A note for wealth managers, private bankers, real estate professionals, and advisors with international clients
Miami has become one of the most significant destinations for foreign capital in the United States. Buyers from Latin America, Europe, and the Middle East have been acquiring real estate, investing in U.S. businesses, and moving wealth into U.S.-based accounts at a pace that has reshaped the city’s financial and real estate landscape. The professionals serving these clients — brokers, bankers, wealth managers, accountants — are doing sophisticated work in a market that has genuinely gone global.
One area that tends to get less attention, not because anyone is careless but because it sits at a specialized intersection of disciplines, is how U.S. tax law treats foreign-owned U.S. assets. The rules are different from what most foreign investors expect, and the gap between expectation and reality can be significant.
What Foreign Nationals Need to Know About U.S. Tax Exposure
Foreign nationals who hold U.S. assets in their personal name are subject to two tax consequences that domestic investors do not face in the same way, and that often go unaddressed until a transaction or estate event brings them to the surface.
The first is FIRPTA withholding at sale. When a foreign national sells U.S. real property, the IRS requires the buyer to withhold up to 15% of the gross sale price at closing — not the gain, the gross price. On a $3 million property, that is $450,000 held back before the seller receives a dollar. The withheld amount is credited against any ultimate tax liability, so it is not necessarily a permanent loss, but it creates real disruption at closing and is almost always a surprise to clients who were never told it applied to them.
The second is U.S. estate tax. Foreign nationals are subject to U.S. estate tax on U.S.-sited assets, with a federal exemption of only $60,000. Everything above that threshold is taxed at rates up to 40%. For reference, U.S. citizens and permanent residents currently benefit from a federal exemption in excess of $13 million. A foreign national who owns a $2 million property in Miami has over $1.9 million in potentially taxable exposure on that asset alone — and if they also hold U.S. investment accounts or an interest in a U.S. business, the number grows quickly. This is the exposure that tends to surface at the worst possible time, when a client has passed and their heirs are navigating an estate without any prior planning in place.
This Goes Beyond Real Estate
Real estate tends to be where this conversation starts because the transactions are visible and the FIRPTA withholding is hard to miss at closing. But the same U.S. estate tax exposure applies to investment and brokerage accounts held in a foreign person’s name, ownership interests in U.S. operating businesses or partnerships, and other U.S.-sited assets. Any foreign national with meaningful U.S. holdings — however those holdings were assembled over time — is worth a careful review.
As Miami continues to attract foreign capital across asset classes, the universe of people in this situation is growing. Many of them have sophisticated advisors in their home countries who are not focused on U.S. tax consequences, and U.S.-based advisors whose expertise is in markets, deals, or relationship management rather than cross-border tax planning. The issue does not fall within any single advisor’s lane. That is precisely why it tends to go unaddressed.
Neither Exposure Is Inevitable
With proper structuring in place, both FIRPTA exposure and U.S. estate tax can be significantly reduced or eliminated. The right approach depends on the owner’s home country, any applicable tax treaties between that country and the United States, the nature and value of the U.S. assets, and the owner’s long-term intentions. Common structures involve offshore holding companies that own the U.S. assets rather than the individual holding them directly, trust arrangements that provide additional layers of planning, and in some cases U.S. entity blocker structures. These are established planning tools used by sophisticated cross-border investors — the issue is simply that someone needs to ask the right questions early enough for the planning to be effective.
The ideal time to address this is before the asset is acquired. The next best time is well before any sale or estate event is on the horizon. A restructuring once assets are already held in a foreign person’s name is more complex than getting the structure right from the start, but it is very achievable. Addressing it after a transaction is underway, or after an owner has passed, is a different situation — options narrow and consequences that could have been avoided may already be in motion.
A Note for the Advisors in the Room
The professionals closest to these clients — real estate brokers, private bankers, wealth managers, accountants — are often the first to have a complete picture of what a foreign national owns in the United States. The question of whether those assets are held in a structure designed around U.S. tax consequences is not one that requires any advisor to step outside their expertise. It simply requires someone to raise it and know who to bring in.
We work on these structures regularly, across real estate holdings, investment portfolios, and business interests. If you have a client situation that might benefit from a conversation, we are glad to be a resource.