As globalization makes the world a smaller place, complex cross-border estates become increasingly common. Administering a purely domestic estate in the United States can be a complicated task in itself, but layering on international issues can make things far more challenging for families. Thoughtful estate planning crafted by a coordinated effort of competent counsel in each country can ensure an individual’s dispositive wishes are achieved by carefully navigating the legal and tax rules of all jurisdictions.
For a variety of reasons, this planning doesn’t always (or unfortunately, even often) happen, due to factors such as severe restrictions imposed by an individual’s jurisdiction of domicile or citizenship, applicable cultural attitudes towards wealth and wealth planning and/or reluctance to dedicate the necessary time or resources to estate planning. When a practitioner is approached by the surviving members of a foreign decedent’s family to deal with the administration of U.S. assets, the practitioner must triage and fix the potentially messy situation left behind.
Governing Instrument
Before advisinga family on the U.S. implications of a foreign decedent’s estate, the U.S. practitioner must ascertain what law governs the estate as that will impact who’s entitled to receive property and who may act on behalf of the estate. Despite each U.S. state having its own succession law, there’s a consistent theme that the law of the decedent’s domicile governs, and there’s broad testamentary freedom. However, many overseas jurisdictions have different choice-of-law provisions, have forced heirship regimes that curtail the decedent’s testamentary freedom and/or lack the concept of an appointed fiduciary to administer the estate.
If the decedent died without any testamentary instrument or other succession planning documents, then the U.S. practitioner will need to seek guidance from legal counsel in the jurisdictions of the decedent’s domicile, residence and property to see how the choice-of-law provisions will apply and divide the estate, noting the rules may differ for real property and personal property. This guidance is not only needed for the practitioner to advise but also to submit to U.S. taxing authorities and courts as evidence of the devolution of the estate (often in the form of affidavits of law from qualified legal counsel from those other jurisdictions).
For the testate decedent, the analysis can be even more complicated. In addition to all of the questions that need to be addressed for intestate estates, the practitioner must determine if the testamentary instrument is valid. To be valid, the instrument must satisfy the applicable formality requirements; however, this doesn’t necessarily mean it must have been executed with the formalities typical in the applicable U.S. jurisdiction(s) as there are various provisions across the states that will accept the validity of a testamentary instrument that complies with the requirements of the jurisdiction where it was executed and/or where the decedent was domiciled.1 Qualified legal counsel may be necessary to provide confirmation that foreign formality requirements were met. The testamentary instrument, even if valid, must then be reviewed to determine what law will govern the estate given the potential for choice-of-law elections and if the disposition of the estate comports with the governing law.
Fiduciary Selection
In any estate, a number of considerations apply in selecting a fiduciary, including suitability and reliability. When cross-border elements are involved, there are additional important considerations, such as the eligibility, practicality and tax impact of each potential fiduciary.
Rules vary among jurisdictions as to who may serve as a fiduciary. If probate needs to be opened for an individual who died overseas, the applicable U.S. jurisdiction may not allow certain individuals to serve as a fiduciary, including on the basis of citizenship or domicile.2 These prohibitions could potentially prevent the party named in estate-planning documents from serving or disrupt otherwise harmonious family members from serving together. Even if the U.S. jurisdiction has no applicable prohibitions on who may serve, there are scenarios in which the family may not wish for some members to serve because their formally serving as a U.S. court-appointed fiduciary isn’t practical, for example due to the difficulty in obtaining notarized signatures in their jurisdiction of residence, time zone differences and language barriers. A U.S. practitioner should advise the family of such formal and practical limitations on who may serve and help them reach a resolution reflecting what will work best in the given situation. Once a solution is found, it then falls to the practitioner to maneuver the estate to obtain the desired outcome from a court of competent jurisdiction.
