Nobody counts the days: who is a nonresident for US estate tax
For estate tax, the United States does not count days. It uses domicile, a test with no numbers in it, decided after you die. What defines it and what turns on the answer.
The United States runs two residency tests and you are graded on both. The first counts days and is pure arithmetic. It governs income tax, and you probably already know it, because it is the one with 183 days in it. The second counts nothing. It reads your life, decides where your center was, and determines whether your estate is shielded by $15,000,000 or by $60,000.
This article is about the second one, which almost nobody explains to you.
It is written for the person who assumes they are a nonresident because they spend a few weeks a year in the United States, and equally for the person who assumes the opposite because they hold a green card. Both assumptions are reasonable. Both can be wrong. And the mistake is not discovered while you are alive to correct it.
It is worth saying up front why this carries more weight than it appears to. The estate tax test is not settled by you, or your accountant, or your banker. It is settled by an IRS examiner after your death, reading the paperwork you left behind, with no way to ask you what you meant. There is no procedure for having it confirmed in advance.
The place to start is the exact sentence the IRS uses when it explains this to its own examination staff.
"Resident" does not mean the same thing in the two laws
The IRS internal manual, in the section instructing examiners who handle international estates, states the point without hedging:
"The term 'resident' in the transfer tax context is different from the definition of 'resident' in the income tax context. Residence in the transfer tax context is based on the individual's 'domicile.'"
Same word. Different examination.
For income tax, section 7701(b) of the Internal Revenue Code gives you two mechanical routes. One is the green card. The other is the substantial presence test, which adds your days in the current year, one third of the prior year's days and one sixth of the year before that, and makes you a resident if the total reaches 183 with at least 31 days in the current year. It is a formula. You can plan around it with a calendar.
For estate and gift tax there is no formula. There is domicile. And domicile is not counted, it is interpreted.
The test has two parts and neither is a number
The Treasury regulation defines it in a single sentence, and that sentence rewards slow reading:
"A person acquires a domicile in a place by living there, for even a brief period of time, with no definite present intention of later removing therefrom."
"For even a brief period of time." There is no minimum. A year is not the threshold. Neither is six months. If you lived there and had no definite present intention of leaving, that is enough.
The same sentence continues, and the second half closes the door from the other side:
"Residence without the requisite intention to remain indefinitely will not suffice to constitute domicile, nor will intention to change domicile effect such a change unless accompanied by actual removal."
There is no maximum either. Living somewhere for years without intending to stay does not create domicile. And meaning to leave is not leaving: an intention to change your domicile changes nothing unless the move actually happens.
That is where the two-prong test comes from. Physical presence, which is objective and verifiable, plus an intention to remain indefinitely, which is neither. Intent is proved, the courts say, by "objective manifestations of subjective intent." Which is the polite way of saying: by your paperwork.
Eight factors, five of them not financial
When the question reaches a court, these are the elements weighed. No single one decides it:
- Whether you held a green card.
- Where you were born.
- How much time you spent at the claimed domicile.
- How the US home compares to the home in your own country, in size and in how fully it is furnished.
- Where your personal investments and business assets were held.
- What you said about your residence, in visa applications, wills, deeds, tax returns and insurance applications.
- Where your family was.
- Which churches, social clubs, political organizations and community associations you took part in.
Read that list again and notice what is on it. The size of your house. Your friends. Your parish. The club. Which country your mother is buried in. Your driver's license. Your doctor. None of those decisions is made with tax in mind, and all of them end up as evidence.
The uncomfortable part is that most of the families we work with accumulate these factors without noticing, and for good reasons. The children go to a school in Florida because it is a good school. The house there is larger than the one in Bogotá because the money buys more square footage. The Florida license gets issued because renting a car without one is a nuisance. Each decision is sensible on its own. Together they build a file.
A man who left in 1986 and never came back
In 1984, Barkat A. Khan obtained a permanent US residence visa. His estate would later report that he had established a California domicile in 1985.
In 1986 he traveled to Pakistan to see his family. Before leaving he obtained a reentry permit, which is what someone does when they intend to return.
He never returned.
He died in Pakistan in 1991, a Pakistani citizen, after five years living in his country of origin. The US Tax Court held that at the date of his death he was a US resident, and that his estate was entitled to the full unified credit under section 2010, because he had never abandoned his US domicile.
In that case the outcome favored the family. The full credit is worth a great deal more than $60,000, so the estate wanted precisely that conclusion and got it.
But the principle the court applied is the one that surprises people, and it runs just as well in the opposite direction. The IRS manual states it plainly: "Once a noncitizen establishes the United States as their domicile, they remain a United States domiciliary until a new domicile is established."
Five years of living abroad, as a citizen of that other country, without a single return trip, were not enough to shed a US domicile once acquired. Domicile does not lapse. It gets replaced, or it stays.
The door swings both ways
Here is the part that is usually framed badly, because it tends to get told as though "resident" were the bad answer and "nonresident" the good one. It is not that simple. It depends entirely on where your assets sit.
A non-domiciliary pays US estate tax only on US-situs assets, and the shield is worth $60,000.
A domiciliary pays on the worldwide estate, and the shield in 2026 is $15,000,000.
Now take two families.
The first holds $8,000,000 of US assets and little else. For that family, a finding of domicile is a rescue. It trades a $60,000 shield for a $15,000,000 one and probably owes nothing at all.
The second holds a $2,000,000 apartment in Miami and $40,000,000 at home: the family business, the land, the portfolio in Switzerland. As a non-domiciliary, exposure is measured against $2,000,000. As a domiciliary, it is measured against $42,000,000, and a $15,000,000 shield does not come close. The rate applied above it reaches 40%.
