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Avoid the US estate tax “$60K exemption trap” on Indian assets with proper planning. Learn how estate tax applies to US NRIs, how Indian property is valued, what assets are taxed, and smart strategies like trusts and gifting to protect your family.
1. What is the US estate tax and why does it apply to Indian NRIs?
Short Answer: The US estate tax applies to worldwide assets of anyone who is a US resident or citizen.
Long Answer: If you live in the US as a Green Card holder or resident for tax purposes, the IRS treats you like a US person. This means your global assets—including property, bank accounts, and investments in India—may be taxed when you pass away.
Long Answer: If you live in the US as a Green Card holder or resident for tax purposes, the IRS treats you like a US person. This means your global assets—including property, bank accounts, and investments in India—may be taxed when you pass away.
2. What is the famous “$60,000 exemption trap”?
Short Answer: Non-resident aliens get only a $60K estate tax exemption.
Long Answer: If an NRI who is NOT a US resident or citizen dies while owning US assets (stocks, real estate, etc.), only the first $60K value is tax-free. Everything above that can be taxed up to 40%. Many Indians misunderstand this and accidentally leave behind US assets to their heirs without proper planning.
Long Answer: If an NRI who is NOT a US resident or citizen dies while owning US assets (stocks, real estate, etc.), only the first $60K value is tax-free. Everything above that can be taxed up to 40%. Many Indians misunderstand this and accidentally leave behind US assets to their heirs without proper planning.
3. Does the $60K limit apply to NRIs holding Indian assets?
Short Answer: No, it applies only to US-situs assets.
Long Answer: The $60,000 exemption is only for non-US residents who die owning US assets. Indian assets like Indian property, Indian bank accounts, NRE/NRO deposits, and Indian stocks are NOT counted in this limit.
Long Answer: The $60,000 exemption is only for non-US residents who die owning US assets. Indian assets like Indian property, Indian bank accounts, NRE/NRO deposits, and Indian stocks are NOT counted in this limit.
4. Does a US resident NRI get the larger $13M+ estate tax exemption?
Short Answer: Yes.
Long Answer: US residents and citizens get the full federal estate tax exemption (about $13.6M in 2024; reduces to ~ $6–7M in 2026). This applies to worldwide assets, including Indian property.
Long Answer: US residents and citizens get the full federal estate tax exemption (about $13.6M in 2024; reduces to ~ $6–7M in 2026). This applies to worldwide assets, including Indian property.
5. Are Indian assets taxable by the US when a US-based NRI dies?
Short Answer: Yes, if the person was a US resident.
Long Answer: The US taxes worldwide estate assets of residents. That means your Indian house, NRE/NRO balance, gold, mutual funds, or inherited Indian property can all be included in your taxable estate.
Long Answer: The US taxes worldwide estate assets of residents. That means your Indian house, NRE/NRO balance, gold, mutual funds, or inherited Indian property can all be included in your taxable estate.
6. Does India have an estate or inheritance tax?
Short Answer: No.
Long Answer: India does not charge estate tax or inheritance tax. So Indian assets are tax-free when inherited. The issue mainly arises in the US because of US estate tax rules.
Long Answer: India does not charge estate tax or inheritance tax. So Indian assets are tax-free when inherited. The issue mainly arises in the US because of US estate tax rules.
7. Is there an estate tax treaty between India and the US?
Short Answer: No.
Long Answer: Many countries have estate tax treaties with the US, but India does not. This means Indian NRIs cannot claim treaty-based exemptions and must plan carefully to avoid unexpected estate tax.
Long Answer: Many countries have estate tax treaties with the US, but India does not. This means Indian NRIs cannot claim treaty-based exemptions and must plan carefully to avoid unexpected estate tax.
8. Does the IRS count Indian money in NRE/NRO accounts toward estate tax?
Short Answer: Yes, for US residents.
Long Answer: For US residents, all worldwide financial accounts, including NRE/NRO/FCNR deposits, are included in the estate valuation. For non-US residents, these accounts are not US-situs, so not taxable.
Long Answer: For US residents, all worldwide financial accounts, including NRE/NRO/FCNR deposits, are included in the estate valuation. For non-US residents, these accounts are not US-situs, so not taxable.
9. Will my children in India pay tax if they inherit my US assets?
Short Answer: They may pay US estate tax, but India will not tax them.