The discussion of who may—and who should—serve as fiduciary of the estate must also include an analysis of applicable tax implications. The selection of a fiduciary and the decision to open probate proceedings in the United States necessarily have a bearing on the income tax treatment of the estate. For U.S. income tax purposes, there can only be one estate even if there are distinct administrative proceedings inside and outside the United States.3 While the estate tax classification of the estate depends on the citizenship and domicile of the decedent, the income tax classification is a fact-based analysis without such bright-line rules.4 Some factors are outside the control of the survivors administering the estate, such as the domicile of the decedent, the place where domiciliary administration will occur and the location of the assets; however, the residency of the estate’s fiduciaries is also a factor that could have a bearing on whether the estate should have U.S. or non-U.S. executors either in the U.S. ancillary proceedings or abroad.
Opening probate proceedings in the United States also greatly increases the chance that the estate will be classified as a U.S. estate for income tax purposes. Therefore, the practitioner must consider whether opening proceedings is truly necessary. If the estate must defend or pursue a claim (including with the Internal Revenue Service) or deal with U.S. real estate, the estate has little choice but to initiate ancillary proceedings in the United States; however, certain financial institutions may respect directions from fiduciaries appointed outside of the United States, provided those foreign fiduciaries are able to provide a transfer certificate from the Internal Revenue Service (discussed in greater detail below). If the overseas decedent died only having financial assets in the United States, the fiduciary should directly ask the financial institution whether directions from the foreign executor will be respected even if the initial form guidance from the institution asks for a U.S. court-appointed fiduciary.
Classification of Decedent
In determining estate tax treatment, the first step is to ascertain to which estate tax regime the estate will be subject: (1) the regime for U.S. citizens and U.S. residents under Chapter 11, Subchapter A, Internal Revenue Code Sections 2001-2058, or (2) the regime for non-resident/non-citizen aliens (NRAs) under Chapter 11, Subchapter B, IRC Sections 2101–2108. While these regimes have many similarities, there are important differences between the two: Both regimes have the same filing deadlines, rate tables and potential to claim treaty benefits, and both can receive a basis adjustment under IRC Section 1014. However, what assets are subject to tax, the deductions available, the exemption available and reporting requirements differ under each, which results in different procedures the estate must undertake and different strategies to be considered. See “Comparison of Two Regimes,” this page.
In making this determination, first, the family will need to identify the citizenship(s) of the decedent.5 If the decedent wasn’t a U.S. citizen at the time of death, then the decedent isn’t a U.S. person on the basis of citizenship (though they may still be on the basis of residency as discussed below). Further, while it’s the citizenship at time of death that determines to which regime the decedent is subject, the practitioner must ascertain whether the decedent was ever a citizen given that’s a question the practitioner must address on the estate tax return for NRAs (Form 706-NA) and could render the estate subject to the covered expatriate rules under IRC Section 2801. If the decedent possesses multiple citizenships and one of them is that of the United States, then that individual will be treated as a U.S. person and not as an NRA.6
Assuming that the decedent isn’t a U.S. person because of citizenship, the practitioner must then work with the family to obtain additional facts about the decedent to see if the decedent would be classified as a U.S. resident for estate tax purposes. The use of the term “resident” can be misleading because for estate tax purposes, it isn’t a question of whether the decedent had a residence in the United States or was classified as a resident for income tax purposes, but instead, is based on whether the decedent was domiciled in the United States.7
Treasury Regulations Section 25.2501-1(b) requires two conditions for domicile: (1) living in a place, even for a brief period of time; and (2) having no definite present intention of leaving the place. The difficulty in determining intent is that intent is a subjective matter, and the star witness is by definition deceased. Therefore, courts must turn to objective factors to determine the intent of the decedent, which often include the location of decedent’s residences, expensive possessions and investments; relative amount of time spent at the claimed domicile versus in other countries; location of family, friends, place of worship, business activities and club memberships; jurisdiction of voter’s registration and driver’s license; declarations of residence or intent (visa applications, wills, tax returns, etc.); and domicile of origin (that is, where the individual was born).
