Dubai-based family with a Miami apartment — US estate tax exposure of approximately $576,000

The situation

Our clients were a family of four, resident in Dubai, who had purchased a two-bedroom apartment in Miami Beach in 2019 for $1.5 million. The property was held personally in the husband's name. Neither the US real estate attorney nor the mortgage broker had raised the question of US estate tax.

The challenge

The United States federal estate tax applies to US-sited assets owned by non-US persons at the date of death. US citizens and permanent residents benefit from an exemption in excess of $13 million. Non-resident, non-citizen individuals receive an exemption of $60,000. On an asset valued at $1.5 million, the taxable estate was $1.44 million. At 40%, the estate tax exposure was approximately $576,000, falling directly on the family's heirs. The family also held a US equities portfolio, which compounded the exposure further.

Our approach

We engaged a US estate attorney and a cross-border tax adviser through our specialist network. The analysis considered the two principal structures used to address this exposure. The advisers confirmed that holding US real estate through a non-US company changes the nature of what is owned: the non-resident holds shares in a foreign entity rather than US real estate directly. Shares in a foreign company are not US-sited assets and therefore fall outside the scope of US estate tax. The advisers modelled the related compliance obligations, including branch profits tax and FIRPTA on eventual sale, in full before any decision was taken.

The outcome

The restructuring was implemented. The US estate tax exposure on the property was eliminated. The family files the required US returns for the corporate structure annually. The position is documented, understood, and maintained.