What Are Portuguese Inheritance Laws and Taxes for U.S. Citizens?

The short answer: Portugal abolished its inheritance tax in 2004 and exempts transfers to a spouse, children, grandchildren, and parents from the stamp duty that replaced it, so a U.S. citizen leaving Portuguese assets to close family will usually owe Portugal nothing at death. That is the good news, and it is where most Americans stop reading. The rest of the picture is harder. If your home is in Portugal, Portuguese law governs your whole estate unless your will elects otherwise, and Portuguese law reserves up to two-thirds of it for your spouse and children. Portugal does not recognize trusts and taxes distributions from a U.S. trust to a Portuguese resident as income at 28 percent. And the United States continues to tax your worldwide estate, with no treaty between the two countries to coordinate the result.

This article explains who inherits under Portuguese law, how to elect American law instead, what Portugal does and does not tax, why the American revocable living trust is a problem, and what a U.S. citizen with Portuguese ties should have in place. It is a map for the conversation with a Portuguese lawyer or notário, not a substitute for it.

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Which Country’s Law Governs Your Estate If You Live in Portugal?

Portugal is bound by the EU Succession Regulation, which has governed successions in participating member states since August 17, 2015. Its general rule is that the law of the country where you were habitually resident at death governs your succession as a whole, wherever the assets are located. An American who has settled in Lisbon or the Algarve and lives there year-round is habitually resident in Portugal, and Portuguese law will apply to the apartment in Cascais, the house in New Jersey, and the brokerage account in New York alike unless the will says otherwise.

The regulation applies universally, so the law it selects governs even when that law is American. That is what makes the election described below available.

What Does Portuguese Forced Heirship Reserve for Your Family?

Portuguese law protects a class of “legitimary heirs,” the spouse, descendants, and ascendants, by reserving a portion of the estate, the legítima, that the deceased cannot give away. The shares under the Portuguese Civil Code are:

• Spouse and children together: two-thirds of the estate is reserved
• Children only, no surviving spouse: one-half if there is one child, two-thirds if there are two or more
• Spouse only, no children or parents: one-half
• Spouse and parents, no children: two-thirds; parents alone: one-half or one-third depending on the generation

Only the remainder, the quota disponível, may be left freely. A will that leaves everything to the surviving spouse, the default American plan, cannot be carried out as written if there are children. Since 2018, Portuguese law has allowed spouses who marry under a separation-of-property regime to renounce their status as legitimary heirs in a prenuptial agreement, a tool with no American equivalent that can matter for second marriages.

None of this resembles American state law, under which a competent adult may leave a child nothing.

Can a U.S. Citizen Choose American Law Instead?

Yes. Article 22 of the EU regulation lets a person choose the law of a country whose nationality they hold, at the time of the choice or at death, to govern the entire succession. The choice must be made expressly in a will. For an American, that means electing the law of the United States, which in practice resolves to the law of the U.S. state with which you are most closely connected, usually your last domicile. An election of your home state’s law removes the Portuguese reserved share and lets you leave your estate as that state allows.

Portugal has not enacted the kind of compensatory levy that France added in 2021 to claw back a share of French assets for children when a foreign law is chosen, so a properly made election is generally respected. The election should appear in both the U.S. will and any Portuguese will, and the two documents must not revoke each other.

Does Portugal Tax an Inheritance?

Not in the way most countries do. Portugal abolished its inheritance and gift tax in 2004. In its place, gratuitous transfers of Portuguese-situs assets, including real estate, vehicles, and shares registered in Portugal, are subject to stamp duty, the Imposto do Selo, at a flat 10 percent. Transfers to a spouse, to descendants, and to ascendants are exempt. Transfers to anyone else, including siblings, nieces and nephews, unmarried partners not recognized as de facto unions, friends, and charities without a specific exemption, are taxed at the full 10 percent.

The duty applies only to assets located in Portugal. A U.S. brokerage account or American real estate is outside it regardless of where the deceased lived. Portugal has no wealth tax on financial assets, although an additional municipal property tax applies to high-value Portuguese real estate.

The procedural side is where U.S. families stumble. The death must be reported to the Portuguese tax authority by the end of the third month after death using the stamp duty declaration, whether or not any duty is owed, and late reporting draws penalties. The heirs establish their status through a habilitação de herdeiros, a notarial deed identifying who inherits, which non-resident heirs can complete through an attorney holding an apostilled power of attorney.

Does the United States Also Tax the Estate?

Yes. The United States taxes its citizens on their worldwide estate wherever they live, with a basic exclusion of 15 million dollars per person for deaths in 2026. Most Americans in Portugal will owe no federal estate tax, but larger estates must plan for it, and there is no estate or gift tax treaty between the United States and Portugal to allocate taxing rights or provide credits. The countries have an income tax treaty only. Where Portuguese stamp duty is owed on a transfer to a non-exempt heir and the estate is also large enough for U.S. estate tax, relief depends on the U.S. foreign death tax credit rules rather than on any treaty.

Heirs who later sell Portuguese property also face two capital gains systems. U.S. heirs receive a step-up in basis for U.S. purposes, but Portugal computes its own gain under its own rules, and the two rarely match.

How Does Portugal Treat an American Trust?

Badly, from an American’s point of view. Portugal does not recognize the trust as a legal form and has not joined the Hague Trusts Convention. Portuguese tax law addresses trusts only to tax what comes out of them. Since a 2015 reform, a distribution from a trust or similar “fiduciary structure” to a Portuguese tax resident during the trust’s life is taxed as investment income at a flat 28 percent on the entire amount, with no distinction between original capital and earnings. When a trust is wound up, a distribution back to the settlor is taxed as a capital gain at 28 percent, and a distribution to anyone else is treated as a gift subject to the 10 percent stamp duty.