Further confusing the analysis is that just as U.S. income tax residency doesn’t fix U.S. estate tax residency, neither does the decedent’s immigration status with respect to decedent’s connections to the United States. For example, though a green card permits a U.S. permanent resident to permanently remain in the United States and is controlling for U.S. income tax purposes, it isn’t controlling for estate tax purposes.8 Temporary visa programs, on the other hand, explicitly require a visa holder to retain domicile in their home country, generally suggesting the intent to remain in the United States isn’t present in the case of a temporary visa holder; however, that a visa is temporary isn’t controlling for estate tax purposes as facts can demonstrate domicile.9 Finally, an undocumented individual may be subject to deportation but can nevertheless be U.S. domiciled for estate tax purposes based on the facts at hand.10
Situs and Valuation
After determining which estate tax regime applies, a practitioner must work with the family to determine what assets are included in the gross estate of the decedent for U.S. estate tax purposes. Foreign structures may pose an added challenge in understanding what constitutes an asset of the decedent for these purposes. For those individuals who died abroad but are U.S. citizens or who meet the definition of a U.S. resident, the worldwide estate must be included.
For the NRA decedent, only assets deemed U.S. situs for estate tax purposes are included in calculating U.S. estate tax.11 The rules for estate taxes for an NRA encompass more asset classes than the gift tax rules: Whereas for gift tax purposes, only real estate and tangible property located in the United States are included for determining the amount of taxable gifts and all intangible property is explicitly excluded,12 the estate tax rules for NRAs deem certain intangible property of the decedent, specifically stock in a U.S. corporation and debt obligations from a U.S. person or entity, as being situs in the United States.13 For most asset classes, there are clear rules for the practitioner to apply for estate tax purposes (see “What Assets Are Included?” p. 75); however, there’s one major asset class that remains an outstanding question.
The rules lack clear guidance as to the situs of entities other than corporations, such as partnerships and limited liability companies. There’s no specific answer in the statutory or regulatory tax law, but instead there are four potential approaches to determining situs of such entities. As a result, if an NRA owns an interest in such an entity, the practitioner will need to help guide the family by reviewing each of these approaches to come to a reporting position.
The first approach is to determine entity situs for U.S. estate tax purposes by applying the common law maxim, mobilia sequuntur personam,which means that given the interest is intangible, it will have situs where the decedent was domiciled at death and therefore would be non-U.S. situs in the estate of an NRA.14The second approach follows the definitions under IRC Section 7701, which generally apply when another part of the IRC doesn’t address the topic; in this instance, the definition of “domestic” would apply to an entity formed in the United States and “foreign” to an entity formed outside of the United States, resulting in entities formed in the United States being U.S. situs and entities formed abroad being non-U.S.15 The third approach looks to the activities of the entity and where it was engaged in a trade or business and determines situs on the basis of where those activities took place.16 Unlike the first three approaches that treat the entire entity as being either U.S. or non-U.S. situs, the fourth approach disregards the entity itself and looks instead to the individual assets of the entity, resulting in the inclusion of only the assets of the entity that are U.S. situs in the estate of the NRA.17
After identifying all of the decedent’s assets and whether they need to be reported, they must be valued in accordance with U.S. valuation principles as the U.S. estate is determined by the rules of IRC Section 2031, which extend to the fair market value (FMV) standards under the accompanying Treasury regulations.18 This can create an issue when working with foreign advisors and financial institutions that aren’t accustomed to nor have any other need to know these rules. As a result, foreign estate or inheritance tax returns may value assets in a different manner than is required for U.S. estate tax purposes. For example, if a foreign financial institution is holding shares in a U.S. corporation in the name of the decedent, that would be includible in the gross estate of a decedent regardless of whether they were a U.S. citizen/resident or an NRA. For foreign estate/inheritance tax reporting purposes, the asset may be reported based on the value at the close of trading on the date of death or using a statement reflecting the value at the end of the month the decedent died. While such approaches aren’t unreasonable, they’re inconsistent with the Section 2031 approach, which dictates that the value for estate tax purposes is the average of the high and low prices on the date of death.19 Thus, U.S. practitioners will need to confirm the value of each asset reported to ensure it comports with U.S. rules and may need to provide an explanation in the U.S. tax reporting as to why a different value is used than that found on foreign tax returns or inventories submitted as attachments.
