally fall outside IHT if the donor survives for seven years after making the gift. Different rules apply to some transfers into trusts, and assets may remain within the donor’s estate where they continue to benefit from property they have given away.

Trusts

Trusts allow you to separate legal ownership of assets from personal ownership, but placing an asset in trust does not automatically remove it from your taxable estate.

The result depends on the type of trust, the jurisdiction concerned, the settlor’s circumstances and whether the settlor retains a benefit. In the UK, for example, retained-benefit rules can cause settled property to remain relevant to the settlor’s estate, while separate entry, periodic and exit charges can also apply to certain trusts.

With the help of cross-border tax and legal advisers, identify whether a trust is suitable for your circumstances and how it will be treated in each country with a relevant taxing connection.

Spouse and Charitable Exemptions

Transfers to a spouse, civil partner or registered charity may qualify for significant exemptions or reliefs, although the conditions differ between jurisdictions.

In the UK, transfers between spouses and civil partners are generally exempt. However, where the transferor is a long-term UK resident and the recipient spouse or civil partner is not, the exemption can be restricted to the nil-rate band applying at the date of transfer, subject to the detailed rules and any available election.

US rules require separate consideration. In particular, the unlimited federal estate tax marital deduction is generally not available where the surviving spouse is not a US citizen unless the statutory requirements are satisfied, potentially through a QDOT.

Life Insurance

Life insurance can form part of an inheritance tax planning strategy. In some jurisdictions, including the UK in appropriate circumstances, it can be structured through a suitable trust so that the proceeds do not form part of the policyholder’s estate for IHT purposes. Life insurance can also provide beneficiaries with liquidity to meet a tax charge without having to sell a property or other illiquid assets.

However, the policy may form part of a taxable estate depending on who owns it, how it is structured and the jurisdictions involved. Policies purchased in one country may also have tax or reporting consequences in a country where the policyholder or beneficiary later becomes resident.

Ownership Restructuring

Restructuring your assets can change the tax analysis, particularly where an individual moves from owning an underlying asset directly to owning an interest in a company or another entity.

Before restructuring, check how the situs and ownership of that asset are determined in every relevant jurisdiction. Real estate is typically closely connected to its physical location, and using a company does not necessarily remove local inheritance or estate tax exposure. Intangible assets, such as shares, can be subject to different situs rules.

Any restructuring should also be reviewed for immediate tax consequences rather than looking only at the position on death.

Coordinated Wills

To ensure that one country’s succession law, such as a forced-heirship regime, does not conflict with your stated wishes, coordinate your will with the laws of each relevant jurisdiction. In some jurisdictions, individuals can elect the law of their nationality to govern aspects of their succession.

Depending on the countries and assets involved, an estate plan may use one coordinated international will or separate jurisdiction-specific wills. Drafting a separate will for particular jurisdictions can sometimes simplify local administration, with each document covering only specified assets.

Where multiple wills are used, each will should state which assets it covers to avoid the same asset being addressed across several documents. It is also critical to ensure that one will does not contain a revocation clause that unintentionally cancels another.

Each planning tool operates differently across jurisdictions and may trigger distinct tax or reporting obligations in multiple countries. Every technique should therefore be assessed against the rules of each relevant jurisdiction.