US Estate Tax for a Non-Resident in the UK: The $60,000 Trap on US Assets

US estate tax applies to a non-resident in the UK who is not a US citizen on the US assets they own at death: US shares, US-domiciled funds and US property. Only about $60,000 is sheltered, against $15,000,000 for Americans dying in 2026, and rates reach 40%. The US UK estate tax treaty removes most of that exposure for UK-domiciled British nationals, but only if the executor claims it, and the paperwork alone can hold up a family's inheritance for more than a year.

This guide is for British people and other non-Americans living in the UK who own US investments or a US home, and for the executors who will deal with their estates. If you are a US citizen, or you hold a green card, different rules apply: your whole worldwide estate is within US estate tax, which our guides on UK Inheritance Tax for Americans and the US UK estate tax treaty cover in detail.

Who is a non-resident for US estate tax?

For US estate tax, a non-resident is someone who was neither a US citizen nor domiciled in the US when they died. Domicile for estate tax is not the same as residence for income tax: it turns on where the person lived with the intention of staying. A British national who has always lived in the UK, and who has a US brokerage account or a holiday flat in Florida, is the typical case.

The US taxes such a person only on the part of their estate that is "situated" in the US. The IRS page Some nonresidents with US assets must file estate tax returns sets out the starting rule: the executor must file Form 706-NA if the fair market value of the decedent's US-situated assets at death is more than $60,000.

The $60,000 threshold and the 40% rate

The $60,000 figure is not a stand-alone exemption. It comes from the unified credit. The IRS instructions for Form 706-NA say the maximum unified credit for a non-resident's estate is generally $13,000, and on the federal rate schedule $13,000 is exactly the tax on the first $60,000.

Two further points widen the net. First, the filing test adds the decedent's adjusted taxable gifts and any gift tax specific exemption used to the value of the US assets, so lifetime gifts of US property can bring an estate over the line. Second, there is no portability for a non-resident: the IRS FAQ for non-resident estates states that a non-resident who is not a citizen cannot make a portability election, so an unused credit cannot pass to a spouse.

Above the credit, the estate pays tax on the same graduated schedule used for American estates. Table A in the Instructions for Form 706 (revised July 2026) runs from 18% to 40%, with the top 40% rate applying to taxable amounts above $1,000,000.

Point	US citizen or US-domiciled estate (2026 deaths)	Non-resident, non-citizen estate
Assets in scope	Worldwide estate	US-situated assets only
Shelter from tax	Basic exclusion amount of $15,000,000	Unified credit of $13,000, covering about $60,000
Return	Form 706	Form 706-NA, if US assets plus certain gifts exceed $60,000
Top rate	40% above $1,000,000 of taxable amount	40% above $1,000,000 of taxable amount
Portability to a spouse	Available by election	Not available
Due date	Nine months after death	Nine months after death

Which assets count as US assets for a non-resident?

US real estate, tangible property kept in the US and shares in US corporations count as US assets for a non-resident; US bank deposits not used in a US business and life insurance proceeds generally do not. The Form 706-NA instructions and the IRS FAQ give the detail.

Counted as US-situated

• US real estate, such as a Florida condominium or a New York apartment.
• Tangible personal property located in the US, such as furniture, a car or jewellery kept there. There is a narrow exclusion for works of art on loan to a US museum for public exhibition.
• Shares in corporations organised under US law, "even if the certificates were held abroad or registered to a nominee", according to the IRS. Holding Apple or Microsoft shares through a UK platform does not change their situs.
• Debts owed by US persons or US governments, subject to the exclusions below.
• Assets used in a US trade or business, including the bank accounts of that business.

Treated as outside the US

• Bank deposits not effectively connected with a US trade or business, including deposits with US banks.
• Debt securities whose interest is portfolio interest, which the IRS FAQ lists among the excluded assets.
• Proceeds of life insurance on the life of a non-resident who is not a US citizen.
• Shares in non-US corporations, wherever the certificates are kept.

