Can You Name a Foreign Citizen as a Beneficiary?

In an era defined by blurred borders, remote work, and international families, our lives are more globally interconnected than ever before. We fall in love across continents, build businesses with partners in different time zones, and form deep, lasting friendships that span oceans. In the midst of this beautiful complexity, a practical, yet profoundly important, question arises for anyone creating a will, trust, or financial account: Can you name a foreign citizen as a beneficiary?

The short, straightforward answer is a resounding yes. In the vast majority of cases, particularly in countries like the United States, there is no legal statute that prohibits you from naming a foreign national as the recipient of your assets. Your money, your property, your legacy—you have the fundamental right to decide who benefits from it, regardless of their passport.

However, and this is a significant "however," the path from your intent to their receipt is not always a simple, straight line. It's a journey that winds through a labyrinth of international tax law, geopolitical tensions, and bureaucratic red tape. Simply writing a name on a form is the beginning, not the end, of the process.

Why This Question is More Relevant Than Ever

We are no longer living in a world where estates are purely local affairs. The dynamics of the 21st century have made cross-border inheritance a common, not exceptional, circumstance.

The Rise of the Digital Nomad and Global Workforce

An American entrepreneur spends five years building a startup in Berlin, forming a chosen family there. A Canadian software developer works remotely for a decade from Bali. These individuals build lives and financial portfolios that are geographically dispersed. Their logical beneficiaries—close friends, local partners—are often foreign citizens, making thoughtful estate planning not just wise, but essential.

Blended Families Across Borders

Second marriages often create families with members holding different citizenships. You may wish to provide for a spouse who is a citizen of France, while also ensuring assets pass to your children from a first marriage who are citizens of the UK and live in Canada. Navigating this requires precision to ensure your wishes are honored without creating unintended legal conflicts.

Geopolitical Shifts and Sanctions

This is perhaps the most volatile and challenging area. The world of international finance does not exist in a political vacuum. A beneficiary who is a citizen of a country that later becomes the target of sweeping economic sanctions (e.g., Russia, Iran, North Korea) could find themselves completely unable to receive funds. Financial institutions in the U.S. and allied nations are legally bound to freeze assets connected to sanctioned jurisdictions. What was a perfectly valid designation one year could become null and void the next, leaving the assets in limbo.

The Practical Hurdles: It's More Than Just a Name

Naming your cousin in Manila or your best friend in São Paulo is legally permissible, but the practical administration of that gift is where challenges emerge.

The Tax Tango: Two Countries Want a Share

This is the single biggest complication. When a foreign citizen inherits from a U.S. person, two tax regimes can come into play.

• The U.S. Side: For the estate of the deceased, the U.S. imposes an estate tax on assets owned worldwide by U.S. citizens and residents. There is an exemption amount (over $12 million as of 2023), but for large estates, tax is due. For the foreign beneficiary, there is generally no U.S. income tax on the inheritance itself. However, if the inherited assets (like an IRA or 401(k)) generate income, that income may be subject to U.S. withholding tax.
• The Beneficiary's Home Country: This is the wild card. The beneficiary's country of residence will have its own inheritance and income tax laws. Some countries, like the UK, do not levy an inheritance tax on the recipient. Others, like many in Europe, do. Your beneficiary could be facing a significant tax bill in their home country that you never anticipated.

Financial Institution Reluctance

Banks and brokerages are risk-averse. An account with a foreign beneficiary is, in their view, a higher compliance risk. They must perform enhanced due diligence to avoid facilitating money laundering or violating sanctions. Some smaller institutions may even have policies that discourage or outright refuse to allow foreign beneficiaries on certain accounts. It is absolutely critical to inform your financial institution of your plans and get their confirmation in writing.

Legal and Administrative Complexity for the Executor

Your executor, the person tasked with carrying out your will, may now have to navigate a foreign legal system. They might need to hire an attorney in the beneficiary's country to understand local tax laws, deal with foreign probate courts if necessary, and navigate international wire transfers, which often involve hefty fees and complex paperwork.

Strategies for a Smoother Cross-Border Transfer

Knowing the challenges is half the battle. The other half is implementing smart strategies to overcome them.

1. The Power of a Revocable Living Trust

For U.S. persons, a revocable living trust can be a far superior vehicle for transferring assets to foreign beneficiaries compared to a simple will.

• Avoids U.S. Probate: A will must go through probate, a public court process. A trust does not. This keeps the affair private and avoids a U.S. court trying to exert authority over a foreign citizen.
• Efficiency and Control: The successor trustee you name can distribute assets to the foreign beneficiary quickly and without court supervision, according to the rules you've set forth in the trust document. This provides a clear roadmap and centralized management.

2. Proactive Communication is Non-Negotiable

Do not let your beneficiary be surprised.

• Talk to Your Beneficiary: Inform them of your intentions. Discuss the potential for taxes in their home country. Encourage them to consult with a local tax advisor now to understand their future liabilities.
• Talk to Your Financial Institutions: As mentioned, confirm their policies. If your current bank is uncooperative, be prepared to move your assets to a more internationally-friendly institution.

3. Seek Expert Guidance: Your International Trio

This is not a do-it-yourself project. You need a team.

• An Estate Planning Attorney (in your country): They must have experience with international issues. They will draft your will or trust with the necessary clauses to address cross-border complexities.
• A Tax Advisor/CPA (with international expertise): They can advise on the U.S. tax implications for your estate and the potential withholding requirements for the beneficiary.
• A Financial Advisor: They can help structure your assets in a way that may be more efficient for international transfer and work with the chosen financial institution.

4. Consider the Form of the Gift

Sometimes, how you give can be as important as what you give. Leaving a foreign beneficiary a piece of U.S. real estate creates a host of complications (like U.S. estate tax and FIRPTA withholding on sales). Leaving them liquid assets from a brokerage account, while not simple, is often more straightforward. For smaller amounts, certain life insurance policies can be an efficient way to transfer wealth across borders, as death benefits are often received income-tax-free.

Special Considerations: When "Yes" Becomes "Maybe" or "No"

Some situations require an extra layer of caution.

• Beneficiaries in High-Risk Jurisdictions: As discussed, naming a beneficiary in a country under international sanctions is highly problematic. You should also be cautious with countries known for financial instability, capital controls, or weak rule of law, as getting the money to them—and ensuring they can keep it—may be impossible.
• Minor Children Abroad: Naming a foreign citizen who is a minor as a beneficiary creates a guardianship nightmare. If both parents are deceased, who will manage the money for the child? A U.S. court-appointed guardian may have no jurisdiction. The solution is often to have the assets held in a trust until the child reaches the age of majority, with a trusted local relative or a professional trustee named to manage distributions for the child's benefit.

Leaving a legacy to someone you care about, regardless of where they were born, is a powerful and loving act. The world's legal and financial systems, built for a less-connected age, have not quite caught up to the reality of our global lives. This does not mean you cannot do it; it means you must be deliberate, informed, and proactive. By acknowledging the complexities and planning for them with a team of experts, you can build a bridge across borders, ensuring that your final wishes provide support, not a bureaucratic nightmare, for the international citizens you hold dear.