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The US tax code treats a married couple as a single economic unit, unless one spouse is not a US person. At that point, almost every estate and gift rule works differently. The difference is not at the margin. It shapes what can pass between spouses, what can be gifted, what is exposed to US tax on death, and what has to be reported along the way.
This article walks through how the US estate and gift tax rules apply when one spouse is a US person and the other is not. It covers the marital deduction and the Qualified Domestic Trust (QDOT),the annual gift exclusion between spouses, what OBBBA changed (and did not),the US-situs analysis for a non-resident alien (NRA) spouse’s balance sheet, how the estate-tax treaty network modifies the default result, and the reporting overlay. It’s a walk-through of mechanics, not a set of recommendations.
Under IRC §2056, a transfer from one spouse to the other at death qualifies for the unlimited marital deduction, no federal estate tax on the value that passes to the surviving spouse, regardless of amount. Its availability turns on the recipient spouse being a US citizen at the time the return is filed.
Where the surviving spouse is not a US citizen, the deduction is not available directly. Congress’s concern was that anon-citizen survivor might leave the US with assets that would otherwise have been taxed in a second estate. The response was the Qualified Domestic Trust, or QDOT, under IRC §2056A: a trust with a US trustee that holds the assets passing to the surviving non-citizen spouse. Income distributions are permitted; principal distributions are generally subject to the estate tax that would have applied at the first death, with limited hardship exceptions. The QDOT defers, not eliminates, the estate tax.
The alternative route is for then on-citizen spouse to become a US citizen before the estate tax return is filed(generally within nine months of the first death, with possible extensions) and to have been a US resident at all times after the decedent’s death. Both routes, QDOT and citizenship election, carry their own tradeoffs, from trust administration cost on one side to the personal and tax consequences of acquiring US citizenship on the other.
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During life, the gift tax rules also differ by the recipient spouse’s citizenship. Where the recipient is a US citizen, gifts between spouses are unlimited and do not consume lifetime exemption. Where the recipient is not a US citizen, gifts are capped at an annual exclusion amount indexed for inflation, US$194,000 per donor, per year for 2026(IRC §2523(i)(2); verify against the current IRS inflation-adjustment Revenue Procedure at filing time). Gifts above the annual exclusion consume lifetime exemption in the usual way and are reported on Form 709.
The practical consequence is that couples with meaningful spousal gifting patterns, transferring assets between accounts, equalizing holdings, or annual-exclusion gifting as part of a broader plan, will hit the cap each year if the recipient spouse is not a US citizen. Planning in mixed-nationality households typically centres on using that window efficiently rather than assuming the unlimited rule applies.
The One Big Beautiful Bill Act took effect on January 1, 2026. It set the federal estate, gift, and generation-skipping transfer tax exemption at US$15 million per individual, indexed for inflation, and made the figure permanent, removing the 2017 TCJA sunset. The top federal estate tax rate remains 40% on the portion above the exemption.
What OBBBA did not touch is as important. The US$60,000 estate-tax exemption for non-resident aliens on US-situs assets is unchanged. An NRA spouse holding US-situs property directly still faces a US estate-tax exposure measured against US$60,000, not the US$15 million figure that applies to a US citizen or US-domiciled person. The indexed annual gift exclusion framework is also unchanged. State-level estate taxes are outside OBBBA and continue to apply in states that levy them.
For a non-resident alien spouse, the core US estate tax question is which of their assets are US-situs. The analysis shifts by asset class, and it is often clearest to read the NRA spouse’s balance sheet one line at a time.
US real estate held directly by an NRA is US-situs. Fair market value at date of death is included in the NRA’s US estate, against the US$60,000 exemption and (for many treaty countries)whatever relief the treaty provides. Real estate held through an ownership structure, a US LLC, a foreign corporation, a trust, can change the analysis materially, subject to substance-over-form and step-transaction principles.
The analysis depends on what is held. US corporate stock held by an NRA is US-situs. US government and corporate bonds are generally treated favourably, with many qualifying for the portfolio interest exemption. Cash in a US bank account held by an NRA is generally not US-situs for estate tax. Brokerage accounts mixing these categories need to be looked at line by line.
