The United States taxes the estate. Much of Europe taxes the heir, and some countries also decide who the heirs must be.
When a family lives under one system and its documents were written for the other, the gaps tend to show up at the worst possible moment. Here is how the two sides fit together, and where I see the most risk.
The U.S. side in 2026
- $15,000,000 per person. That is the federal estate and gift basic exclusion for 2026, set by Public Law 119-21 (enacted July 4, 2025). Indexing for inflation starts after 2026. It has no scheduled expiry, which is not the same as being permanent.
- $30,000,000 for a married couple is possible, not automatic. It depends on portability. To keep the first spouse’s unused exclusion, the estate must file a timely Form 706, even when no tax is due.
- $19,000 per recipient. The annual gift exclusion for 2026.
The portability point deserves attention. If the first estate is small, or administered abroad, it is easy to skip the U.S. return. Skipping it can quietly forfeit up to $15,000,000 of exclusion for the surviving spouse.
The rule that surprises mixed-nationality couples
The unlimited marital deduction is the largest shelter in American estate planning. It does not apply when the receiving spouse is not a U.S. citizen.
- During life: gifts to a non-citizen spouse are capped at an annual exclusion of $194,000 for 2026.
- At death: the substitute is a qualified domestic trust (QDOT) under section 2056A. It needs at least one U.S. citizen or U.S. corporate trustee, specific withholding rights, and an irrevocable election on the estate tax return.
For an American married to a citizen of the country they live in, this is often the single biggest difference from a couple who never left.
How Europe looks at the same estate
Who pays. In Spain, inheritance tax falls on the person receiving, not on the estate. It is largely set by each region, so there is no single national rate.
Who must inherit. Forced heirship rules decide part of the outcome regardless of the will:
- Spain: children and descendants have a reserved share of two-thirds of the estate.
- Portugal: with a spouse and children surviving, the reserved share is two-thirds.
The EU Succession Regulation
For deaths since August 17, 2015, EU Regulation 650/2012 decides which country’s succession law applies (Denmark and Ireland do not participate).
- The default is the law of the country where you were habitually resident at death.
- The alternative is to choose, in your will, the law of your nationality.
Here is a detail that is easy to miss. There is no single “United States succession law.” Succession is state law. A will that simply chooses “U.S. law” leaves the Regulation’s fallback rules to decide which state. A will that names a specific state leaves far less to chance.
Treaties: who has one and who does not
The IRS lists fifteen countries with U.S. estate or gift tax treaties, including France, Germany, Italy, Switzerland and the United Kingdom.
Portugal and Spain are not on the list. Americans living there rely on the U.S. credit for foreign death taxes, without a treaty to allocate taxing rights.
Life insurance: two different questions
“Tax-free life insurance” usually refers to income tax. Death benefits are generally excluded from the beneficiary’s income.
Whether the policy is inside your taxable estate is a separate question. If you held any incidents of ownership at death, the proceeds are generally included. Same policy, two different answers.
What I review with a family
- Citizenship of each spouse, and of the children
- Country of habitual residence today, and likely in ten years
- Where each asset sits, and how it is titled
- Every will: which country it was written in, and whether it makes a clear choice of law naming a specific state
- Beneficiary designations on retirement accounts and life insurance
- Who owns each life insurance policy
- A plan to file Form 706 at the first death to preserve portability
None of this can be solved by one adviser alone. It works best when a U.S. estate attorney, a local lawyer or notary, the tax advisers on both sides, and the financial planner are working from the same facts.
Important disclosures
Estate, succession and tax rules differ by country and by U.S. state. Work with a U.S. estate attorney and a local lawyer or notary before changing a will, trust or beneficiary designation.
Educational information only. This article is for general educational and informational purposes only. It is not personalized tax, legal, immigration, investment, financial planning, insurance, accounting or estate planning advice, and it cannot account for every reader’s citizenship, residence, domicile, tax status, objectives or jurisdiction. Consult appropriately qualified U.S. and local professionals before making decisions or taking action.
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Tax, legal and immigration rules change. These rules are complex, fact dependent and subject to change. Deadlines, thresholds, tax rates, treaty provisions and reporting obligations may change after publication. Figures are as of September 2026. This site does not provide tax preparation, immigration filing or legal representation.
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A longer version with full sources appears on US Expat: Cross-Border Estate Planning: U.S. and Europe.