Succession & Estate Planning 2026 Comparisons

Succession planning in the United States is shaped by both a strong legal tradition of freedom of disposition and a high degree of cultural and family diversity. As family structures and priorities vary widely, planning approaches often differ even among similarly situated clients. Some families favour earlier lifetime transfers and a more collective, multi-generational planning process, while others prefer to maintain control during life and defer meaningful control until later stages.

In practice, US families frequently favour trust-based planning and entity-based structures over outright dispositions, reflecting a broader cultural emphasis on privacy, control, continuity, and risk management across generations. Trusts and family limited partnerships are commonly used to centralise management of assets, to provide guardrails for younger beneficiaries, and to create longer-term governance frameworks for family wealth. Planning also increasingly addresses modern realities such as blended families, multi-generational households, and geographically dispersed beneficiaries.

Additionally, dynasty trusts, which are long-duration trusts, are also commonly used to support multi-generational wealth preservation and provide control in how and when beneficiaries receive distributions. These trusts offer many advantages, such as creditor protection and spendthrift risk, and also minimise transfer tax exposure.

A longstanding “established wealth” cohort includes multi-generational families whose wealth is concentrated in assets such as (including but not limited to) family-controlled businesses and income-producing real estate. These clients focus on continuity-focused planning, such as family governance, fiduciary selection, and co-ordinated business-transition planning (eg, management succession and liquidity planning).

A prominent “new wealth” cohort includes entrepreneurial and growth-sector wealth (including venture-backed businesses), where assets are often illiquid, concentrated, and event-driven (founder equity, options, and pre-liquidity stock). Planning commonly centres on implementing structures ahead of liquidity events, and co-ordinating tax and diversification planning around concentrated equity.

Persons domiciled in the United States are subject to US transfer taxes on their worldwide assets. A person residing in the US with no present intent to leave is considered domiciled in the US. The US domiciliary test evaluates several factors, including the length of US residence, ties to foreign countries, green card status, and lifestyle indicators such as voter registration, driver’s licence and club affiliations.

Individuals who are not domiciled in the US are not subject to US transfer taxes (gift, estate, and Generation-Skipping Transfer (GST) taxes) on their worldwide assets at death. However, assets with a US situs are still subject to US transfer taxes, even if the individual is not US-domiciled.

The key question for US federal income tax purposes is whether an individual is a “United States Person” (“US Person”) or a foreign person. All US Persons are subject to federal income tax.

A US Person is any individual who (i) is a US citizen, or (ii) is a “resident” of the United States. Residency for tax purposes is determined under one of two tests: the green card test or the substantial presence test.

The green card test is straightforward – an individual who holds a US green card is considered a resident for US tax purposes.

The substantial presence test is more complex and is based on the number of days an individual spends in the US over a three‑year period. To meet this test, an individual must:

• be present in the US for at least 31 days during the current year; and
• be present in the US for at least 183 days during the three‑year period that includes the current year and the two preceding years.

When calculating the 183 days, an individual must count:

• all days present in the US in the current year;
• one third of the days present in the US in the first year before the current year; and
• one sixth of the days present in the US in the second year before the current year.

Despite these rules, the substantial presence test includes a “closer connection” exception. Under this exception, an individual may be treated as a resident of another country if they can demonstrate a closer tax connection to that country.

The consequences of not having a will or living trust are that the decedent’s assets will be distributed according to the intestacy laws of the state where the decedent was domiciled. These laws may direct the distribution of assets in a way that does not reflect the decedent’s personal wishes. Generally, intestacy laws provide that a decedent’s assets pass to the surviving spouse and children.

Additionally, as discussed below, some states have “spousal election” rules that allow a surviving spouse to claim a statutory minimum share of the estate. In contrast, in community property states, the decedent can typically dispose only of their one‑half share of the community property. This structure effectively protects the surviving spouse’s ownership interest, regardless of the terms of the decedent’s will.

Rules of succession are determined at the state – not federal – level. In general, individuals are free to distribute their assets to anyone they choose through a will or a living (revocable) trust, which functions as a substitute for a will. Only one state, Louisiana, has a forced‑heirship rule.