There are practical limitations to the way items are valued in the United States and abroad. For example, when reporting real estate located in another jurisdiction as part of the gross estate for a U.S. citizen/resident, or to claim deductions for an NRA (as further discussed below), there’s unlikely to be a local appraiser in that foreign jurisdiction who prepares reports in the manner common in the United States or possesses certifications that are known by the IRS. Both the estate and IRS will need to work within practical limitations of this nature, but this doesn’t mean any report will work. The U.S. practitioner should ensure that the report reflects the correct date of valuation and a determination of FMV as of that date. There are other steps that the U.S. practitioner may need to take to have foreign valuations made usable for U.S. purposes, specifically currency conversions and certified translations to English. While such steps are fairly mechanical, they do take some time and have some expense associated with them, so the U.S. practitioner should plan accordingly.
Finally, a U.S. practitioner advising the family of an NRA decedent should do so with the Form 706-NA in mind. In addition to providing for a calculation of U.S. taxable estate and related asset information, the Form 706-NA raises other questions about the decedent NRA, such as concerning prior transfers of property by gift in trust or otherwise, access to a safety deposit box and applicable powers of appointment. Accordingly, to comply with U.S. reporting obligations, a practitioner should be prepared to think beyond the narrow question of U.S. situs assets.
Spousal Issues
The federal marital deduction from estate and gift taxes only applies to gifts or bequests to a spouse who’s a U.S. citizen.20 Accordingly, although unlimited transfers may be made between spouses without gift or estate tax consequences if the recipient spouse is a U.S. citizen, the same isn’t true if the recipient spouse isn’t a U.S. citizen, regardless of the residence of the latter. In the case of a gift to a non-citizen spouse, the donor spouse only has the benefit of an enhanced annual exclusion from potentially applicable U.S. gift taxes21 and, in the case of a bequest to a non-citizen spouse, no particular benefit beyond the available exemption.
It follows that a typical qualified terminable interest property (QTIP) marital trust for a non-citizen surviving spouse wouldn’t qualify for the marital deduction and succeed in deferring U.S. estate taxes until the death of the survivor. Instead, a qualified domestic trust (QDOT) may be used for this result. Assets held in a QDOT wouldn’t be taxed in the U.S. estate of the first spouse to die and would be taxed instead at the later death of the surviving non-citizen spouse. Also like a QTIP trust, a QDOT provides for income to be distributed to the surviving spouse; however, unlike in a QTIP trust, principal distributions from the QDOT to the non-citizen spouse would be subject to tax unless made for hardship (and may only be made if there’s a U.S. trustee able to withhold taxes).22 In the event that assets pass outright to a non-citizen spouse or to a nonconforming trust, a practitioner should promptly consider opportunities to reform and direct such assets to a QDOT instead.23
Jointly held U.S. estate taxable property merits particular attention. In the case of property owned jointly by citizen spouses, whether as tenants by the entirety or as sole joint tenants with rights of survivorship, the default rule is that only one-half of the property owned jointly is included in the estate of the first spouse to die.24 In the case of property owned jointly by spouses the survivor of whom isn’t a citizen, however, the rule differs: The full value of the jointly held property will be included in the estate of the first spouse to die, other than to the extent it can be shown the surviving non-citizen spouse provided the consideration.25
Deductions and Credits
When filing an estate tax return, there’s always planning to be done with potential deductions. For the typical estate of a U.S. citizen/resident, the analysis focuses on whether to take the deduction on the estate tax return or whether to claim it on the income tax return instead. That is in large part a mathematical exercise, as the estate will want to claim a deduction where it will provide the greatest reduction of tax liability. However, for the NRA, there’s a question of whether to take the deduction at all.
