The US estate tax exemption for non-US investors is USD 60,000. Here is what that means — and what to do about it
Imagine you are a successful investor in Dubai. You have built a solid portfolio over two decades — USD 3 million in American stocks. Apple, Microsoft, an S&P 500 ETF. Nothing exotic. You reinvest the dividends. You sleep well.
Now imagine that on the day you die, the United States government presents your family with a bill for approximately one million dollars. Payable within nine months. In cash.
This is not hypothetical. This is US federal estate tax as it applies to non-US investors — and the overwhelming majority of the people it affects have no idea it exists.
The US estate tax exemption for a non-resident alien is USD 60,000. Not USD 60 million. Not USD 6 million. USD 60,000
The Rule Most International Investors Have Never Heard Of
The United States imposes a federal estate tax on US-situs assets owned by non-resident aliens (NRAs) — anyone who is not a US citizen and is not domiciled in the US. US-situs assets include shares in US corporations, US real property, and tangible assets physically located in the US.
US citizens and permanent residents receive an exemption of USD 15 million (as of 2026, per Deloitte’s 2026 estate tax guide). The exemption for everyone else — every non-US investor in the world — is USD 60,000.
Above that threshold, federal estate tax applies at rates between 18% and 40% on amounts over USD 1 million of taxable estate. The calculation is straightforward and the results are stark:
| USD 3m Portfolio | USD 5m Portfolio | |
|---|---|---|
| US assets | USD 3,000,000 | USD 5,000,000 |
| NRA exemption | (USD 60,000) | (USD 60,000) |
| Taxable estate | USD 2,940,000 | USD 4,940,000 |
| Federal estate tax | ≈ USD 1,158,800 | ≈ USD 2,158,800 |
| % of portfolio | 38.6% | 43.2% |
Estimates based on 2026 federal estate tax rate schedule (18%–40%). State estate taxes may apply additionally. Source: Deloitte 2026 estate tax guidance.
It Does Not Matter Where You Live
This is perhaps the most important thing to understand about US estate tax: it is triggered by the location of the asset, not the residence of the investor.
A UK investor, a German investor, a UAE investor, a Singaporean investor — if they hold shares in a US company, those shares are US-situs assets. It does not matter that the shares are held through a Swiss bank, a British brokerage, or a Dubai account. If the company is a US corporation, the shares are in scope.
This is a point EY’s cross-border tax team specifically flags: holding US shares in a foreign brokerage account provides no estate tax protection whatsoever. The tax follows the asset, not the custodian.
The only investors partially protected are residents of the 15 countries with which the US has a bilateral estate tax treaty: Australia, Austria, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Netherlands, South Africa, Switzerland, and the United Kingdom. Even these treaties only modify — they do not eliminate — the exposure for larger estates.
For everyone else — residents of the UAE, Saudi Arabia, Russia, China, Israel, Singapore, and most of the world — there is no treaty protection whatsoever. The USD 60,000 exemption is all they get.
The list of countries without a US estate tax treaty includes the UAE, Russia, China, Israel, Singapore, and most of the world
The Solution: IRC §2042 and Private Placement Life Insurance
There is a clean, well-established, legally sound solution to this problem — and it does not require a treaty, does not depend on where you live, and has been used by international investors for decades.
It is IRC §2042, the provision of US tax law that excludes life insurance proceeds from an insured person’s estate. The rule is simple: if your assets are held inside a Private Placement Life Insurance (PPLI) policy, and you do not retain control over the policy (no ‘incidents of ownership’), then on your death the policy proceeds pass directly to your beneficiaries — and the US imposes zero estate tax on them.
The key features of this solution:
- Works regardless of where the policy is issued — Luxembourg, Ireland, Mauritius, Cayman. The §2042 exclusion is a US domestic tax rule. It does not require a treaty.
- Works regardless of where you live. UAE resident, Russian national, Israeli investor — it applies to everyone equally.
- The full value of the portfolio can be removed from the US taxable estate. There is no cap.
- The structure is straightforward: the policyholder (typically a trust or family entity) owns the policy. You are the insured. Your family members are the beneficiaries.
| How the §2042 Exclusion Works | |
|---|---|
| 1 | You (the insured) have no rights or control over the PPLI policy. |
| 2 | Your assets are legally owned by the insurance carrier, which invests them in the agreed investment account. |
| 3 | On your death, the policy matures and the proceeds are paid to the named beneficiary. |
| 4 | Because the proceeds do not form part of your estate, US estate tax does not apply. |
| ✓ | The result: USD 3 million becomes USD 3 million for your family — not USD 1.8 million after tax. |
Does It Matter Which Carrier Jurisdiction?
For the estate tax benefit, no. The §2042 exclusion operates identically whether the policy is issued from Luxembourg, Ireland, Mauritius, or the Cayman Islands. The estate tax outcome does not depend on the carrier’s location.
Where carrier jurisdiction does matter is in the area of withholding tax on dividends — the 30% US tax on dividends paid to non-US investors. Carriers in jurisdictions with a US income tax treaty (Luxembourg, Ireland, Switzerland, Malta) can reduce that rate to 15% inside the policy. Carriers in non-treaty jurisdictions cannot. That analysis is covered in a separate article.
For estate planning — which is the primary reason most international investors structure through PPLI — carrier jurisdiction is secondary. The first question to answer is whether the problem is solved. And for US estate tax, §2042 answers that question completely, regardless of where the policy is issued.
The Conversation Most Advisers Are Not Having
US estate tax exposure on non-US investors is systematic and near-universal. Any client who holds shares in a US company — whether directly in a brokerage account, through a fund, or via a custodian in Europe or the Gulf — is potentially exposed.
The challenge is that this exposure sits at the intersection of US tax law and international wealth management — a gap in coverage that most local advisers never explore, and that clients themselves almost never ask about because they do not know to ask.
The result is a large population of investors carrying a significant, perfectly foreseeable liability — one that will fall on their families at the worst possible time, with a nine-month payment deadline and no obvious source of funds to meet it.
The PPLI solution is not complex. The legal foundation — §2042 — has been in place for decades. The products are well-established and regulated. For any NRA client holding meaningful US assets, the question is not whether they should explore this. The question is why it has not already been done.
Download the full US Assets / Non-US Persons PPLI Whitepaper
Non-US persons holding US assets — equities, bonds, bank accounts, real estate — face 40% US estate tax above a $60,000 exemption with no credit equivalent. Most clients and many advisers are unaware of this exposure. Offshore PPLI held by a Luxembourg or Irish carrier restructures the ownership of those assets in a way that may remove the US estate tax nexus entirely. This guide covers IRC §2042, §817(h) diversification requirements, withholding tax rates by carrier (Luxembourg 15%, Mauritius 30%, and the §871(h) zero-rate portfolio interest exemption), and FIRPTA considerations for US real estate. Free for professional advisers. Verified email required.