The fund question catches many UK investors. A US-domiciled ETF or mutual fund is organised under US law, so executors should generally expect its shares to be treated as US assets. A UK- or Ireland-domiciled fund that holds the same US shares is stock of a non-US corporation, which the IRS instructions treat as outside the US. Most UK residents already hold non-US funds for UK reasons, as our guide to US ETFs for UK residents explains, but individual US shares and older US fund holdings remain common.

How does the US UK estate tax treaty change US estate tax for a non-resident in the UK?

The US UK estate tax treaty lets the US tax a UK-domiciled British national who is not a US citizen only on US real property and the business property of a US permanent establishment. US shares and US funds drop out of US tax, provided the executor claims the treaty on Form 706-NA.

The treaty is the 1978 estate and gift tax convention, published in the UK as the schedule to SI 1979/1454. Three articles do the work:

• Article 5 says that where the decedent was domiciled in one country, property is not taxable in the other, unless the decedent was a national of that other country. It is subject to Articles 6 and 7.
• Article 6 lets the country where immovable property (real property) is situated tax it, so US real estate stays within US estate tax.
• Article 7 lets the country where a permanent establishment sits tax the business property of that establishment.

A fourth provision helps even with the real estate. Article 8(5) limits the US tax on a UK national who was neither domiciled in nor a national of the US. In the words of the Form 706-NA instructions, the tax "may not exceed the U.S. estate tax that could have been imposed on the decedent's worldwide assets had the decedent died domiciled in the United States". The executor reports the lower figure and attaches a statement with the alternate computation. Because a US-domiciled estate gets the much larger basic exclusion, this cap can reduce the US tax on a UK national's US property very sharply, but it needs a full valuation of the worldwide estate to prove it.

Whether a person is "domiciled" in the UK for the treaty is decided by Article 4, not by the UK's own Inheritance Tax rules, and it includes tie-breaker tests for people both countries claim. Our article on the US UK estate tax treaty walks through those tests.

Illustrative example: a UK estate with US shares and a Florida flat

Illustrative example: Helen is a British national who has lived in England all her life and is not a US citizen. She dies owning $400,000 of shares in US companies, held through a UK investment platform, and a Florida condominium worth $500,000. She made no lifetime gifts of US property, and her worldwide estate is well below the $15,000,000 basic exclusion amount for US-domiciled estates dying in 2026. For simplicity the example ignores debts, expenses and any deductions.

1. US domestic law only. Both assets are US-situated, giving $900,000. On Table A, the tax on $900,000 is $248,300 plus 39% of the $150,000 above $750,000, which is $306,800. After the $13,000 unified credit, the US estate tax would be $293,800.
2. Treaty Article 5. Helen was UK-domiciled and not a US national, so the US shares fall outside US tax. Only the condominium remains, under Article 6. The tax on $500,000 is $155,800; after the $13,000 credit, $142,800.
3. Treaty Article 8(5). The executor then computes the tax as if Helen had died domiciled in the US, on her worldwide assets with the full basic exclusion. With an estate below $15,000,000, that alternate figure is nil, so the treaty limit can bring the US estate tax on the condominium down to nil. The executor must still file Form 706-NA, claim both treaty positions with a statement, and support the worldwide valuation.

The example shows why the treaty matters so much: the same estate moves from a US bill of almost $300,000 to potentially none. It also shows why the executor cannot do nothing. Every step depends on a return being filed and accepted. Any US tax that is paid on the condominium is then dealt with in the UK through the credit rules in Article 9 of the treaty, so the family does not pay full tax twice. UK Inheritance Tax itself still applies to the worldwide estate of someone like Helen, a lifelong UK resident, above the nil-rate band, which GOV.UK confirms is £325,000, fixed until the end of the 2030 to 2031 tax year.

Why a US broker freezes the account: the transfer certificate

The part of US estate tax for a non-resident that families notice first is often not the tax but the delay. A US broker or share registrar that holds a non-resident decedent's shares will normally ask for an IRS transfer certificate before it re-registers or sells them. Treasury Regulation 20.6325-1 tells domestic corporations and their transfer agents not to transfer a non-resident decedent's stock without one, and makes demanding the certificate the way they avoid liability for the tax.