Deductions are generally available to the estate of an NRA on a proportional basis. As discussed above, situs determines the assets included in the gross estate of an NRA for U.S. purposes. Deductions aren’t sourced in a similar way, but instead administration expenses under IRC Section 2053 and losses under IRC Section 2054 are deductible on a proportional basis, determined by relationship of U.S. situs assets to the worldwide estate.26 For example, if the U.S. situs assets comprise 20% of the worldwide estate, then only 20% of the administration expenses and losses (whether or not directly attributable to the administration of the U.S. estate) will be deductible for U.S. purposes. To even claim these prorated deductions, the entire worldwide estate must be disclosed.27 Depending on the circumstances of the estate, the party filing the return may decide to refrain from claiming such deduction. Although claiming a deduction will reduce the tax liability, clients may choose not to claim the deduction over concerns about privacy given the degree of disclosure that would be required or because the professional fees needed to claim the deduction may be greater than the tax savings.
There’s one important exception to this proportional rule of which practitioners should be mindful—namely non-recourse debt secured by U.S. situs property. If an estate owns property, and the estate isn’t liable for debt (that is, it’s a non-recourse debt) and such non-recourse debt is secured by the U.S. situs asset, then only the net value of the property must be reported, which renders the debt fully deductible.28 If instead, the estate could be liable for the debt (that is, a recourse debt), then only a proportionate deduction is allowed on such recourse debt.29
As a general matter, practitioners should be broadly attuned to the more limited scope of deductions allowed for NRAs: not only with respect to administrative expenses and debts as discussed immediately above and with respect to the marital deduction (discussed previously) but also with respect to the charitable deduction, which is only available for U.S. situs property passing to U.S. charities and requires disclosure of the worldwide estate,30 and with respect to limitations on the deduction for U.S. state estate taxes.31
Practitioners should give careful thought as to whether the estate should file a protective claim for refund. An estate is generally entitled to a refund only if it makes the claim by the later of three years from filing a return or two years after the tax was paid.32 Given how long international estates can remain open and that many factors will be outside the control of the U.S. estate administration process, estates with foreign connections must be mindful of this potential deadline for estates that paid taxes. Estates may protect their rights to later seek a refund by filing a protective claim for refund. By following the procedures set forth in Revenue Procedure 2011-48, the estate may protect its right to seek a refund based on specified issues that will change the tax liability. A common reason to make such a claim is that the decedent has potential compliance issues with U.S. income tax filings or informational returns.
There may also be the opportunity to claim additional estate tax credit for the estate, supplementing the $13,000 credit that results from the $60,000 estate tax exemption applicable to NRAs. One potential option is to claim a benefit under an estate tax treaty, as some allow for the estate to claim a proportionate amount of the higher estate tax exemption amount available to U.S. persons, which can be very attractive given the current estate tax exemption of $12.92 million; however, such a position requires the disclosure of the worldwide estate. Further, this potential benefit is limited given the United States only has estate tax treaties with 15 countries, most of which are in Europe.33
Practitioners should also see if the estate is eligible for the credit for prior transfers available under IRC Section 2013, which is available to U.S. persons as well as to NRAs. This provision gives an estate credit for estate taxes paid by another estate for property that was included in both gross estates. The credit is 100% of the taxes paid on the property for deaths that are within two years of each other and reduces 20% each 2-year period thereafter. This provision rarely comes up with the estates of U.S. persons because so few estates pay estate taxes given the high exemption amounts, and many larger estates don’t have an estate tax liability due to the use of the marital deduction. However, with estates of NRAs where the exemption is so low, it’s more likely a tax liability is generated. This can be very effective when a married couple are NRAs, one leaves property to the other and the other dies soon after.
