Jun 8, 2026
By: Gabriela Páez | Tax Manager - EAS LATAM
The answer is not only emotional. It is also legal, tax, financial, and practical. A surviving spouse, children, heirs, or the person appointed to handle the estate may need to deal with Costa Rican documents, U.S. tax filings, bank accounts, debts, property, insurance, Social Security, retirement accounts, and assets in more than one country.
1. U.S. obligations may continue after death
A U.S. citizen or resident alien is generally subject to U.S. tax rules whether living in the United States or abroad, including the obligation to report worldwide income. The IRS also notes that Americans abroad may qualify for certain benefits, such as the foreign earned income exclusion or foreign tax credit, but those benefits generally require filing a U.S. return.
When an American expat dies, the family may still need to file a final U.S. income tax return for the year of death. IRS Publication 559 is specifically designed for survivors, executors, and administrators, and addresses the tax responsibilities that may arise after a person dies.
2. First step: official documentation
If a U.S. citizen dies abroad, the family will normally need local death documentation and may also need to coordinate with the U.S.
Embassy or Consulate. The U.S. Department of State explains that consular officers can assist after the death of a U.S. citizen abroad and may issue a Consular Report of Death Abroad, which is often requested for U.S. legal and financial purposes.
This documentation may be requested by banks, insurance companies, investment custodians, the IRS, attorneys, retirement plan administrators, or courts.
3. What should the spouse, children, or heirs do?
The surviving family should not rush to distribute assets before understanding the full picture. A practical first step is to build a simple inventory.
Area | What the family should review |
U.S. tax filings | Final Form 1040, prior unfiled returns, estimated taxes, IRS notices, and possible state filings. |
Costa Rican assets | Real estate, vehicles, bank accounts, corporations, business interests, and local liabilities. |
U.S. assets | Bank accounts, brokerage accounts, retirement plans, insurance, real estate, and business interests. |
Debts | Mortgages, credit cards, personal loans, taxes, medical bills, business obligations, and guarantees. |
Children | Guardianship, school, health insurance, immigration status, and support arrangements. |
Beneficiaries | Life insurance, retirement accounts, payable-on-death accounts, and transfer-on-death accounts. |
Foreign accounts | FBAR or other information reporting obligations if thresholds were met. |
The key point is that debts and tax obligations should be reviewed before assets are distributed. Not every family member is personally responsible for every debt, but the estate may need to settle valid obligations before heirs receive property.
4. Foreign accounts can create reporting issues
Many American expats hold bank or financial accounts outside the United States. FinCEN explains that a U.S. person must file an FBAR, formally the Report of Foreign Bank and Financial Accounts, if the aggregate value of foreign financial accounts exceeds USD 10,000 at any time during the calendar year.
This can matter after death if the deceased had accounts in Costa Rica, was a signer on company accounts, held joint accounts, or maintained investment accounts outside the United States.
For the family, the issue is not only whether tax is owed. Sometimes the bigger risk is that no one knows the accounts existed or that a reporting obligation was triggered.
5. Estate tax: not every estate pays, but every estate should be reviewed
Not every American expat estate will owe U.S. federal estate tax. The IRS explains that estate tax applies to the transfer of property at death and that a filing requirement depends on the value of the gross estate, adjusted taxable gifts, and the exclusion amount applicable for the year of death.
Even when no federal estate tax is due, the family may still need tax advice if there are assets in both countries, U.S. retirement accounts, life insurance, closely held companies, Costa Rican real estate, or beneficiaries living in different jurisdictions.
6. How the expat can prepare while alive
The best gift an expat can leave the family is order. An American living in Costa Rica should keep a clear and updated file with the following information.
Area | What should be prepared |
Tax compliance | U.S. and Costa Rican filings, tax preparer contacts, IRS notices, and supporting documentation. |
Asset list | Bank accounts, investments, properties, corporations, vehicles, insurance policies, and retirement accounts. |
Debt list | Mortgages, credit cards, personal loans, business debts, guarantees, and local obligations. |
Beneficiaries | Life insurance, retirement accounts, bank instructions, investment accounts, and updated contact information. |
Children | Guardianship instructions, school information, health insurance, immigration documents, and key contacts. |
Legal documents | Wills, powers of attorney, estate planning documents, and local succession advice where needed. |
Access and contacts | Attorneys, accountants, banks, insurance brokers, custodians, and trusted family members. |
A power of attorney may help during life, but it is not a substitute for estate planning. After death, the family usually needs a different legal process to access, transfer, or liquidate assets.
7. The real risk: leaving the family without a map
For an American expat in Costa Rica, estate planning is not only about wealth. It is about reducing confusion.
A surviving spouse or child should not have to discover bank accounts, tax obligations, debts, passwords, property records, insurance policies, or IRS filing issues in the middle of a crisis.
When an American expat dies in Costa Rica, the family may face obligations in both countries. There may be a final U.S. tax return, possible estate reporting, foreign bank account issues, debts, local succession matters, and family decisions involving children or dependents.
The best time to prepare is before anything happens.
A well-organized expat should leave three things behind: clear documents, updated tax compliance, and a practical roadmap for the people who will have to act.
Because when families are grieving, the last thing they need is to start from zero.
References
IRS. U.S. Citizens and Resident Aliens Abroad. https://www.irs.gov/individuals/international-taxpayers/us-citizens-and-resident-aliens-abroad
IRS. Publication 559, Survivors, Executors, and Administrators. https://www.irs.gov/pub/irs-pdf/p559.pdf
IRS. Estate Tax. https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax
FinCEN. Report Foreign Bank and Financial Accounts (FBAR). https://www.fincen.gov/report-foreign-bank-and-financial-accounts
U.S. Department of State. Death of a U.S. Citizen Abroad. https://travel.state.gov/en/international-travel/living-abroad/death.html