Overseas Real Estate: Planning for Property Outside the United States
U.S. citizens and residents may own property abroad as a home, an investment, or an inheritance. The country where the property is located determines ownership, transfer, and inheritance rights. U.S. rules also apply to rental income, gains on sale, estate taxation, and reporting of related accounts and entities. Planning coordinates these requirements.
Milvidskiy Law Group P.C. advises on the U.S. legal and tax aspects of owning, transferring, and selling overseas property, in coordination with counsel in the country where it is located. We also assist non-residents acquiring U.S. real estate, a related service described below.
Key Takeaways:
- Local law governs the property. Forced heirship, restrictions on foreign ownership, notarial transfer requirements, and the non-recognition of trusts are common, and the U.S. will or revocable trust may have no effect on the property at all.
- U.S. tax and reporting. Rental income and gain on sale are reported here with a credit for foreign tax paid, the property is in the U.S. taxable estate of a citizen or domiciliary, and the entity or accounts through which it is held may be reportable.
- How the property is held is decided before the purchase. Direct ownership, a local company, a U.S. entity, or a trust each produce a different result under both systems, and changing the structure after the purchase is often a taxable transfer in the foreign country.
Buying Property Abroad
The questions to answer before signing a contract in another country are the ones a local buyer would ask, plus the ones that arise because the buyer is a U.S. person. Whether foreigners may own the property outright, or only through a local entity or a long-term lease, differs by country and sometimes by region within a country. Transfers are typically made before a notary who is a public official rather than an advocate for either side, so the buyer’s own counsel is retained separately. Title systems, surveys, and the equivalent of title insurance vary. Financing from a foreign bank is available in some countries and not in others, and a U.S. lender will not generally lend against foreign property.
From the U.S. side, the choice of ownership vehicle is the main decision. Direct ownership is the simplest and, for U.S. reporting, the lightest, since directly held foreign real estate is not itself a reportable financial asset. Ownership through a foreign company avoids some local succession problems but makes the company a reportable foreign corporation, may subject its income to U.S. tax rules for foreign investment companies, and can forfeit the favorable capital gains rate on sale.
Ownership through a U.S. entity may not be recognized locally. Ownership through a trust depends on whether the country recognizes trusts. Planning with foreign assets must also account for reporting obligations. The vehicle is chosen with local counsel before the purchase, because restructuring afterward is usually a taxable transfer in the foreign country.
Succession of Property Abroad
Forced heirship and local succession law
Many countries reserve a fixed portion of a decedent’s estate, or of the real estate within it, for children or a spouse regardless of any will. A U.S. will leaving the foreign apartment to one child, or to a second spouse, may be overridden to the extent it invades the reserved share. In the European Union member states that apply the succession regulation, a U.S. citizen can elect in a will to have the law of their nationality govern the succession, which can avoid forced heirship for property there; the election is made in the will, and its tax consequences are confirmed with local counsel. In other countries the reserved share can be planned around only through lifetime transfers, local entities, or agreements with the heirs, where local law permits them.
Wills, probate, and transfer
A U.S. will is often given effect abroad only after a local proceeding that recognizes it, and some countries require a local will, a notarial will, or an inheritance certificate before title can be transferred. A local will limited to the property in that country, drafted so that it does not revoke the U.S. will and coordinated with it on executors and taxes, is the usual solution. After a death, the U.S. executor or the heirs will need local counsel to complete the transfer, pay the local inheritance tax, and register the new owner, and we coordinate that with the U.S. estate administration through our probate and estate administration practice.
Trusts
A revocable trust is the standard U.S. tool for avoiding probate, and it does not work in a country that has no concept of a trust. Attempting to transfer foreign property into one may be refused by the land registry, treated as a gift to a stranger and taxed, or disregarded entirely. Where trusts are recognized, the local tax treatment of the transfer and of the trust’s ownership must be confirmed. The plan for foreign property usually keeps it out of the U.S. trust and addresses it through a local will or entity instead.
U.S. Tax on Foreign Property
A U.S. citizen or resident reports the rental income from foreign property on the U.S. return, with the same deductions available for domestic rental property and a credit for foreign income tax paid, subject to limits. Gain on sale is taxed in the United States, with a credit for foreign tax on the gain, and the exclusion of gain on the sale of a principal residence is available if the foreign property was the taxpayer’s residence and the requirements are met.
Currency movements between purchase and sale can produce gain or loss in dollars that does not exist in the local currency, and the repayment of a foreign-currency mortgage can itself produce taxable gain.
At death, the property is included in the U.S. estate of a citizen or domiciliary at its dollar value, against the $15,000,000 exemption in 2026, receives a basis adjustment to that value for U.S. purposes, and may be subject to the foreign country’s inheritance tax as well, with a credit against U.S. estate tax for the foreign tax paid on foreign property. Our tax planning and estate tax planning attorneys handle the U.S. side.
Related Service: U.S. Property for Non-Resident Buyers
We also advise on the reverse situation: a family abroad buying an apartment in New York or a house in New Jersey or Connecticut for a child, an investment, or a future move. A non-resident who is not domiciled in the United States is subject to U.S. estate tax on U.S. real estate above a $60,000 exemption, against $15,000,000 for a citizen in 2026, and an estate tax return is required when U.S.-situated assets exceed $60,000.