Reporting/Transfer Certificates
The reporting requirements for an estate of an individual dying overseas will be driven by the size of the estate and whether a U.S. executor is serving. For estates with foreign decedents, key determinations include whether an estate tax return is due and whether a transfer certificate is needed. While these two forms are often connected, when they’re needed depends on different factors. Whether an estate tax return is owed depends on whether the gross estate and taxable gifts are greater than the filing threshold. If the overseas decedent was a U.S. citizen or still qualifies as a U.S. domiciliary, then the estate enjoys the benefit of the $12.92 million exemption in 2023. If the decedent is an NRA, while only U.S. situs assets are factored into the value of the gross estate, the exemption of $60,000 provides far more limited relief. Ultimately, an estate that’s required to file a return may owe no taxes because of allowable deductions and credits available under U.S. tax law and/or estate tax treaties, but the estate must file a return to claim those benefits. In addition to having to file an estate tax return, these estates will also be required to file a Form 8971 (Information Regarding Beneficiaries Acquiring Property from a Decedent).34 For estates of NRAs, only U.S. situs assets need to be reported on this form.
The “executor” is the party required to file the return, but that term as used for estate tax law purposes isn’t intuitive.35 If there’s a fiduciary of the estate appointed by a U.S. court, then that person(s) is responsible for the return even if not the executor appointed in the foreign jurisdiction where primary administration will occur. If there’s no U.S. appointed executor, then it’s any party that has actual or constructive possession of the decedent’s property, which could include the foreign appointed fiduciary as well as financial institutions that have custody of the assets, and there’s no priority order of who should file under U.S. law.
A second concept unique to estates with foreign decedents is a transfer certificate, which is a document issued by the IRS that relieves a party from liability. As with all estates, an executor is liable for the payment of the estate tax.36 As noted above, if there’s no executor appointed by a U.S. court, under IRC Section 2203 “then any person in actual or constructive possession of any property of the decedent” is considered the executor and could in turn be liable for the payment of any estate tax liability.37 Understandably, no person or institution would want to be responsible for the tax liability of a decedent’s estate and not have the estate’s assets still under its control, so those parties will seek to be relieved of that liability in order to transfer assets. This can be done one of two ways. The first is that any party transferring property to be administered by an executor appointed by a U.S. court is relieved from liability.38 This is straightforward enough in concept because if there’s a U.S. executor serving, then that party ultimately bears the liability instead of the party that was simply in possession. However, as noted above, having an executor appointed in the United States can have undesirable income tax ramifications and comes with increased professional fees, so the estate may not wish to pursue appointment of a fiduciary by a U.S. court.
This leaves only one other option under U.S. tax law—namely obtaining a transfer certificate. Importantly, a transfer certificate is required for all estates in which the decedent resided overseas, which includes U.S. citizens. This document “is a certificate permitting the transfer of property of a nonresident decedent without liability.”39 For estates that must file an estate tax return, whether it’s Form 706 for U.S. citizens or domiciliaries or Form 706-NA for NRAs, the process is essentially the same. First, the estate tax return must be filed and any payment made. After the IRS has accepted the return as filed or after any disagreements are resolved, the executor must then fax a request for a transfer certificate that must include several attachments.40 For estates that weren’t required to file an estate tax return, technically a transfer certificate is required and the transferee won’t be liable if it obtains a statement of facts from a responsible party that shows the estate is below the applicable exemption amount.41 However, in practice, transferees will insist on provision of a transfer certificate, in which case the estate can still request one from the IRS. As no return is on file with the IRS, the IRS requires more information be provided than for larger estates that filed a return before issuing a transfer certificate.42 This an important point for practitioners to consider to set expectations because even when a U.S. return needn’t be filed, a similar amount of information will need to be gathered to request a transfer certificate.