An IRA or 401(k) held in an NRA spouse’s name is more nuanced than it first appears. The account itself is US-situs by virtue of the US custodian. A beneficiary designation in favour of an NRA surviving spouse does not access the unlimited marital deduction unless the non-citizen-spouse rules (QDOT or pre-filing citizenship) are met. Income tax treatment on later distribution is a separate question layered on top.
Proceeds of a policy on the life of an NRA are generally not US-situs. Proceeds of a policy on the life of a US citizen or US-domiciled person passing to a non-citizen spouse follow the marital deduction analysis rather than the US-situs analysis. Policy ownership, who owns the policy, who pays the premiums, affects which side of the line the proceeds fall on.
Direct shares in a US corporation are US-situs; shares in a foreign corporation generally are not, even if the foreign corporation’s underlying assets include US-situs property. US LLC and partnership interests are analysed under their own rules, and the result can depend on whether the entity is engaged in a US trade or business. This is the balance-sheet line where specialist advice adds the most, because the structure usually pre-dates the cross-border planning question.
The US estate tax treaties that matter most in cross-border practice are with the United Kingdom, Ireland, Switzerland, Germany, the Netherlands, and France. Each modifies the default analysis in its own way, but two themes recur. First, the treaties often extend to an NRA spouse domiciled in the treaty country a prorated share of the US unified credit, the relevant exemption is measured against the worldwide estate(subject to the US$15 million per-person figure for 2026, indexed) rather than the default US$60,000 US-situs exemption. Second, the treaties contain their own situs rules for specific asset classes, which in some cases differ from domestic-law rules. The UK treaty, for example, has a marital-transfer provision that can allow a broader marital deduction than the default. The German treaty has specific pension provisions. The Swiss treaty is older and narrower in scope.
Whether a household benefits from a treaty position depends on the NRA spouse’s domicile under the treaty, not residence alone. Domicile is a different concept in each treaty country’s law and in US law, and the coordination is where the technical work happens.
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Mixed-nationality households typically pickup foreign-account information reporting obligations a US-only household would not face. FBAR (FinCEN 114) applies to the US-person spouse where the aggregate value of foreign financial accounts they have a financial interest in or signature authority over exceeds US$10,000 at any point in the year. Form 8938applies to the US-person spouse at different thresholds depending on joint/separate filing and US/foreign residence. Form 3520 reports gifts and bequests from a non-US person to a US person where the aggregate crosses the indexed annual threshold (verify against current IRS guidance). None of these forms are filed by the adviser; all of them depend on year-end information the adviser produces.
A short reference grid for the mechanics covered in this article.
Source: Skybound 2026
Considerations to raise with a qualified estate attorney and tax adviser include:
Tom Pewtress is Head of USA at SkyboundWealth USA and a member of the Skybound Wealth Management Executive Committee.A fee-based fiduciary adviser with more than a decade advising internationallymobile households, Tom helps US citizens, dual-nationals, green card holders,and families moving to or from the United States align their wealth, taxposition, and long-term plans across borders.
His work focuses on the issues cross-borderclients actually face: 401(k) and IRA decisions when leaving the US, Rothconversion strategy, tax-aware investing across jurisdictions, PFIC andforeign-fund pitfalls, Social Security totalization, and estate planning forfamilies with ties to more than one country.
Tom regularly writes and speaks oncross-border financial planning. He also leads Skybound's global training andproposition work, ensuring the firm's financial planners remain highlytechnically capable in the industry.
This article is for educational and informational purposes only and does not constitute personalized investment, tax, or legal advice. Tax and regulatory rules change frequently and their application depends on individual circumstances. Readers should consult qualified professionals before making any financial decisions. Skybound Wealth USA is an SEC-registered investment adviser; registration does not imply any level of skill or training.
Mixed-nationality couples sit outside the standard US estate tax assumptions. The marital deduction, gifting limits, and trust requirements all shift, and the right structure usually has to be set up while both spouses are alive.
A short conversation with Tom can give you a clearer picture of where you stand and what is worth acting on first.
For mixed-nationality families, the OBBBA $15 million exemption rarely changes the binding constraint. The non-US spouse's status does.
Tom Pewtress works with mixed-nationality couples to design QDOT structures and align US estate tax with both spouses' citizenship status.
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In a private introductory session, Tom canhelp you:
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