When the non-resident sells, the buyer must withhold fifteen percent of the price and remit it to the IRS. No withholding applies where the buyer will use the property as a residence and the price is $300,000 or less, the rate is ten percent for a residence purchase of $1,000,000 or less, and a withholding certificate can reduce the amount where the actual tax will be less.
How the non-resident holds the property, whether directly, through a U.S. entity, through a foreign corporation, or through a trust, determines the estate tax exposure, the income tax on rent and sale, and the reporting, and the structure is chosen before the contract is signed. We coordinate the real estate purchase with the family’s broader international estate plan.
What Our Overseas Real Estate Service Includes
- Advice on the ownership vehicle for a foreign purchase, with the U.S. tax and reporting consequences of each option, in coordination with local counsel.
- Coordination of the U.S. estate plan with a local will, a choice-of-law election, or a local entity for the foreign property.
- Review of existing foreign holdings for reporting compliance, entity classification, and succession problems.
- Planning for the U.S. tax on rental income, sale, and currency gain, with the client’s accountant.
- Coordination of the foreign transfer after a death with the U.S. probate or trust administration.
- Ownership structures, purchase representation, and estate planning for non-residents acquiring U.S. real estate, including withholding on a later sale.
- Execution and authentication of documents for use abroad.
- Coordination with our cross-border estate planning attorneys and with counsel in the country where the property sits.
Coordinating With Counsel in the Property’s Country
Our attorneys advise on U.S. federal and state law and do not give advice on the law of the country where the property is located or represent clients in transactions there. We identify the questions local counsel must answer, work with counsel the client selects or we recommend, and integrate their answers into the U.S. plan.
Schedule a Consultation About Overseas Real Estate
If you own or are buying property outside the United States, or are a non-resident buying property here, bring the property documents, any local wills or agreements, your existing U.S. estate plan, and your recent tax returns. Our attorneys practice in New York, New Jersey, and Connecticut. Contact Milvidskiy Law Group P.C. to schedule a consultation.
This page is provided for general informational purposes only and does not constitute legal advice. Laws differ by state and change over time. For advice about your situation, consult a qualified attorney.
Frequently Asked Questions
Will my U.S. will control my property abroad?
Often not fully. The property is governed by the law of the country where it sits, which may reserve a share for children or a spouse regardless of the will, require a local proceeding before the will is given effect, or require a local or notarial will. A local will limited to that property and coordinated with the U.S. will is the usual solution.
Can I put my foreign property in my revocable trust?
Usually not where the country has no concept of a trust. The land registry may refuse the transfer, or local law may treat it as a taxable gift. Where trusts are recognized, the local tax treatment is confirmed first. The plan for foreign property usually addresses it through a local will or entity instead.
How should I hold property I am buying abroad?
It depends on the country and on your goals. Direct ownership is the simplest approach for U.S. reporting. A local company can solve succession problems but becomes a reportable foreign corporation and may create additional U.S. tax costs. A U.S. entity may not be recognized locally. The vehicle is chosen with local counsel before the purchase, because restructuring afterward is often a taxable transfer there.
Do I report foreign real estate to the IRS?
Directly held foreign real estate is generally not a reportable financial asset, but the rental income is reported on your return, the foreign accounts that receive it are reportable once foreign accounts together exceed $10,000 at any time in the year, and property held through a foreign entity is reported through the entity.
Is the rental income taxable in the United States?
Yes, for a U.S. citizen or resident. The same deductions available for domestic rental property apply, and a credit is available for foreign income tax paid, subject to limits. Your accountant reports the income and claims the credit.
What happens when I sell property abroad?
The gain is taxed in the United States with a credit for foreign tax on the gain. The principal residence exclusion is available if the property was your residence and the requirements are met. Currency movements can produce gain or loss in dollars that does not exist in the local currency, and repaying a foreign-currency mortgage can itself produce taxable gain.
What is forced heirship?
A rule in many countries that reserves a fixed portion of a decedent’s estate, or of the real estate within it, for children or a spouse regardless of any will. A U.S. will that invades the reserved share may be overridden to that extent. In some countries it can be avoided by a choice-of-law election or planned around with lifetime transfers or local entities.
Can I choose U.S. law to govern property in Europe?
In the European Union member states that apply the succession regulation, a U.S. citizen can elect in a will to have the law of their nationality govern their entire succession, which can avoid forced heirship. The election must be made correctly and its local tax consequences confirmed with counsel there.
My parents abroad want to buy an apartment in New York for me. What should they know?
A non-resident owner is subject to U.S. estate tax on U.S. real estate above a $60,000 exemption, against $15,000,000 for a citizen in 2026. When a non-resident sells, the buyer must withhold fifteen percent of the price for the IRS, or ten percent where the buyer will use the property as a residence and the price is $1,000,000 or less, and nothing where the buyer will use it as a residence and the price is $300,000 or less. Whether your parents hold it directly, through a U.S. or foreign entity, or through a trust changes the estate tax, the income tax, and the reporting, and the structure is chosen before the contract is signed.
Do you handle the transaction in the other country?
No. We advise on U.S. federal and state law, identify the questions local counsel must answer, and coordinate with counsel in the country where the property sits. The local purchase, transfer, and registration are handled there.
