How to Pass Down Real Estate Across Borders Without Tax Nightmares

Passing down real estate to loved ones gets more complex when the property lies across international borders. Unlike domestic transfers, international real estate transfers involve navigating different legal systems, tax obligations, and reporting requirements.

Luckily, there are legal structures and tax strategies that can minimize the complications and ensure that your property passes smoothly to your heirs.

Understanding International Estate Planning

Estate planning becomes more complex when foreign real estate is involved, as multiple legal systems and tax rules come into play. Each country may have its own inheritance laws, estate laws, and reporting requirements, which can create confusion and financial strain for heirs.

International planning helps coordinate cross-border issues to ensure your wishes are respected while minimizing legal and tax burdens for your loved ones. With a well-structured plan, you can streamline the transfer process and protect global assets for future generations.

Key Tax Considerations in Cross-Border Real Estate Transfers

Before transferring real estate internationally, it’s important to consider several key tax implications, which can vary depending on the location of the property as well as the residency and nationality of both the owner and the beneficiaries.

“The most common tax challenges people face when transferring real estate across international borders is making sure they do not trigger a taxable event or miss reporting obligations with significant IRS penalties,” said Jasmine DiLucci, tax lawyer, CPA, and founder of DiLucci CPA Firm.

If the deceased was a U.S. citizen or resident, their worldwide assets, including foreign real estate, are subject to U.S. estate taxes if the estate exceeds the exemption amount of $13.99 million in 2025. Whether the property is used for rental income also impacts tax and reporting obligations.

“If the real estate is a personal home with no rental income or bank accounts, then the tax and reporting implications are not significant. But if the real estate is a rental property, then there will be tax and reporting consequences,” DiLucci added.

Additionally, if the real estate is transferred during the person’s lifetime, gift taxes may apply. The person gifting the real estate is generally responsible for paying any applicable gift tax.
But in some cases, the recipient may agree to pay it through a special arrangement.

“US real estate owned by a non-resident or foreign national transferred through inheritance or gift usually creates a taxable event for real estate since foreign nationals do not have the same estate tax exemption afforded to U.S. residents,” DiLucci noted.

However, certain gifts are exempt from taxation.

For example, in 2025, the annual exclusion for gifts is $19,000 per recipient. This means that donors can give away gifts worth up to $19,000 without paying the gift tax.

Legal Systems and Their Impact on Estate Planning

The legal system in a given country plays an important role in how estates are planned and executed. Broadly, legal systems fall into two categories: common law and civil law.

• Common law systems, such as those in the U.S., U.K., and Canada, typically allow more freedom in determining how assets are distributed, often relying heavily on wills and trusts.
• Civil law systems, such as those in France, Greece, and Spain, may impose forced heirship rules, where certain portions of an estate go to specific heirs, regardless of the decedent’s wishes.

Understanding which legal framework applies is necessary to crafting an estate plan that aligns with the local laws while still reflecting the individual’s intentions.

Role of Tax Treaties in Mitigating Double Taxation

Tax treaties between the U.S. and other countries help prevent your heirs from being taxed twice when they inherit foreign real estate. These agreements usually give the country where the property is located the sole right to tax it, but they may also allow a credit so you’re not taxed again in the U.S. on the same property.

“Utilizing the taxes paid in the other country to offset any potential US tax liability is the key driver to reduce double taxation,” DiLucci said.

Imagine a U.S. citizen inherits a house in France from a parent who lived there. France imposes an inheritance tax on the property, which the heir must pay before taking ownership. Normally, the U.S. would also include the value of that house in the deceased’s estate for U.S. tax purposes. However, because the U.S. and France have a tax treaty, the heir can apply a credit for the French inheritance tax paid, reducing or potentially eliminating the U.S. estate tax on the same property.

Strategies for Minimizing Tax Implications

Several strategies can be leveraged to reduce the tax implications of international real estate transfers, including:

Gifting: Transferring ownership to heirs while living can potentially reduce tax liabilities.

Business Ownership Holding property through a business structure, such as a corporation, can simplify the transfer process, as well as offer tax benefits and protect the asset.

Joint Ownership: Adding an individual as co-owner of the property can help avoid probate and estate taxes.

“When transferring real estate internationally, available tax strategies will be based on factors such as income level, asset value, country where the property is located, and whether the person is a US citizen or resident. The location of the real estate is significant since a tax treaty may relieve certain tax implications when transferring by inheritance or gift,” said DiLucci.

Utilizing Trusts for Cross-Border Real Estate Transfers

Trusts are one of the most effective tools for managing international real estate planning. A trust allows an individual, the grantor, to place assets under the control of a trustee for the benefit of the beneficiaries. In cross-border scenarios, trust can help:

• Avoid probate in multiple jurisdictions
• Reduce exposure to estate and inheritance taxes
• Maintain control over how and when assets are distributed

“While trusts can provide benefits, they usually create additional reporting obligations and, in many instances, do not provide a respective tax benefit if not planned correctly,” said DiLucci.

The Bottom Line

Cross-border real estate transfers aren’t as simple as when you’re dealing with non-U.S. properties. Whether you’re planning to pass down a vacation home abroad or your primary residence, it’s important to know the laws and requirements for reporting and taxes. This allows for proper international estate planning, which allows families to preserve wealth, honor their legacy, and ensure that their loved ones are protected across borders.