Long Answer: India does not tax inheritances. However, before the US assets pass to children, the estate might owe US estate tax if the total value exceeds the allowed exemption.
Long Answer: India does not tax inheritances. However, before the US assets pass to children, the estate might owe US estate tax if the total value exceeds the allowed exemption.
10. Do NRI parents in India need to worry about US estate tax?
Short Answer: Only if they own US assets.
Long Answer: Indian parents with no US connection face no US estate tax. But if they own US real estate or US stocks, the $60K exemption rule applies.
Long Answer: Indian parents with no US connection face no US estate tax. But if they own US real estate or US stocks, the $60K exemption rule applies.
11. How does the US value Indian property for estate tax?
Short Answer: Fair market value in USD.
Long Answer: The IRS uses property valuation converted at the exchange rate on the date of death. Estate planners often use independent valuation reports from India.
Long Answer: The IRS uses property valuation converted at the exchange rate on the date of death. Estate planners often use independent valuation reports from India.
12. Can a US-based NRI gift Indian assets before death to reduce estate tax?
Short Answer: Yes, gifting is a common strategy.
Long Answer: Gifting assets during your lifetime reduces the size of your taxable estate. You may need to file Form 709, but gifting Indian assets can reduce future estate tax exposure.
Long Answer: Gifting assets during your lifetime reduces the size of your taxable estate. You may need to file Form 709, but gifting Indian assets can reduce future estate tax exposure.
13. Is gift tax applied when gifting Indian property to children?
Short Answer: No tax in India, possible reporting in US.
Long Answer: India does not tax gifts to relatives. However, if you’re a US resident, large gifts must be reported on Form 709, though no tax is typically due unless you exceed the lifetime exemption.
Long Answer: India does not tax gifts to relatives. However, if you’re a US resident, large gifts must be reported on Form 709, though no tax is typically due unless you exceed the lifetime exemption.
14. What happens if a non-US parent leaves foreign assets to a US child?
Short Answer: No US tax, but reporting is required.
Long Answer: The child must report the foreign inheritance on Form 3520 if the value exceeds $100,000. The inheritance itself is not taxed.
Long Answer: The child must report the foreign inheritance on Form 3520 if the value exceeds $100,000. The inheritance itself is not taxed.
15. Does the US tax gold or jewelry inherited from India?
Short Answer: Not directly, but it must be included in estate valuation.
Long Answer: Gold held by a US resident at death is included in their estate value. If inherited from a non-resident, it’s tax-free but may require reporting by the heir.
Long Answer: Gold held by a US resident at death is included in their estate value. If inherited from a non-resident, it’s tax-free but may require reporting by the heir.
16. Does the IRS tax Indian mutual funds when a US resident dies?
Short Answer: Yes.
Long Answer: They are part of the US resident’s worldwide estate. Their value contributes to the total estate and may trigger estate tax if above exemption.
Long Answer: They are part of the US resident’s worldwide estate. Their value contributes to the total estate and may trigger estate tax if above exemption.
17. What if I hold Indian assets jointly with my spouse?
Short Answer: Only your share counts.
Long Answer: For estate tax, only the deceased person’s share of the joint asset is included in the taxable estate. Proper documentation is important.
Long Answer: For estate tax, only the deceased person’s share of the joint asset is included in the taxable estate. Proper documentation is important.
18. Can a trust help avoid US estate tax on Indian property?
Short Answer: Yes, trusts are a common planning tool.
Long Answer: Placing Indian assets into a foreign trust or irrevocable trust may remove them from the estate. Trust planning must follow US and Indian laws, so professional guidance is essential.
Long Answer: Placing Indian assets into a foreign trust or irrevocable trust may remove them from the estate. Trust planning must follow US and Indian laws, so professional guidance is essential.
19. Are Indian retirement accounts (PPF, EPF) included in US estate tax?
Short Answer: Yes.
Long Answer: The US includes all foreign retirement accounts in estate valuation for residents. For non-residents, these are not US assets, so estate tax doesn’t apply.
Long Answer: The US includes all foreign retirement accounts in estate valuation for residents. For non-residents, these are not US assets, so estate tax doesn’t apply.
20. Are NRE/NRO bank nominees protected from US estate tax?
Short Answer: No. Nomination does not avoid US rules.