The consequences for the standard American plan are severe. A U.S. citizen who moves to Portugal with a revocable living trust holding a brokerage account will find that every distribution from the trust to themselves is potentially taxable in Portugal, even though U.S. law ignores the trust entirely. Children in Portugal who receive distributions from a parent’s irrevocable trust owe 28 percent on each one. Portuguese land registries will also resist recording a trust as owner of real estate.

The practical answer for most families is to keep U.S. trusts out of Portugal altogether: do not fund a trust with Portuguese assets, and think carefully before moving to Portugal as a beneficiary of a trust that will make distributions. Where a trust is unavoidable, its terms and distribution pattern should be reviewed by Portuguese counsel before the move, not after.

What Portuguese Planning Tools Should Be on the Table?

A Portuguese will. The most secure form is the testamento público, made before a notário in the presence of two witnesses and recorded in the notary’s books and the central will registry. A closed will, the testamento cerrado, is written privately and approved by a notário. Foreigners may make either. The Portuguese will should cover Portuguese assets, confirm the choice of U.S. law, and be coordinated with the U.S. will so neither revokes the other.

Lifetime transfers. Because transfers to spouses, descendants, and ascendants are exempt from stamp duty at death and in life, lifetime gifts of Portuguese property to children carry no Portuguese transfer tax, though they have U.S. gift tax reporting consequences and forfeit the U.S. step-up in basis.

Usufruct. Portuguese law readily separates the right to use property from ownership. Giving children the bare ownership of a home while a parent keeps a lifetime usufruct is a common Portuguese technique for passing real estate.

The matrimonial regime. Portugal treats marriage as a property regime, and which regime applies to a couple married in the United States determines what falls into the estate. The 2018 spousal renunciation is available only under separation of property.

Life insurance. Policies with named beneficiaries pass outside the succession and, to Portuguese-resident beneficiaries, are generally exempt from stamp duty.

What Happens to Assets Back in the United States?

U.S. real estate and accounts pass under U.S. procedures regardless of Portuguese law. Real estate will need probate or another transfer route in the state where it sits. Retirement accounts pass by beneficiary designation. New York and Connecticut impose their own estate taxes. Our overview of how probate works in New Jersey and New York explains what a family abroad should expect.

Should You Have One Will or Two?

Two, for almost everyone with property in both countries, together with a decision to keep U.S. trusts on the American side of the Atlantic.

A single U.S. will can legally govern the whole estate, Portuguese apartment included, with the Article 22 election inside it. In practice it slows everything down. The notário preparing the habilitação de herdeiros will want an apostilled copy of the will, a certified Portuguese translation, proof of the applicable U.S. law, and usually the U.S. probate court’s order admitting the will before recognizing anyone as heir. The stamp duty declaration is still due by the end of the third month after death whether or not the U.S. court has acted, and Portuguese banks and the land registry will not release or transfer anything until the heirs are formally established.

A Portuguese will fixes most of this. Made before a notário as a testamento público and recorded in the central will registry, it covers only Portuguese assets, repeats the election of U.S. law in the same words as the U.S. will, and lets the Portuguese estate be settled from a Portuguese document while the U.S. estate proceeds on its own track. The U.S. will covers everything else.

Three rules keep the two wills from cancelling each other:

• No general revocation clause. Each will must revoke only prior wills dealing with the assets it covers and expressly leave the other in force. A Portuguese will that revokes all prior wills, or a later U.S. will that does, silently destroys the other half of the plan.
• One choice of law, stated identically in both. Article 22 permits a choice of law for the succession “as a whole.” You cannot elect your home state’s law for U.S. assets and Portuguese law for Portuguese assets. If either will omits or rewords the election, a Portuguese court may treat it as never made and apply Portuguese law, reserved shares included, as the law of your habitual residence.
• One residuary clause. Decide which will catches assets in third countries and property acquired after signing, and make sure the two do not both claim, or both ignore, the same asset.

Neither will should pour Portuguese assets into an American trust. The 28 percent tax on trust distributions and the land registry’s resistance to trust ownership make the trust the wrong vehicle for anything located in Portugal.

Have both advisors review both drafts before either is signed, then sign in an order where the second document expressly acknowledges the first.

How Do You Coordinate Planning on Both Sides?

A Portuguese lawyer or notário handles the Portuguese will, the reserved-share analysis, stamp duty compliance, and the matrimonial regime. A U.S. attorney handles the U.S. will, the trust question, federal and state estate tax, beneficiary designations, and the election language. Each should see the other’s drafts. Bring a complete asset list showing where each asset sits and how it is titled, the citizenships and residences of the children, the date and place of marriage and any marital agreement, and every existing will and trust.

Plan Well. Live Better.

Portugal’s light touch on inheritance tax has drawn many American retirees, and the same families are often surprised by its heavy hand on forced heirship and trusts. At Milvidskiy Law Group, we handle the U.S. side of cross-border plans and coordinate directly with Portuguese counsel so the two halves fit. Learn more about our international estate planning services.

This article is for general informational purposes only and does not constitute legal or tax advice, and it does not address Portuguese law as a Portuguese practitioner would. Reading this article does not create an attorney-client relationship. Cross-border succession and tax rules depend on individual facts and change frequently. Figures were verified in September 2026 against Portuguese, EU, and U.S. sources and should be confirmed before relying on them.