In a situation where a U.S. estate tax treaty may be applicable, the same inquiry will arise with respect to the location of the decedent’s domicile. The U.S. bilateral estate tax treaties have their own rules to determine whether a foreign individual is a resident in the United States at the time of death. These same rules apply bilaterally, of course, to determine whether a U.S. individual is domiciled in the foreign tax treaty jurisdiction at the time of death.
Recognizing that dual domiciliary status may exist, estate tax treaties often prescribe tie-breaker rules to determine domicile, based on the following priorities:
1. Location of the permanent home
2. Location of the closest personal and economic interests (i.e., the “center of vital interests”)
3. The individual’s habitual abode
The benefits of a U.S. estate tax treaty available to a foreign client are ordinarily available only if the foreign client is a domiciliary of that country and not if he is actually domiciled in a third country.