The IRS explains the process on its page Transfer certificate filing requirements for the estates of nonresidents not citizens of the United States:

• If Form 706-NA is required, the executor faxes the filed return and any continuation schedules for the assets.
• If Form 706-NA is not required, the executor faxes the will and codicils, any non-US death or inheritance tax returns, the death certificate and a notarised affidavit setting out the decedent's citizenship and residence, the US assets with date-of-death values and account numbers, and whether any US bank accounts were used in a US business. The IRS asks executors in that position not to file Form 706-NA, because it slows the certificate down.
• The IRS says processing the affidavit and supporting documents takes 12 to 18 months.
• A certificate is not required for property administered by an executor or administrator appointed, qualified and acting within the US.

The practical lesson for a UK executor is to start early. Valuations at the date of death, a translation of any non-English documents and a clear schedule of US accounts all go in the first submission; anything missing restarts the wait.

What people get wrong about US estate tax as a non-resident

• "My shares are in a UK ISA or platform, so they are UK assets." The IRS looks at where the company is organised, not where the account is held. US company shares are US-situated whatever the wrapper.
• "The treaty applies automatically." It does not. The executor claims the treaty on Form 706-NA, and the IRS FAQ says to list exempt assets on Schedule A without values and attach Form 8833 for a treaty-based position. Without the claim, the broker has no reason to release the account.
• "Below $60,000 there is nothing to do." Below the threshold there may be no return, but a US broker will usually still want a transfer certificate or the IRS's letter saying one is not needed, which means the affidavit route.
• "Leaving it to my spouse solves it." The IRS instructions allow a marital deduction only for property passing to a US citizen spouse or to a qualified domestic trust (QDOT), unless a treaty allows otherwise. A British spouse inheriting a US home does not get the unlimited deduction an American spouse would.
• "Owning through a company always fixes it." Holding US property through a company or trust can change the situs analysis, but it brings US and UK income tax, reporting and Inheritance Tax consequences of its own. It is a planning decision to model before buying, not a form to fill in afterwards.

Planning steps for UK families with US assets

1. List the US assets. Note each US share, US-domiciled fund, US property and US account, who owns it and its approximate value in dollars.
2. Check treaty status. Confirm that the owner is a British national, is not a US citizen and would be treated as UK-domiciled under Article 4 of the treaty. Anyone with a green card or US citizenship in the family needs a different analysis.
3. Review how the investments are held. Where investment reasons allow, non-US funds avoid the US-situs question for the portfolio, but any change should be weighed against capital gains tax and charges.
4. Plan for the US property. Real estate is the asset the treaty leaves with the US. Ownership structure, mortgages and the Article 8(5) computation all affect the final figure.
5. Prepare the executors. Keep a schedule of US accounts with the will, and consider whether a US executor or a US-administered arrangement would avoid the transfer certificate delay.
6. Coordinate with the UK side. The same assets sit inside the UK Inheritance Tax estate, and any US tax paid needs to be credited correctly. Our guide to US UK trust and estate tax planning covers how the two systems fit together.

For families on the receiving end, our article on inheriting US assets as a UK resident explains what happens to the heir's own tax after the estate is settled.

How US/UK Cross Border Tax helps

US/UK Cross Border Tax is US CPAs and UK tax advisers working as one team, with offices in London, Manchester, New York and San Francisco. Our US UK estate and trust planning team reviews which of your assets are US-situated, models the treaty position including the Article 8(5) limit, and prepares Form 706-NA, the treaty statement and the transfer certificate request for executors. We work alongside the UK Inheritance Tax return so the credits line up, and we advise cross-border investors on holding structures before the question arises. Where lifetime gifts of US property are involved, our gift tax return service handles the US filings.

If you own US shares or US property from the UK, or you are the executor of an estate that does, contact us for a review before the nine-month deadline.