Estate Planning for U.S. Parents with Non-U.S. Children

Leaving U.S. property to children who are not U.S. citizens can trigger FIRPTA withholding and cross-border tax issues. Learn why directing your estate to sell the property may be a better option.

Many Korean-American families have children who live abroad or are not U.S. citizens. Parents often want to leave their U.S. home directly to those children. While this seems simple, it can create tax complications and administrative burdens for heirs overseas.

Why Direct Transfers Can Be Problematic

FIRPTA Withholding

If a non-U.S. child sells inherited U.S. real estate, the buyer must withhold 15% of the gross sale price under the Foreign Investment in Real Property Tax Act (FIRPTA). This applies regardless of actual gain, and the child must file a U.S. tax return to claim any refund.

Cross-Border Tax Filings

A non-U.S. heir may owe U.S. capital gains tax when selling the property and must comply with IRS filings, even if living abroad. This process can be confusing and expensive.

Practical Ownership Issues

Managing, renting, or co-owning U.S. property from abroad can be difficult and may cause disputes among siblings.

Why an Estate Sale Is a Better Strategy

Step-Up in Basis

At death, property receives a “step-up” in tax basis to its fair market value. If the estate sells promptly, there is usually little or no capital gains tax.

No FIRPTA Withholding

Because the estate is a U.S. taxpayer, no FIRPTA applies. This avoids unnecessary withholding and refund claims for foreign heirs.

Simplified Distribution

Sale proceeds are easily divided into equal shares, giving each child a fair and clean inheritance in cash.

Executor Flexibility

The executor can sell at the right time, ensuring maximum value for beneficiaries.

The Bottom Line

If your children are not U.S. citizens, leaving them U.S. property outright may create avoidable tax and compliance burdens. Directing your estate to sell the property and distribute cash often results in a cleaner, more tax-efficient inheritance.

Contact The Law Office of Jin-Wook Kim, P.C. to explore estate planning strategies that protect your family and simplify cross-border inheritance.

Estate Planning for U.S. Parents with Non-U.S. Children