For Scottish individuals who own assets in the US, the interaction between the two legal systems can create unforeseen challenges on death. Even modest US-situated property can trigger complex tax rules and lengthy administrative requirements, meaning families in Scotland may face delays and additional costs when dealing with an estate. Understanding these cross-border issues early is key.
If you’re a non-US citizen with property in the US, it’s important to understand that when you die, things can get complicated and expensive. Unlike US citizens, foreign owners of US assets face a very small estate tax exemption, limited planning options, and lengthy delays for paperwork to be processed. So, what should your key estate planning considerations be, and what can you do to make life easier for your beneficiaries?
What’s new? The estate tax exemption problem
The IRS announced that, from 1 January 2026, the estate and gift tax exemption for US citizens will jump to $15 million (that’s $30 million for a married couple!). Great news for Americans but for non-US citizens, the exemption stays the same at $60,000.
If your US property is worth more than $60,000, your executors will need to file the appropriate IRS returns and US estate tax applies at progressive rates of up to 40%, depending on the overall value of the US property. This growing gap makes planning ahead more important than ever.
What counts as US situs property?
When considering what counts as US situs property, the definition can be surprisingly specific. Some examples include;
- US real estate;
- shares in US corporations;
- tangible property located in the States, and;
- cash held in US investment accounts.
Meanwhile, cash in US bank accounts and US life insurance (on the life of the insured) policies are not US situs assets. By contrast, Scotland uses the term “property” more broadly: all moveable assets, such as cash, investments, and bank accounts are classed as property, and even land and buildings may fall under the same umbrella.
Intestacy in the US
Dying without a US will (dying “intestate”) can create real complications for families who already have to navigate two legal systems. While each US state has its own intestacy rules, the common thread is that the distribution of your US assets will be dictated by law, not by your wishes. This can cause several problems for families based in Scotland or the wider UK.
Firstly, assets may pass to people you would not have chosen. State intestacy laws typically prioritise spouses and children, but the exact split varies significantly by state. If you have a partner you are not married to, stepchildren, estranged family members, or specific beneficiaries in mind, intestacy can lead to outcomes that conflict with your intentions. Secondly, what counts as “moveable property” under Scots law is not treated the same way in the US, and US states do not have the same forced heirship regime as Scotland. This mismatch increases the risk that US-based assets are divided differently from your UK estate.
Finally, without a will, the court must appoint someone to administer the estate, which adds delay, complexity and cost. If your family is overseas, this can mean additional documentation, notarised statements, or even posting an administration bond before the court will grant authority.
How a US will helps
Having a dedicated US will that works alongside your Scottish or UK will can make the administration of your estate far more straightforward. It allows you to name an executor who will be recognised by the relevant US court, reduces the need for translations, apostilles and additional evidential paperwork, and helps ensure your US-situated assets are dealt with in line with your wider estate planning.
Given the differences between legal systems, anyone with assets in the US should take advice from a US-qualified lawyer to ensure their will meets local requirements and complements their Scottish or UK estate plan effectively.
The IRS clearance headache
In many instances, before beneficiaries can access US assets owned by non-US citizen/non-US residents, the financial institution in which assets are held will require a Federal Transfer Certificate from the IRS confirming that all relevant taxes have been paid. This process is far from quick: reviewing the necessary paperwork and issuing the certificate is currently taking in excess of three years. During this period, accounts are often frozen, leaving families unable to access funds at an already difficult and emotional time.
An exception to the Federal Transfer Certificate requirement applies where a US estate administrator or executor has been authorised to act by a US probate court. It may be possible to find a sympathetic probate court who agrees there is enough of a nexus between the decedent (A decedent is simply a person who has died, especially when their money, property, or affairs are being dealt with after their death) or a particular asset and the county in which the probate court is located to open a US estate. On the other hand, courts have the discretion to refuse probate, and often do so, for non-resident decedents.
To make a frustrating situation even worse, many financial institutions communicate only via customer service departments, who impose requirements incompatible with the client’s specific situation. A legal department, however, may accept an opinion letter confirming no further tax liabilities, and will waive the Federal Transfer Certificate.
Use of the Taxpayer Advocate Service, an independent organization within the IRS, can help practitioners in securing a response on the status of any filing, as well.
There is no one way to work around the significant wait times on securing a decedent’s US assets, but instead comprises a variety of approaches based on the individual circumstances.
The importance of planning ahead
It is essential to seek cross-border advice to:
- Limit tax exposure: Some countries, including the UK, have a Double Taxation Treaty with the US that can offer relief where the same assets might otherwise be taxed twice. For UK residents, the UK–US Estate Tax Treaty may allow proportionate relief against US estate tax, depending on the nature and location of assets.
- Control the passing of assets: utilising wills in both Scotland and US jurisdictions where you hold assets.
- Make full use of gifting exemptions in countries where you hold assets.
Where you are considering any of the above strategies, you should consult a specialist in US advice from a cross-border specialist.
Owning US property as a non-US citizen/non-US resident comes with big tax exposure and red tape. The sooner you plan the better. Waiting could cost your beneficiaries time, money, and stress at a difficult juncture in their lives. For more information, please get in touch with our wills and estate planning lawyers.
