The one-paragraph answer
How the tax works
Two different taxes
US income tax applies to dividends and other income while you are alive. US estate tax is a separate, one-time tax on the value of what you own at death. This guide is about the estate tax only.
The US-situs concept
A nonresident non-citizen (the law says "nonresident not a citizen"; practitioners say NRA) is taxed only on assets situated in the US (IRC 2103; Treas. Reg. 20.2104-1). US citizens and domiciliaries are taxed on their worldwide estate.
The shares are US-situs, period
IRC 2104(a): shares of stock are US property if issued by a domestic corporation. The US ownership entity is a Delaware corporation, so the shares are US-situs. Certificate location, custody account, and the location of the underlying real estate are all irrelevant.
Mirror rule: shares of a foreign corporation are NOT US-situs even if that company owns US real estate. This is the basis of "blocker" planning, covered below.
The exemption gap (2026)
- Non-US person: $60,000 exemption, delivered as a $13,000 unified credit (IRC 2102(b)(1)). Not indexed. Unchanged for decades. The One Big Beautiful Bill Act (OBBBA, signed July 4, 2025) did NOT change this figure.
- US citizen or domiciliary: $15,000,000 exemption for 2026, permanent under OBBBA, indexed from 2027 (IRC 2010(c)(3)(A)). Unified credit approximately $5,945,800.
Rate schedule
Graduated 18% to 40% (IRC 2001(c), Table A). The top 40% bracket starts above $1,000,000. Table A anchors, all before the $13,000 credit:
| Taxable US estate | Tentative tax (Table A) |
|---|---|
| $100,000 | $23,800 |
| $500,000 | $155,800 |
| $1,000,000 | $345,800 |
| $2,000,000 | $745,800 |
Domicile vs income-tax residency
Income-tax residency is objective (green card test, substantial presence day count). Estate tax domicile is subjective: living in a place with no definite present intention of leaving (Treas. Reg. 20.0-1(b)). You can be non-resident for income tax yet domiciled for estate tax, or the reverse. A typical Regulation S investor who lives abroad with family and business abroad is not a US domiciliary, so the NRA rules apply.
Deductions
An NRA estate may deduct a pro-rata share of debts, funeral and administration expenses (IRC 2106), prorated by US assets over worldwide assets, which requires disclosing the worldwide estate. Charitable deductions to US charities are allowed. The unlimited marital deduction is generally NOT available where the surviving spouse is not a US citizen (IRC 2056(d)) unless a Qualified Domestic Trust (QDOT, IRC 2056A) is used; a QDOT defers the tax rather than eliminating it. Lifetime gifts to a non-citizen spouse get an elevated annual exclusion of $194,000 for 2026 (Rev. Proc. 2025-32).
Valuation of the private shares
Fair market value at date of death (Treas. Reg. 20.2031-1; Rev. Rul. 59-60 framework). Two discounts commonly apply and reduce the taxable value: lack of marketability (commonly cited 10% to 33%) and minority interest / lack of control (commonly cited 20% to 40%). Both require a qualified appraisal paid for by the estate, and the burden of proof is on the estate.
The gift tax asymmetry (the key planning fact)
An NRA's gift of intangible property, including shares of a US corporation, is generally NOT subject to US gift tax (IRC 2501(a)(2); IRC 2511(a); Treas. Reg. 25.2511-3). The same shares ARE fully taxable if held at death (IRC 2104(a)). So the shares can be gifted during life free of US transfer tax but are taxed if you die holding them.
Gifting traps
- The exemption covers intangibles; gifts of US tangible property or cash from a US bank account ARE subject to US gift tax, so move cash offshore before gifting.
- Retained-interest transfers can be pulled back under IRC 2035 through 2038; an IRS Chief Counsel memo (POSTU-112539-09) concluded gift tax paid by an NRA within three years of death is not pulled back under 2035(b).
- Your home country may tax the gift.
- The gift must be complete and documented: signed transfer instrument, updated share register, no retained control or benefit.
- Gifted shares carry over your basis; there is no step-up for the recipient.
Which lane are you in
Find your lane
Lane A: the 15 treaty countries
The US has estate or gift tax treaties with 15 countries (IRS official list): Australia, Austria, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Netherlands, South Africa, Switzerland, United Kingdom. (Canada's relief sits inside the income tax treaty, Article XXIX B.)
Lane A benefits:
- Modified situs rules that can reclassify assets as non-US.
- The pro-rata unified credit: a treaty-country resident can claim a share of the full US unified credit prorated by US assets over worldwide assets, which can raise the effective exemption from $60,000 into the millions.
Some treaties also open the marital deduction. Claiming a treaty requires filing Form 706-NA with Form 8833 and disclosing the worldwide estate.