Endnotes
1. See, e.g., N.Y. Est. Powers & Trusts Law Section 3-5.1; Conn. Gen. Stat. Section 45a-251.
2. N.Y. Surr. Ct. Proc. Act Law Section 707(1)(c) (prohibiting non-domiciliary non-citizen from serving without co-fiduciary domiciled in New York); Fla. Stat. Section 733.304 (general prohibition on non-family members or non-Florida domiciliary serving).
3. Revenue Ruling 64-307; Rev. Rul. 62-154.
4. Internal Revenue Code Section 7701(a)(31)(A); Rev. Rul. 81-112.
5. The estate tax provisions of U.S. tax law don’t define the term “U.S. citizen;” however, the Treasury regulations for income taxes define the term as “Every person born or naturalized in the United States and subject to its jurisdiction is a citizen.” Treasury Regulations Section 1.1-1(c).
6. Estate of Vriniotisv. Commissioner, 79 T.C. 298 (1982).
7. Treas. Regs. Section 20.0-1(b)(1): “A ‘resident’ decedent is a decedent who, at the time of his death, had his domicile in the United States;” Treas. Regs. Section 20.0-1(b)(2): “A ‘nonresident’ decedent is a decedent who, at the time of his death, had his domicile outside the United States under the principles set forth in subparagraph (1) of this paragraph.”
8. Estate of Khanv. Comm’r, T.C. Memo. 1998-22.
9. Estate of Jack v. United States, 54 Fed. Cl. 590 (2002).
10. Rev. Rul. 80-209.
11. IRC Section 2103.
12. IRC Section 2501(a)(2).
13. IRC Sections 2104 (for U.S. situs assets); 2105 (for items specifically excluded from being U.S. situs).
14. Blodgett v. Silberman, 27 U.S. 1 (1928).
15. IRC Sections 7701(a)(4); 7701(a)(5); Treas. Regs. Section 301.7701-5.
16. Rev. Rul. 55-701 (determining the situs of a partnership for purposes of the Convention With Great Britain and Northern Ireland With Respect to Taxes on Estates of Deceased Persons, July 25, 1946).
17. Sanchez v. Bowers, 70 F.2d 715 (2d Cir. 1934).
18. IRC Section 2103.
19. Treas. Regs. Section 20.2031-2(b).
20. IRC Sections 2056(d); 2523(i)(1).
21. IRC Section 2523(i)(2) provides for a $100,000 annual exclusion from gifts to a non-citizen spouse that would otherwise qualify for the marital deduction, indexed for inflation as directed by Section 2503(b) or $175,000 in 2023.
22. See Section 2056A generally for description of qualified domestic trusts and applicable rules and Section 2056A(b)(3)(B) specifically for the hardship exemption.
23. See Treas. Regs. Section 20.2056A-4.
24. IRC Section 2040(b).
25. Section 2056(d)(1)(B); Section 2040(a). Note that there are scenarios in which this default can be used for a taxpayer’s strategic benefit, to the extent that inclusion in the estate of the first spouse to die is a good result.
26. IRC Section 2106(a)(1).
27. Section 2106(b); Treas. Regs. Section 20.2106-1(b).
28. Sections 2016(a), 2053; Treas. Regs. Section 20.2053-7.
29. Estate of Fung v. Comm’r, 117 T.C. 247 (2001).
30. Section 2106(a)(2).
31. Section 2106(a)(4).
32. IRC Section 6511.
33. www.irs.gov/businesses/small-businesses-self-employed/estate-gift-tax-treaties-international.
34. IRC Section 6035(a).
35. IRC Sections 6018(a); 2203.
36. IRC Section 2002; Treas. Regs. Section 20.2002-1.
37. Liability extends to all assets in the gross estate including jointly owned Rev. Rul. 55-160.
38. Treas. Regs. Section 20.6325-1(c).
39.Treas. Regs. Section 20.6325-1(a).
41. Treas. Regs. Section 20.6325-1(a).
42. See supra note 40.