US India Estate Planning: Wills, Estate Tax, Inheritance and Succession

US India estate planning is hard for a simple reason: the two countries tax death very differently, and a family often has a foot in each. The U.S. taxes estates; India stopped taxing them. An engineer in Aurora with a flat in Pune and parents in Hyderabad who hold U.S. stock may owe nothing in India, face a U.S. return in one case, and need two sets of paperwork to move the assets to the next generation. This guide shows who is exposed to U.S. estate tax, how Indian succession works, and how to avoid mismatched wills and nominations. It is general information, and cross-border estate work needs a lawyer in each country.

How does U.S. estate tax apply to Indian-origin families?

The test is citizenship and domicile, not income tax residency. The IRS Form 706-NA instructions say a person acquires domicile in a place by living there, even for a brief period, with no definite present intention of later moving, and warn that someone can be a U.S. resident for income tax purposes yet a nonresident for estate tax purposes. In practice:

For U.S.-situs property of a nonresident non-citizen, the Form 706-NA instructions say real estate located in the U.S. counts, and stock of corporations organized under U.S. law is U.S. property wherever the certificates are kept. A notable carve-out is that certain bank deposits and portfolio debt are treated as located outside the U.S. The instructions list the death-tax treaty countries and India is not on it, so there is no treaty relief (see our US India tax treaty guide and the three-country gifts and estate comparison).

What about the spouse?

An unlimited marital deduction is available for property left to a surviving spouse who is a U.S. citizen. If the spouse is not a citizen, the Form 706-NA instructions say the marital deduction generally requires that the property pass to a qualified domestic trust (QDOT). Lifetime gifts to a non-citizen spouse also have a special annual limit; the 2025 Form 709 instructions put it at $190,000. For citizen decedents, the IRS says an unused exclusion can pass to the surviving spouse through a timely filed return (portability).

What does India tax at death?

Nothing at death. The Legislative Department's list of repealed Acts records the Estate Duty Act, 1953 as repealed (Act 20 of 2000). On receipt, the Income Tax Department's guidance lists money or property received under a will or by inheritance among the cases that are not charged to tax, and gifts from relatives are also exempt. The department's definition of relative includes a spouse, siblings, and lineal ascendants and descendants. Gifts from non-relatives above Rs 50,000 in a year can be taxed in the recipient's hands, and the department says this applies even if the gifted property is outside India. Our India gifts and inheritance guide covers the details, and the NRI property and FEMA guide covers foreign-exchange limits on NRI heirs. Later sales trigger capital gains tax; your Chartered Accountant confirms the cost and holding period that carry over to an heir. Stamp duty and registration on transferring property vary by Indian state.

Step-by-step: a US India estate planning checklist

1. List assets by country, owner name, joint holders and nominee: bank accounts, demat and mutual fund folios, EPF and insurance, property, U.S. brokerage and retirement accounts.
2. Decide each person's U.S. estate tax status (citizen, domiciled, or nonresident) and run the numbers against the $15,000,000 federal threshold and the lower Illinois exclusion.
3. Prepare wills in both countries and make sure the later will does not revoke the earlier one by accident. Indian succession law depends on religion and the type of property, and whether probate is needed can depend on the city; ask an Indian advocate.
4. Review nominees and beneficiary designations. In the U.S., an IRA, 401(k) or life insurance beneficiary form generally controls over a will. In India, a nominee on a bank or demat account does not always become the final owner, so legal heirs also matter.
5. If the spouse is not a U.S. citizen, plan for a QDOT or other solutions, and consider citizenship timing with your immigration lawyer.
6. For U.S. heirs, understand the basis rule: Publication 551 says inherited property generally takes a basis equal to its fair market value at the date of death, which can reduce U.S. gain on an inherited Indian flat; the Indian rules for the heir's cost may differ.
7. Prepare the heirs' reporting: Form 3520 for large foreign gifts or bequests, FBAR and Form 8938 for inherited accounts.

Who files, and by when?

For the estate of a nonresident non-citizen, Form 706-NA is due 9 months after death, and Form 4768 gives an automatic 6-month extension to file (not to pay). A citizen or domiciliary files Form 706 when the estate, plus adjusted taxable gifts, exceeds the threshold for the year of death. The Illinois Estate Tax is filed with the Illinois Attorney General on Form 700, with payment to the State Treasurer; check the current instructions for the exclusion. For heirs in the U.S., a bequest of more than $100,000 from a nonresident alien individual or foreign estate is reportable on Form 3520 (see Forms 3520 and 3520-A), and a penalty of 5% per month up to 25% can apply to late reports.

Worked example

Suresh and Kavita, green card holders in Aurora, own a $900,000 home in Illinois, $2,100,000 of U.S. investments and retirement accounts, and a Pune flat worth the equivalent of $300,000. Their combined estate of $3,300,000 is below the $15,000,000 federal threshold for 2026 deaths, so no federal estate tax is expected, though Illinois may apply depending on its exclusion and the structure of the estate. Suresh's mother in Hyderabad owns $200,000 of U.S. stock bought through a broker. She has a nonresident filing threshold of $60,000, so her U.S.-situs holding alone could require a Form 706-NA on her death, with no treaty relief. Illinois estate tax is a separate question to check. All figures are hypothetical.

Mistakes to avoid

• Assuming that because India has no estate duty there is no estate planning to do.
• Relying on an Indian nomination to pass assets that the U.S. will tax or that heirs must claim as legal heirs.
• Letting parents in India accumulate U.S. brokerage holdings without checking the $60,000 threshold.
• Two wills that revoke each other.
• Not reporting inheritances to the IRS on Form 3520 or an inherited account on the FBAR.

How we can help

From our Aurora, Illinois area base we model U.S. estate and gift tax exposure, prepare Forms 706, 706-NA and 709 as needed, handle Form 3520, FBAR and Form 8938 reporting for heirs, and coordinate with your estate attorney, your Indian advocate and your Indian Chartered Accountant. See our cross-border tax and real estate investor tax services. We do not give legal advice or guarantee tax results.

Frequently asked questions

General information only. It is not tax, legal, accounting or immigration advice for your situation, and rules change; confirm the current rules with the official source or a licensed professional in the relevant country.