Lane B: everyone else
Everyone else, including India, the UAE, and Singapore. Default rules: $60,000 exemption, 18% to 40% rates, plan proactively.
The same shareholding, lane by lane
Lane contrast on the same $500,000 shareholding: the Lane B investor owes about $142,800. A Lane A investor with a $5,000,000 worldwide estate: the pro-rata credit is ($500,000 / $5,000,000) x $5,945,800 = $594,580, which exceeds the $155,800 tentative tax, so US estate tax is $0. Same shares, different lane, $142,800 difference.
What happens when a shareholder dies
Filing trigger
Gross US-situs assets above $60,000 mean the executor must file Form 706-NA (IRC 6018), even if a treaty or deductions reduce the tax to zero.
Deadline
Deadline9 months from date of death. An automatic 6-month filing extension is available on Form 4768 (an extension to file, not to pay).
Who files, who is liable
DeadlineThe executor or administrator files, or anyone in possession of the property if none is appointed (IRC 2203). An executor who distributes before paying the tax can be personally liable (31 USC 3713(b)). Heirs can be liable up to what they received (IRC 6324(a)(2)). A 10-year federal estate tax lien attaches to the US assets (IRC 6324(a)(1)).
The freeze
The issuer and any transfer agent will freeze the shares: no transfer, no sale, no re-registration until the IRS issues a transfer certificate (Form 5173), because releasing assets early exposes them to liability for the tax.
Getting the certificate
File Form 706-NA, clear the tax, request the certificate. Documentation: death certificate (translated if needed), proof of the executor's authority (letters testamentary or foreign equivalent), will and probate documents, asset schedules. The IRS states processing takes 6 to 9 months from a complete package; practitioners commonly report a year or more. Plan for 6 to 18 months end to end.
Dividends during the freeze
Held or accrued to the frozen position; not freely accessible to heirs until the estate is cleared and the shares re-registered (typically with a Medallion Signature Guarantee).
If the estate never files
The shares stay frozen indefinitely, heirs cannot receive or sell them, the 10-year lien persists, and penalties and interest accrue. Doing nothing strands the investment; it does not make the exposure disappear.
Silver lining: basis step-up
Silver liningShares included in the US gross estate get a stepped-up basis to date-of-death fair market value (IRC 1014(a)), reducing heirs' future US capital gains tax. Assets kept OUT of the estate via a foreign blocker do not get this step-up.
State tax: none
Delaware repealed its estate tax effective January 1, 2018, and US states do not tax a nonresident's intangible shares. Exposure is federal only.
Planning options
Each option below carries honest tradeoffs. None of this is a recommendation; it is the menu practitioners work from.
Foreign holding company (blocker)
Hold the US shares through a non-US company; you then own foreign shares, which are not US-situs, so no US estate tax and no US gift tax on transfers of them. Costs: formation and annual running costs; dividend withholding chains (US-to-blocker distributions face 30% withholding unless reduced); possible home-country CFC or attribution rules taxing you currently; loss of the IRC 1014 step-up. Risk: the structure needs real substance; the IRS can attack shells under sham, agency, and nominee doctrines, and practitioners disagree on how much substance is enough. Works best when set up before subscribing; retrofitting can itself trigger US tax.
Irrevocable trust (including foreign non-grantor trusts)
Removes the shares from the gross estate if genuinely irrevocable. Trap: the retained-interest string rules (IRC 2035 to 2038): keep the income, the enjoyment, the power to control beneficiaries, or the power to revoke, and the assets come back into your estate. Adds US and home-country reporting complexity. Best funded before subscribing.
Lifetime gifting
Use the intangibles exemption: gift the shares during life, generally free of US gift tax (IRC 2501(a)(2)). Tradeoffs: you give up ownership and future distributions; recipients take your basis (no step-up); the gift must be complete and documented; home-country gift tax may apply. Simple and powerful for those ready to part with the asset.
Term life insurance sized to the exposure
Proceeds on the life of a non-US person are NOT US-situs (IRC 2105(a)). A term policy sized to the projected estate tax gives heirs the cash to pay the Form 706-NA bill and unlock the shares without a forced sale. It does not reduce the tax; it funds it. Often the cheapest, cleanest fix for mid-sized holdings. The policy must be on the investor's own life.
Joint ownership: usually a trap
Joint tenancy with a non-spouse or non-citizen spouse triggers a presumption of 100% inclusion in the first decedent's estate unless the survivor proves their own contribution (IRC 2040(a)). Generally not a solution; frequently backfires.
