964 / May a nonresident alien’s estate claim an estate tax exemption upon the death of the nonresident alien?
The unified transfer tax credit in the case of a nonresident alien decedent is only $13,000.1 This effectively exempts only the first $60,000 of his or her taxable estate from estate tax, a considerably lower threshold than applies to a domestic decedent.
A special rule applies if the decedent was a nonresident of the United States, but resided in a U.S. possession (e.g., Puerto Rico, Guam) and was a U.S. citizen only because of birth or residence in, or citizenship of, the possession. Under these circumstances, the decedent is considered to be a “nonresident noncitizen,”2 and the estate of a decedent in this category qualifies for a credit that is the greater of:
(1) $13,000, or(2) $46,800 multiplied by the ratio that the value (at death) of that part of the decedent’s gross estate that is located in the U.S. bears to the entire value of the decedent’s gross estate.3
In either case, the credit may not be more than the amount of the estate tax.4 Further, the amount of the available credit is reduced by the value of any lifetime gifts made by the nonresident alien-decedent.5
1 IRC § 2102(b)(1).