A foreign buyer signs a contract on a Manhattan apartment. The broker is pleased, the lawyer reviews the contract, the deal closes. Nobody asks who is going to own the apartment, and in what.
That unasked question is usually the most expensive part of the transaction. Not the price, not the mortgage rate, not the closing costs — the ownership structure, which is fixed at the moment of purchase and painfully expensive to change afterwards.
What actually goes wrong
Across the matters our firm has handled for international buyers, the same handful of mistakes account for most of the damage. They are worth naming plainly.
Buying in your own name
The simplest thing to do, and for a non-U.S. person usually the worst. A non-domiciliary who owns U.S. real property directly is exposed to U.S. estate tax on that property, with an exemption that is a small fraction of what a U.S. person receives. The property is also fully exposed to any claim brought against the owner personally.
The heirs discover this after the death, at which point nothing can be restructured.
Reaching for an LLC because someone said “use an LLC”
A single-member LLC owned directly by a foreign individual is transparent for U.S. estate tax purposes. It gives liability separation, which is real, but for a non-resident it does not solve the estate exposure that most buyers assume it solves. It is the most common structure we are asked to unwind.
Not claiming a treaty position
The United States has income and estate tax treaties with a long list of countries, and several of them change the answer materially for a buyer from that country. A treaty position has to be taken and documented; it is not applied automatically because the buyer happens to hold that passport.
Ignoring FIRPTA until the sale
The Foreign Investment in Real Property Tax Act requires the buyer to withhold a percentage of the gross sale price when the seller is a foreign person — on the gross price, not on the gain. Sellers who planned nothing discover it at closing, when the money is already being held back. There are procedures to reduce or recover the withholding, but they take time and have to be started before the closing, not after.
Never considering a trust or a blocker
For many international families the right answer is a trust, a corporate blocker, or a combination — a structure in which the buyer never owns U.S. situs property directly, and what passes on death is a non-U.S. asset. Whether that structure is worth its cost depends on the value of the property, the family’s residence, and the treaty in play. It is a decision to be made before the contract, not a fix to be applied later.
The sequence that works
Pre-purchase planning is cheap relative to what it prevents. In practice the order is:
- Establish who the buyer is, where they are resident and domiciled, and who is intended to inherit
- Decide the holding structure — individual, entity, trust, blocker, or a layered combination — against those facts and the applicable treaty
- Form the vehicle and obtain U.S. tax identification numbers before closing, not during
- Open the U.S. bank account, which for non-residents takes longer than anyone expects
- Negotiate the contract, run title, and close
- Keep the structure compliant afterwards: annual filings, FIRPTA planning for the eventual sale, and estate documents that match the ownership
Where the firm has done this
Representative matters from our real estate practice for international clients:
- A foreign investor purchasing a $15M+ condominium unit in Midtown Manhattan
- An international private equity fund structuring a joint venture to develop a luxury condominium project in Brooklyn
- A foreign investor establishing an irrevocable trust holding structure to purchase and hold New York investment real estate for the benefit of the investor’s family
- A foreign client obtaining financing for a $5.75M retail condominium unit in Downtown Manhattan
- A foreign investor in a $7M buy-out of a partner’s interest in a mixed-use Midtown building
What we handle
- Forming tax-efficient holding entities and trusts for foreign buyers
- FIRPTA compliance, withholding certificates, and planning ahead of a sale
- U.S., New York State and New York City tax and reporting obligations on purchase and sale
- U.S. tax identification numbers and assistance opening U.S. bank accounts
- Drafting and negotiating offers, contracts, closing documents and deeds
- Title search, examination, and clearing title problems
If you are a non-U.S. buyer considering New York property, the useful conversation happens before the contract is signed. Request a consultation, or call +1 212 457 9797.