Long Answer: Nominees in India only simplify transfer. The IRS still includes the asset in the deceased’s estate for US tax purposes.
Long Answer: Nominees in India only simplify transfer. The IRS still includes the asset in the deceased’s estate for US tax purposes.
21. Does life insurance payout reduce estate tax?
Short Answer: Only if structured correctly.
Long Answer: If the deceased owned the policy, its value is included in the estate. Using an ILIT (Irrevocable Life Insurance Trust) can keep it outside the taxable estate.
Long Answer: If the deceased owned the policy, its value is included in the estate. Using an ILIT (Irrevocable Life Insurance Trust) can keep it outside the taxable estate.
22. Should US-based NRIs write a separate Will for Indian assets?
Short Answer: Yes, it helps avoid delays.
Long Answer: A dedicated Indian Will for Indian property simplifies probate and transfer. It does not directly change US estate tax calculation, but reduces legal hurdles.
Long Answer: A dedicated Indian Will for Indian property simplifies probate and transfer. It does not directly change US estate tax calculation, but reduces legal hurdles.
23. Does transferring Indian assets to children before moving to the US help?
Short Answer: Yes, often.
Long Answer: If you gift or transfer assets before becoming a US resident for tax purposes, the assets may remain outside the US estate tax system.
Long Answer: If you gift or transfer assets before becoming a US resident for tax purposes, the assets may remain outside the US estate tax system.
24. Does giving Power of Attorney in India reduce US estate tax?
Short Answer: No.
Long Answer: POA only gives authority to act; it does not change ownership. Estate tax depends on ownership, not who manages the asset.
Long Answer: POA only gives authority to act; it does not change ownership. Estate tax depends on ownership, not who manages the asset.
25. What happens to Indian bank accounts after the US-based NRI dies?
Short Answer: They pass to heirs under Indian law but must be included in US estate calculations.
Long Answer: India will not tax the inheritance. But the IRS requires these values to be part of the US estate tax filing.
Long Answer: India will not tax the inheritance. But the IRS requires these values to be part of the US estate tax filing.
26. Can inheriting Indian property cause US tax for the heir?
Short Answer: The inheritance is tax-free, but future sale may be taxable.
Long Answer: US tax applies only when the US-based heir sells the inherited property. The sale is taxed as capital gains, using stepped-up basis rules in many cases.
Long Answer: US tax applies only when the US-based heir sells the inherited property. The sale is taxed as capital gains, using stepped-up basis rules in many cases.
27. How can NRIs avoid the $60K estate tax trap?
Short Answer: By gifting, using trusts, and reducing US-situs assets.
Long Answer: Strategies include avoiding holding US real estate personally, gifting assets early, moving investments to non-US assets, or using structures like LLCs or trusts (with legal guidance).
Long Answer: Strategies include avoiding holding US real estate personally, gifting assets early, moving investments to non-US assets, or using structures like LLCs or trusts (with legal guidance).
28. Should US-based NRIs avoid owning US stocks directly?
Short Answer: For non-residents, yes—estate tax exposure is high.
Long Answer: Non-US residents holding US stocks face estate tax over $60K. Many prefer holding through foreign ETFs or funds that are not US-situs assets.
Long Answer: Non-US residents holding US stocks face estate tax over $60K. Many prefer holding through foreign ETFs or funds that are not US-situs assets.
29. Does renouncing a Green Card remove US estate tax on Indian assets?
Short Answer: Yes, but only after you are fully a non-resident.
Long Answer: Once you officially give up residency and meet US tax exit rules, worldwide estate rules no longer apply. Only US assets may be taxed under the $60K exemption.
Long Answer: Once you officially give up residency and meet US tax exit rules, worldwide estate rules no longer apply. Only US assets may be taxed under the $60K exemption.
30. What is the safest overall way to plan for Indian assets as a US NRI?
Short Answer: Combine US estate planning with Indian legal structuring.
Long Answer: Use Wills in both countries, consider trusts, track asset valuations, avoid unnecessary US-situs assets, and plan gifts early. A cross-border estate planner ensures proper US-India coordination.
Long Answer: Use Wills in both countries, consider trusts, track asset valuations, avoid unnecessary US-situs assets, and plan gifts early. A cross-border estate planner ensures proper US-India coordination.
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