For the families we work with, whose wealth is concentrated at home, the second scenario is the disaster. Accidental domicile is not a technicality. It is the difference between a two million dollar problem and a forty-two million dollar one.
One procedural detail makes both versions worse. Where domicile is genuinely in doubt, the IRS manual instructs a rebuttable presumption in favor of the country where the person actually resided. That helps the family that truly lived at home. It hurts the family whose father spent eight months a year in Florida while saying he lived somewhere else.
Gift tax does not wait for you to die
Domicile gets discussed as a date-of-death problem. It is not. It starts earlier.
A non-domiciliary pays US gift tax only on US real property and on tangible personal property physically located in the United States. Intangibles fall outside it. That exclusion is a large one, because it covers shares in US companies: a non-domiciliary can give shares of a US corporation to their children with no federal gift tax, even though those same shares count as US-situs property on the day they die.
A domiciliary pays gift tax on worldwide transfers, across every class of asset.
So a finding of domicile does not merely reopen the arithmetic of the estate. It reopens years of gifts made in the belief that they sat outside the reach of the United States, and that now turn out to be reportable.
The non-citizen spouse
This is where the most common assumption of all fails silently: "everything passes to my wife and the tax is deferred."
The unlimited marital deduction, the rule that lets a married couple postpone estate tax until the second death, does not apply when the surviving spouse is not a US citizen. The IRS manual limits it: the marital deduction is available only if the surviving spouse is a United States citizen, or if the property passes to a qualified domestic trust, the QDOT, unless a treaty provides otherwise.
Lifetime gifts between spouses are not free either when the recipient is not a citizen. In 2026 the annual exclusion for that case is $194,000. Generous next to the $19,000 that applies to anyone else. Nothing like unlimited.
It is a rule almost no international couple knows about, and it turns the first death into a taxable event when everyone had planned around the second.
With no treaty, there is no tie-breaker
The United States has estate or gift tax treaties with fifteen countries: Australia, Austria, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, the Netherlands, South Africa, Switzerland and the United Kingdom.
Not one Latin American country is on that list. Not Mexico, not Brazil, not Colombia, not Argentina, not Chile, not Peru, not Panama, not the Dominican Republic. Spain is not on it either. The US treaty with Spain covers income tax, not estate tax.
That absence matters far more than it sounds, and for a reason that goes straight to the subject of this article. The modern estate tax treaties, those with the United Kingdom, France, Germany and the Netherlands, contain domicile tie-breaker articles. When two countries both claim the same person as domiciled, the treaty sets out which one prevails and obliges the other to give credit for the tax paid.
A French family in this position has a written procedure to invoke.
A Mexican or Colombian family has none. If the IRS concludes there was US domicile, there is no treaty article to appeal to and no mechanism to compel relief from double taxation. The examiner's conclusion stands, and whatever the home country charges on the same inheritance is added to it rather than offset against it.
That is why this question is more dangerous for our clients than for almost anyone else.
What can be done, and what cannot
Start with what cannot. There is no procedure for asking the IRS to confirm your domicile during your lifetime. No form, no advance ruling, no certificate. The question is answered afterward, in a file, and the one witness who could explain what he intended is no longer there.
That leaves two paths, and they work together.
The first is to reduce the ambiguity while you still can. You cannot fully control the eight factors, but you can control whether they agree with each other. A file that says the same thing everywhere is worth more than any single strong document. The usual problem is not one bad factor, it is contradiction: the will says Bogotá, the deed says Florida, the visa application says one thing, the tax return says another, and the club has the Key Biscayne address on file. Every piece is defensible alone. The set is not.
The second is to stop building the plan on winning the argument. If the estate cannot survive an adverse finding, then the finding cannot be the plan. That is where liquidity comes in: money that arrives at death without depending on how the domicile question is resolved, or on whether the heirs have enough time.
That is the honest role of life insurance in this conversation, and it is worth stating without overstating it. A policy does not settle your domicile or prevent the examination. What it does is make the result survivable. It puts cash where it is needed at the nine month mark, which is when Form 706-NA falls due, without forcing the family to sell the apartment, liquidate the portfolio at the worst possible moment, or borrow against assets that are frozen anyway.
And they are frozen. The IRS manual defines a transfer certificate as a release of the federal estate tax lien on a decedent's property, and in practice US banks, brokerages and transfer agents will not release a deceased nonresident's assets until the IRS issues one. The very assets that would pay the tax are held back by the process that determines it.
What to check before you assume you are a nonresident
None of this calls for a decision today. It calls for knowing what your paperwork says, which is a different thing from what you believe it says. Six specific items:
- What your last visa application stated about where you reside. And whether that matches your tax return.
- What your will says about your domicile, using that word. A great many wills declare it explicitly and nobody rereads them for twenty years.
- Which address appears on your property deeds, your investment accounts, your driver's license and your club memberships.
- How many nights a year each member of the family actually spends in the United States, counted rather than estimated. It does not decide domicile, but it is the first figure an examiner asks for.
- Where the wealth sits, as a percentage. If more than 80% of it is outside the United States, a finding of domicile is catastrophic, and that is worth knowing now.
- Whether your spouse is a US citizen, and whether the current plan assumes an unlimited marital deduction that does not exist.
If all six answers point the same way, you are in a strong position to hold it. If they contradict each other, you have already identified the work, and there is still time to do it yourself rather than leave it to your children.
Barkat Khan took out his reentry permit in 1986 believing he would go back. Five years later, a court read that permit and decided what he had meant by it.
One team, the whole problem
Complex is fine. Unattended is the expensive part.
Everything above is general information. Your own answer depends on your country, your ownership, and facts a professional has to confirm. We measure the exposure, place the life insurance that funds it, and coordinate the licensed attorneys, accountants, and trustees who complete the plan, so one team is accountable for the outcome.