A size framework
Assumptions: the shares are the investor's only US-situs asset; the investor is in Lane B; figures are illustrative, not advice.
| Holding size | Sensible posture |
|---|---|
| Below ~$60,000 | No US estate tax after the credit. Documentation and beneficiary records only. Recheck as value grows. |
| ~$60,000 to ~$500,000 | Real tax (about $142,800 at $500,000) but structures are overkill. Term life insurance sized to the exposure and/or a lifetime gifting program. |
| ~$500,000 to ~$1,000,000 | Combine insurance and gifting; begin evaluating a blocker or trust if the holding will grow. Weigh annual structure cost against a 26% to 40% marginal tax. |
| Above ~$1,000,000 | Structural solutions (blocker at entry, or irrevocable/foreign trust) generally justify their cost, layered with insurance for residual exposure. Structure before subscribing. |
Events that change the plan: becoming resident in a treaty country (move to Lane A); acquiring a green card or building US ties (risk of US domicile and worldwide exposure); a non-citizen spouse as intended heir (QDOT planning).
Worked examples
Example 1: $100,000 of shares
Hypothetical and educational. Assumes the shares are the only US-situs asset, no deductions, Lane B unless stated, 2026 law.
- Gross US estate
- $100,000
- Tentative tax (Table A)
- $23,800
- Unified credit
- less $13,000
- Tax due
- $10,800
Effective rate ~10.8%. Form 706-NA required; transfer certificate needed.
Example 2: $500,000 of shares
Hypothetical and educational. Assumes the shares are the only US-situs asset, no deductions, Lane B unless stated, 2026 law.
- Gross US estate
- $500,000
- Tentative tax (Table A)
- $155,800
- Unified credit
- less $13,000
- Tax due
- $142,800
Effective rate ~28.6%. Form 706-NA required; transfer certificate needed.
Example 3: $2,000,000 of shares
Hypothetical and educational. Assumes the shares are the only US-situs asset, no deductions, Lane B unless stated, 2026 law.
- Gross US estate
- $2,000,000
- Tentative tax (Table A)
- $745,800
- Unified credit
- less $13,000
- Tax due
- $732,800
Effective rate ~36.6%. Form 706-NA required; transfer certificate needed.
Example 4: the $500,000 case rerun in Lane A
Hypothetical and educational. Assumes the shares are the only US-situs asset, no deductions, Lane A, 2026 law.
- Worldwide estate
- $5,000,000
- US shares
- $500,000
- Tentative tax (Table A)
- $155,800
- Pro-rata credit
- $594,580
- Tax due
- $0
Pro-rata credit: ($500,000 / $5,000,000) x $5,945,800 = $594,580, exceeding the $155,800 tentative tax. Form 706-NA still required, with Form 8833 and worldwide-estate disclosure. Identical shareholding: Lane B pays $142,800, Lane A pays $0.
Home-country interaction
Whether the family owes tax at home depends on home-country law, not US law. Three questions to ask:
- Does my country levy inheritance or estate tax on worldwide assets?
- If US estate tax is paid, does my country give a credit or relief?
- What succession rules apply (forced heirship in civil-law countries; Sharia succession; whether local probate recognizes US assets)?
Factual context: India currently has no inheritance or estate tax; the UAE has none for most persons (Sharia succession can govern distribution; non-Muslim expatriates often register wills, for example at the DIFC Wills Service Centre); Singapore abolished estate duty in 2008.
For US accredited investors (Reg D 506(c))
Your exemption is $15,000,000 for 2026 (indexed from 2027), so this shareholding is very unlikely to generate estate tax on its own. The shares are still includible in your worldwide gross estate and still get a basis step-up at death (IRC 1014). The one flag: a non-citizen spouse does not get the unlimited marital deduction; plan for a QDOT (IRC 2056A) for amounts above your exemption passing to that spouse.
Frequently asked questions
No. Those are income taxes while you are alive. Estate tax is a separate one-time tax on the value of your shares when you die.
Yes. IRC 2104(a) makes shares of a US (Delaware) corporation US-situs property. Exposure attaches at the share level.
No. It is an income tax treaty only. There is no estate tax treaty between India and the US, nor for the UAE or Singapore. You are in the default $60,000 lane.
Generally no US gift tax, because an NRA's gift of US corporate shares (intangible property) is not subject to US gift tax (IRC 2501(a)(2)). You give up ownership, the gift must be documented, your children take your cost basis, and your home country may tax the gift.
You are in Lane B. Know your value against $60,000, consider term life insurance and lifetime gifting, and for larger holdings consider a blocker or trust set up before investing.
After the $60,000 exemption, 18% up to 40% (40% above $1,000,000). Roughly $142,800 on $500,000 of shares; roughly $732,800 on $2,000,000.
Contact the platform and a US cross-border estate advisor immediately. File Form 706-NA within nine months (extension on Form 4768), then obtain the IRS transfer certificate (Form 5173). Do not distribute anything before the tax is cleared.
Not until the transfer certificate is issued and the transfer is completed. Expect roughly 6 to 18 months.