Some common‑law states have “spousal election” statutes designed to prevent a surviving spouse from being completely disinherited. These laws typically allow the surviving spouse to claim a portion (for example, one‑third or one‑half) of the deceased spouse’s assets, even if the Will intentionally left the spouse nothing. These rights, however, can be modified or waived by agreement – such as a valid prenuptial or postnuptial agreement – provided the agreement was entered into voluntarily and with fair disclosure.

Community‑property states (eg, California, Texas, and Washington) generally do not have spousal‑election statutes, because the surviving spouse already owns half of the community property. Community property consists of any property acquired during the marriage that was not received as a gift or inheritance.

If an individual dies without a valid Will or living trust, the state’s intestacy laws govern how the decedent’s assets are distributed. Under most intestacy statutes, the spouse and children receive most or all of the estate.

The characterisation of marital property is determined by state law, as discussed in more detail below. In separate‑property states, each spouse generally owns – and may transfer – the property titled in their own name without needing the other spouse’s consent, unless the property is jointly titled or subject to specific state protections (such as homestead rules). In contrast, in community‑property states, one spouse cannot make a gift of community property without the consent of the other spouse.

At death, spouses may direct the disposition of their property through a will or a will substitute. If no such estate planning has been completed, state intestacy statutes apply. In community‑property states, intestacy rules typically provide that the surviving spouse receives the decedent’s share of the community property, as well as a portion of the decedent’s separate property, with the remainder of the separate property often passing to the decedent’s children. In common‑law states, many jurisdictions restrict a decedent’s ability to fully disinherit a spouse by imposing “spousal election” statutes, which entitle the surviving spouse to a minimum share of the estate (commonly one‑third or one‑half).

The classification of property acquired during marriage is governed by state law. Nine jurisdictions – Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin – follow a community property regime. In these states, property acquired by either spouse during the marriage is generally treated as community property, owned equally by both spouses, except for assets received by gift or inheritance.

All other states are “common law” states. In general, common law states treat property acquired during marriage as belonging to the spouse who acquires it, unless the spouses take title jointly or otherwise demonstrate joint ownership. Even in common law states, however, courts in divorce proceedings will typically distribute marital assets equitably if the parties cannot reach an agreement.

Every state also allows spouses to modify these default rules by contract. Agreements entered before marriage are commonly referred to as pre-marital agreements, while those entered after marriage are known as post-marital agreements. Although requirements differ by state, enforceability usually depends on full and fair disclosure of assets and each party having the opportunity to consult independent counsel. A marital agreement can address nearly any issue related to property ownership during the marriage, including – but not limited to – the management of property and the allocation of assets upon divorce or death. Such agreements may also modify or waive certain statutory rights, including spousal support.

The gift tax applies to transfers made during a donor’s lifetime when the transfer constitutes a completed gift. However, most donors do not incur gift tax because of the available lifetime exclusion, which is USD15 million in 2026.

In addition, outright lifetime gifts to a US citizen spouse qualify for the unlimited marital deduction and are not subject to gift tax. Gifts to a non‑US citizen spouse are not eligible for the unlimited marital deduction, but the donor may use a USD194,000 annual exclusion in 2026 before gift tax applies.

US citizens and domiciliaries may make gifts in 2026 – other than gifts to a US citizen spouse or a charity – of up to USD19,000 per donee, per year without any gift tax consequences. To qualify, these gifts must be completed gifts, either made outright to an individual or to a trust that includes properly administered “Crummey” withdrawal powers. This annual exclusion allows such gifts to fall entirely outside the gift tax system.

If an individual makes a gift to any donee (other than a US citizen spouse or a charity) that exceeds USD19,000 in 2026, the donor must file Form 709 to report the gift to the IRS. Form 709 is due on 15 April of the year following the gift, unless the donor requests an automatic six‑month extension. Any estimated gift tax must still be paid by the original due date. Only one US state – Connecticut – imposes a state‑level gift tax. For non‑residents, gifts of US situs real property and tangible personal property are subject to federal gift tax, with no exemption available other than the USD19,000 annual exclusion.

