Most countries tax you based on where you live. The United States taxes you based on who you are.

If you hold a US passport, a green card, or were born on American soil — it doesn't matter whether you've lived in Hong Kong, London, or Dubai for the past decade, in the eyes of the IRS, you are still a US person, and the full weight of American tax law follows you everywhere you go.

But "US person" is actually the narrow version of a much broader concept: the US-Connected Person.

This is someone whose financial life intersects with the United States in ways that trigger legal, tax, and compliance obligations — regardless of where they live, work, or hold citizenship. It includes:

• US citizens living abroad — the classic expat carrying a US passport

• Green card holders — even those who haven't set foot in the US in years

• Former US residents who may still have filing obligations

• Non-US nationals married to a US spouse — often unaware their joint finances carry American reporting strings

• Beneficiaries of US trusts or estates

• Holders of US financial accounts or real property

>> The category is wider than most people realize, and the obligations that come with it are more complex — and more unforgiving — 

than almost any other tax system in the world. <<

Why this matters now

The global financial system has quietly been restructured around US compliance requirements. FATCA — the Foreign Account Tax Compliance Act — effectively conscripted foreign banks and financial institutions into the IRS's reporting network. Today, if you are a US-Connected Person, your bank in Singapore, your brokerage in the UK, or your insurance company in Hong Kong may already be reporting your account details to the US government — whether you know it or not.

The consequences of getting this wrong are severe

Penalties for unreported foreign accounts can reach 50% of account value per year. Offshore investment structures that seem perfectly ordinary in Asia or Europe — unit trusts, foreign mutual funds, insurance wrappers — can trigger punitive US tax treatment under Passive Foreign Investment Company (PFIC) rules that most people have never heard of.

Meanwhile, US-Connected Persons are being quietly offboarded by banks, brokerages, and wealth managers who have decided the compliance cost isn't worth it. Some can't open accounts. Others can't access the investment products available to their non-US colleagues sitting next to them.

This is not a niche problem

There are an estimated 9 million US citizens living outside the United States. Millions more hold green cards or have US connections through marriage, birth, or inheritance. Many of them are senior executives, entrepreneurs, and investors who have built genuinely international lives — and are now discovering that the United States has built a compliance framework that was never designed for a cross-border lifestyle. 

Over the coming weeks, I'll be writing a series exploring the specific challenges US-Connected Persons face:

           • Foreign Bank Account Report (FBAR) and Foreign Account Tax Compliance Act (FATCA) — what you're required to report, and the penalties when you don't

           • Foreign Earned Income Exclusion (FEIE) and Foreign Tax Credits — the tools available to reduce double taxation, and their real limitations

           • Passive Foreign Investment Companies (PFIC) and investment restrictions — why your foreign mutual fund is a tax nightmare

           • Estate and gift tax exposure — the traps that catch families who never planned for them

           • Banking and brokerage access — the quiet discrimination happening in financial services

           • Renunciation and exit tax — the cost of walking away from US status

If any of this touches your situation — I hope this series gives you a clearer picture of the landscape and what can be done about it.  The first step to solving a problem this complex is understanding that it exists.

Of all the issues facing US-Connected Persons living internationally, estate and gift tax planning may be the one most consistently deferred, most widely misunderstood, and most catastrophically expensive when it catches families unprepared.

The United States imposes a federal estate tax on the worldwide assets of its citizens and domiciliaries at rates of up to 40%. For non-US persons — including many spouses, partners, and family members of US citizens — it imposes a narrower but still significant tax on US-sited assets. Understanding which regime applies to you, and where the traps are, is essential planning for any internationally mobile family.

The Worldwide Reach of US Estate Tax

US citizens are subject to US federal estate tax on their worldwide assets at death — regardless of where they live, where the assets are held, or whether those assets have ever touched American soil. For 2024, the federal exemption is $13.61 million per individual ($27.22 million for married couples), indexed for inflation.

That exemption sounds large. But there are two critical warnings:

• Sunset provision: Under current law, the elevated exemption amounts introduced by the Tax Cuts and Jobs Act of 2017 are scheduled to revert to approximately $7 million (inflation-adjusted) per person after December 31, 2025 — absent congressional action. For families with meaningful assets, this is an urgent planning consideration.

• State estate taxes: Many US states impose their own estate taxes with exemptions as low as $1 million and no portability between spouses. A US citizen domiciled abroad may still be subject to state estate tax in their last state of domicile.

The Non-Citizen Spouse Problem

US tax law treats a surviving non-citizen spouse very differently from a surviving US citizen spouse. Under normal rules, assets passing to a US citizen spouse at death qualify for an unlimited marital deduction — no estate tax, regardless of amount. This deduction is not available for a non-citizen spouse.

A US citizen with a non-citizen spouse who passes away leaving a significant estate may trigger substantial estate tax at the first death — a result that would not occur if both spouses were US citizens or if proper planning structures were in place.

The primary planning tool for this situation is a Qualified Domestic Trust (QDOT) — a specially structured trust that allows assets to pass to a non-citizen spouse while deferring estate tax until distributions are made. But a QDOT must be established before death, and the trust requirements are specific and technical. It is not something that can be organized retroactively.

Non-US Persons and US-Sited Assets

For non-US persons — including non-citizen, non-resident individuals — US estate tax applies only to US-sited assets. But the definition of 'US-sited' is broader than many people expect:

• US real estate

• Shares in US corporations (even held through foreign accounts or nominee arrangements)

• US bank deposits (with limited exceptions)

• US-based life insurance policies on the life of the decedent

The exemption available to non-US persons for US-sited assets is only $60,000 — not the multi-million dollar exemption available to US citizens. A non-US family member who inherits a US stock portfolio or a US property interest may face estate tax on virtually the entire value.

Gift Tax: The Often-Forgotten Partner

US gift tax applies to transfers of property during life, and for US citizens, it applies to worldwide transfers. The annual exclusion for 2024 is $18,000 per recipient. Gifts to a non-citizen spouse are subject to a separate annual exclusion of $185,000 (2024, indexed).

Large lifetime gifts reduce the donor's estate tax exemption dollar for dollar — the estate and gift tax are unified. Gifts made within three years of death may be pulled back into the taxable estate in some circumstances.

For non-US persons, gift tax applies only to transfers of US-sited tangible property — shares in US companies transferred during life by a non-US person are not subject to US gift tax, which creates planning opportunities that estate tax alone does not.

Planning Across Borders

The intersection of US estate and gift tax with foreign succession law, forced heirship rules, and non-US estate planning structures creates complexity that demands specialist advice. Some of the most common planning considerations for US-Connected families:

• Review and update wills and beneficiary designations to reflect cross-border asset structures.

• Evaluate QDOT structures for US citizens married to non-citizen spouses.

• Consider life insurance as an estate liquidity tool — particularly for illiquid assets like real estate or private business interests.

• Assess the impact of the 2025 exemption sunset on current estate plans.

• Understand how foreign situs assets interact with the US estate tax, particularly in countries with no bilateral estate tax treaty with the US (most Asian jurisdictions have none).

Estate planning for US-Connected families is not a 'someday' exercise. The best time to address these issues is before a triggering event — not during one.

Next in the series: your overseas bank is talking to the IRS.  We examine the filing requirements for US-connected persons and what your overseas bank is required to file about you - and the consequences for failing to report.