A deceased nonresident individual that is not a United States citizen is only subject to U.S. estate taxation with respect to his or her U.S. situated assets. These U.S. situated assets, commonly known as the U.S. gross estate includes real, tangible, and intangible property. Assets that are exempt from U.S. estate tax include securities that generate portfolio interest, bank accounts not used in connection with a trade or business in the U.S., and insurance proceeds. Estate tax treaties between the U.S. and other countries often provide more favorable tax treatment to nonresidents by limiting the type of asset considered situated in the U.S. and subject to U.S. estate taxation.
In the event the decedent possesses such U.S. holdings, the estate must file a Form 706NA if the fair market value at death of the decedent’s U.S. situated assets exceeds $60,000. If the decedent made substantial lifetime gifts of U.S. property, and used the applicable $13,000 “unified credit exemption” amount to eliminate or reduce any gift tax on the lifetime gifts, a U.S. estate tax return may still be required if the value of the decedent’s U.S. situated assets is less than $60,000 at the date of death (due to the decrease in the “unified credit exemption” for the lifetime gifts).