Estate Planning for Americans Residing in Australia

Estate planning is not exactly a glamorous subject, but if you're an American resident of Australia, it's one you cannot afford to skip. Between two taxation systems, varying inheritance legislation, and the fact that things do occur on both sides of the Pacific, careful planning can spare your family money, aggravation, and unwanted legal entanglements.

This handbook presents the fundamentals of estate planning for U.S. expats in Australia—what to look out for, how the regulations vary, and real steps that you can take.

Why Estate Planning is Important for Expats

Estate planning is not merely drafting a will. It's about ensuring your assets pass as desired, reducing taxes, and safeguarding your loved ones.

For U.S. expats living in Australia, the hurdle is double:

1. The United States taxes citizens on worldwide assets, even if you’ve lived abroad for decades.
2. Australia has no inheritance tax, but it does impose capital gains tax (CGT) in some estate-related situations.

Without planning, your family could face double reporting, unnecessary taxes, or delays in accessing your estate.

U.S. Estate and Gift Tax Rules

Even if you’ve lived in Australia for years, the U.S. estate and gift tax rules still follow you. Here’s what that means in plain English:

• Big lifetime allowance: In 2025, you can pass on up to $13.61 million (through gifts made during your life or through your estate when you pass away) without paying U.S. estate tax. If your estate is worth more than that, the amount above the limit can be taxed at rates up to 40%.
  
  
• Gifts to your spouse: If your spouse is a U.S. citizen, you can leave them as much as you want without any estate tax. But if your spouse is not a U.S. citizen, different rules apply. In that case, you may need to set up something called a Qualified Domestic Trust (QDOT) to delay or reduce taxes.
  
  
• Yearly small gifts: You’re also allowed to give up to $18,000 per person per year (2025 amount) without affecting your lifetime allowance. This is handy for gradually passing wealth to family members.
  
  
  

The key point: These rules apply no matter where you live. That means your house in Australia, your superannuation account, and your local investments could all count toward your U.S. taxable estate.

Australia’s Take on Estates

Unlike the U.S., Australia doesn’t have an inheritance or estate tax. But that doesn’t mean everything passes on tax-free. Here’s what actually happens:

• Capital Gains Tax (CGT): If someone inherits property and later sells it, they may have to pay CGT. The tax is based on the property’s value at the time it was inherited.
  
  
• Superannuation death benefits: Money left in a super account may be taxed depending on who receives it. For example, if the beneficiary is a non-dependent adult child, they could pay up to 15% tax plus Medicare levy on certain parts of the payout.
  
  
• State rules: Each Australian state has its own laws about wills, probate (the legal process of settling an estate), and what happens if you die without a will.

Common Estate Planning Issues for U.S. Expats

• Cross-border assets

If you have property or investments in both the U.S. and Australia, both nations may want a voice in how they're taxed and passed on.

• Non-U.S. citizen spouse

If your Australian spouse (or any foreign citizen) is not a U.S. citizen, the marital deduction does not apply. Without a strategy, this can trigger surprise U.S. estate tax.

• Superannuation

Super accounts are not always easy to fit into U.S. planning. Although they are treated as retirement savings in Australia, the IRS can see them differently.

• Trusts and reporting

Utilizing Australian trusts within your estate plan can be tax-effective domestically, but the IRS demands further reporting (Forms 3520/3520-A) and can treat them differently for estate tax purposes.

• Two wills, two systems

Most expats appreciate having a will in both nations—one for U.S. assets and one for Australian assets—to prevent probate delays and legal disputes.

Discretionary Trusts in Estate Planning

In Australia, a lot of families use discretionary trusts—sometimes called family trusts—as part of their financial planning. Think of it like this: a trustee holds the family’s assets in one “bucket” and gets to decide each year how to share out the income or capital among the beneficiaries.

Why do Aussies like them? They’re flexible. A trust can help protect family wealth, keep assets safe from creditors, and let income flow to family members who are in lower tax brackets—so less of it goes to the ATO.

For Americans, though, it’s not that straightforward. The IRS doesn’t treat these trusts the same way Australia does. If you’re tied to one—whether as the person who set it up, a trustee, or even just a beneficiary—you may have extra U.S. reporting to do (like Form 3520 or 3520-A). On top of that, the IRS may tax the income in a way that doesn’t match the Australian system.

Tip: Consult with a cross-border tax expert if you're thinking about using a discretionary trust as an estate planning device. Expat US Tax can help you with this.

Professional Assistance Is Critical

Estate planning is complicated enough in a single country—multiply that by two systems, and it's simple to make an error. Consulting experts who are familiar with both U.S. and Australian regulations is the smartest way to secure your assets and your family. Search for:

• An estate planning lawyer who knows cross-border law.
• A tax adviser who deals with U.S.–Australia expat tax.
• A money planner who can merge estate planning into your longer-term wealth strategy.

Expat US Tax has tax lawyers and advisers who can help you shield your assets and manage your taxes in the most beneficial way.

Final Takeaway

Estate planning is not a choice for U.S. citizens in Australia—it's a necessity. With careful planning, you can:

• Shield your assets.
• Reduce taxes in both nations.
• Leave your family what you want them to have.

Begin by assessing your assets, revising your will, and determining how both U.S. and Australian regulations bind you. With the proper advice, you'll have peace of mind knowing your estate is secure—wherever life leads you.