Held or accrued to the frozen holding; not freely accessible until the estate is cleared and the shares re-registered.
Generally no. Delaware repealed its estate tax in 2018, and states do not tax a nonresident's intangible shares. Exposure is federal only.
Yes. The unlimited marital deduction does not apply unless the property passes through a Qualified Domestic Trust (QDOT), which defers rather than eliminates the tax.
No. The shares stay frozen, heirs cannot access them, a 10-year federal tax lien attaches, and penalties and interest accrue.
Yes. Proceeds on the life of a non-US person are not US-situs (IRC 2105(a)), so a term policy sized to the tax gives your family the cash to pay the bill and unlock the shares.
Yes, for shares included in your US estate: they are revalued to fair market value at your death (IRC 1014(a)), reducing future US capital gains tax.
Glossary
- Basic exclusion amount
- The amount a US citizen or domiciliary can pass free of estate tax: $15,000,000 for 2026, indexed from 2027. A non-US person gets a $60,000 exemption instead.
- Discount for lack of marketability (DLOM)
- A valuation discount, commonly cited at 10% to 33%, reflecting that private shares cannot be sold quickly on an open market. It reduces the taxable value of the shares.
- Domicile
- Living in a place with no definite present intention of leaving. Estate tax domicile is subjective, and separate from income-tax residency.
- Estate tax lien (IRC 6324)
- A 10-year federal lien that attaches automatically to a decedent's US assets until the estate tax is resolved.
- Executor / administrator
- The person who administers the estate. If no one is appointed, anyone in possession of the property can carry the US filing duties.
- FDAP / FIRPTA
- US income tax regimes covering a foreign person's US investment income and US real estate sales. Separate from estate tax; mentioned in this guide only to distinguish them.
- Foreign blocker corporation
- A non-US company placed between the investor and US shares, so the investor holds foreign shares that are not US-situs property.
- Form 4768
- The IRS form for the automatic 6-month extension to file the estate tax return. It extends the time to file, not the time to pay.
- Form 706-NA
- The US estate tax return for a nonresident non-citizen, due 9 months after death whenever US-situs assets exceed $60,000.
- Intangibles gift exemption
- The rule that an NRA's lifetime gift of intangible property, including shares of a US corporation, is generally not subject to US gift tax (IRC 2501(a)(2)).
- Marital deduction
- The deduction for property passing to a surviving spouse. Unlimited for a US-citizen spouse, but generally unavailable for a non-citizen spouse unless a QDOT is used.
- Medallion Signature Guarantee
- A bank-issued stamp verifying a signature on a securities transfer, typically required to re-register shares to heirs.
- Minority interest / lack of control discount
- A valuation discount, commonly cited at 20% to 40%, reflecting that a small shareholding cannot control the company.
- NRA (nonresident not a citizen)
- The estate tax law's term for a person who is neither a US citizen nor US-domiciled. An NRA is taxed only on US-situs assets.
- Pro-rata unified credit
- A treaty benefit letting a treaty-country resident claim a share of the full US unified credit, prorated by US assets over the worldwide estate.
- QDOT (Qualified Domestic Trust)
- A trust (IRC 2056A) that lets property pass to a non-citizen spouse with the estate tax deferred rather than eliminated.
- Regulation S / Regulation D 506(c)
- The SEC exemptions under which participation is offered: Regulation S for non-US persons, Regulation D 506(c) for verified US accredited investors.
- Situs-type / domicile-type treaty
- The two families of US estate tax treaties. They differ in whether they reassign where assets are treated as located, or which country gets to tax by domicile.
- Step-up in basis (IRC 1014)
- The revaluation of inherited assets to fair market value at death, reducing heirs' future US capital gains tax.
- Substantial presence test / green card test
- The objective day-count and immigration-status tests for US income-tax residency. Different from estate tax domicile, which is subjective.
- Transfer certificate (Form 5173)
- The IRS document that releases a nonresident decedent's US assets for transfer once the estate tax is cleared.
- Unified credit
- The credit that delivers the estate tax exemption: $13,000 for a non-US person (equal to $60,000 of assets), approximately $5,945,800 for a US person in 2026.
- US-situs property
- Property the law treats as located in the US for estate tax purposes, including shares issued by a US corporation, regardless of where certificates or accounts sit.
Disclaimer
This material is general education, not tax or legal advice, and does not create an adviser relationship. US tax law is complex and individual circumstances vary; consult your own qualified tax and legal advisers before acting. Investment in private real estate involves risk, including possible loss of capital and illiquidity; nothing here is an offer to sell or a solicitation to buy any security. Participation is limited to non-US persons under SEC Regulation S and verified US accredited investors under SEC Regulation D 506(c).
Last verified: 2026.
