801 Brickell Ave Ste 800
Miami FL 33131
The Estate Tax Trap for Foreign Investors
When foreign investors purchase U.S. real estate—whether a Miami condo, a Dallas multifamily building, or a California strip mall—many don’t realize they’re entering a highly complex tax environment. Unlike U.S. citizens, non-resident aliens (NRAs) only get a $60,000 U.S. estate tax exemption. Any U.S.-situated assets above that are subject to estate taxes of up to 40%.
That means a $2 million investment property in Austin could face an $800,000 tax bill upon the owner’s death. If the property was held personally or through a U.S. entity without proper structuring, the IRS could come knocking.
Why Holding Real Estate Personally is a Mistake
Owning real estate directly as a non-U.S. person or through a U.S. LLC provides no protection from estate taxes. Worse, it can trigger probate and expose beneficiaries to legal complications. It’s a common and costly mistake.
At Infinity⁹, we’ve reviewed dozens of foreign-held properties structured this way. Without fail, each one had unnecessary exposure that could have been avoided with a better framework.
The Key: Use Non-U.S. Structures to Own U.S. Assets
One of the most effective strategies is to interpose a non-U.S. entity between the investor and the U.S. real estate. Here’s how that works:
- The property is held by a U.S. LLC for operational purposes (e.g., leasing, liability shielding).
- That LLC is owned by a non-U.S. corporation, typically domiciled in a jurisdiction like the British Virgin Islands, Panama, or Luxembourg.
- The investor holds shares in the non-U.S. corporation.
Under this setup, the investor doesn’t directly own U.S. assets. At death, they own shares of a foreign corporation, which are not considered U.S.-situs property and are therefore not subject to U.S. estate tax.
But What About Income Taxes?
This structure also has income tax implications. Non-U.S. corporations are subject to a flat 21% federal corporate tax on effectively connected income, plus potential state taxes. However, with proper tax planning, income can be distributed in a tax-efficient manner.
More importantly, this structure trades a potential 40% estate tax hit for a more manageable corporate tax exposure, which is often acceptable in long-term wealth preservation.
The "Building Capital Framework"
Infinity⁹ helps clients build what we call a "Capital Framework"—a long-term ownership structure that aligns legal, tax, and strategic goals. That includes:
- Cross-border tax planning
- Asset protection
- Succession strategies
- Compliance with both U.S. and foreign tax rules
Our guiding belief is simple: There are no bad markets, just bad strategies. Structuring your investment with the end in mind is the essence of sound capital building.
Avoiding Common Pitfalls
Many investors get seduced by oversimplified solutions. Some of the most common missteps we’ve seen include:
- Using U.S. revocable trusts (which don’t avoid estate tax for non-residents)
- Relying solely on life insurance (often insufficient)
- Holding property through U.S. LLCs without a foreign parent
A well-structured investment doesn’t just protect your assets—it ensures your heirs receive the full value of your efforts.
Your Money Doesn’t Need a Visa
Cross-border investing comes with complexity, but that’s no reason to settle for public vehicles like REITs or ETFs that offer little control and zero tax advantage. With the right private investment strategy, your money can move globally, grow tax-efficiently, and pass generationally.
Infinity⁹’s institutional-quality real estate offerings are designed with international investors in mind. We help you build a secure capital foundation—one that thrives beyond borders and beyond generations.