In the United States, gifts or bequests to charities may qualify for a deduction from gift or estate tax, as applicable. An income tax deduction may also be available. The Internal Revenue Code recognises different categories of charities, but the two primary types are public charities and private foundations. Gifts or bequests to public charities generally receive more favourable tax treatment than those made to private foundations.

A lifetime gift typically does not trigger federal income tax for the donor. However, it may shift the built‑in gain to the donee because the donee receives the donor’s carryover basis. By contrast, assets transferred at death generally receive a step‑up in basis, allowing heirs to sell such assets with little or no capital gains tax due.

The United States imposes a federal gift tax, estate tax, and Generation-Skipping Transfer (GST) tax. The gift and estate tax regimes are unified, meaning gifts made during an individual’s lifetime reduce the amount of exemption available to offset estate tax at death. Each US citizen and US domiciliary has a lifetime gift and estate tax exemption. Transfers up to that exemption amount are not subject to tax, but amounts exceeding the exemption are taxed at a federal rate of 40%.

Gift and Estate Tax Exemption

In 2026, the gift and estate tax exemption is USD15 million per US citizen or domiciliary. Married couples who are both US citizens can effectively combine their exemptions – either through gift splitting during life or through portability, which allows a surviving spouse to use a deceased spouse’s unused exemption.

US domicile for transfer tax purposes is determined by whether an individual lives in the US with no intention of leaving. This domicile test is different from the residency test used for income tax.

Estate Tax

Estate tax applies at death when an individual transfers assets to recipients other than qualified charities or a US citizen spouse, to the extent those transfers exceed the individual’s remaining exemption. Any unused exemption is applied to the taxable estate first. If taxable transfers exceed the remaining exemption, the excess is subject to a 40% estate tax.

Transfers to qualified charities and US citizen spouses are fully deductible through the charitable or marital deduction, provided the transfers are made outright. Special rules apply to transfers made in trust.

Non‑Residents

Non‑resident individuals may also be subject to US federal estate tax on US-situs assets, such as real property. Unlike US citizens and domiciliaries, non‑residents have only a USD60,000 estate tax exemption.

Certain US states also impose their own estate tax and/or inheritance tax. Rules and exemption amounts vary by state.

Generation‑Skipping Transfer Tax

GST tax applies to transfers made to “skip persons”, generally meaning a grandchild or more remote descendant, or someone more than 37½ years younger than the transferor. Each individual has a separate GST exemption – USD15 million in 2026 – which is not unified with the gift and estate tax exemption.

If a transfer to a skip person exceeds the annual GST exclusion of USD19,000 in 2026, the excess reduces the transferor’s GST exemption. Once the exemption is exhausted, transfers are subject to a 40% GST tax. Additional complex rules apply to transfers made through trusts.

Income Tax Basis Adjustment

Upon a decedent’s death, inherited assets generally receive a step‑up in income tax basis to fair market value as of the date of death.

Succession Laws

State law governs the succession of a decedent’s tangible and intangible property. The primary factor in determining which state’s laws apply is the decedent’s domicile – the place they consider their permanent home and intend to remain indefinitely. An individual can have only one domicile.

If the decedent is domiciled in a state, that state’s law governs the succession of their personal property (tangible and intangible) and any real property located within the state.

Real property located outside the decedent’s domicile is governed by the laws of the state where the property is located (the “situs”). This usually requires a separate proceeding called ancillary probate, which disposes of the out-of-state real property under the decedent’s will or, if none exists, the situs state’s intestacy laws.

A valid will or living trust generally controls the disposition of assets regardless of state succession statutes.

Conflicts of Law

Conflicts of law may arise regarding property characterisation, interpretation of a will or trust, or the exercise of a power of appointment. Courts typically apply an “interest analysis” or “significant interest” test, examining which state has the greatest interest in resolving the issue. Many of these potential conflicts can be addressed within the estate planning documents themselves through a choice‑of‑law provision, which states which jurisdiction’s laws will govern interpretation of the document. Except where contrary to public policy or involving certain marital property issues (eg, community vs separate property), courts generally uphold such provisions.

Donors may make annual exclusion gifts and certain qualified transfers for education and medical expenses, which are excluded from gift tax when paid directly to the provider. In addition, lifetime gifts to trusts and the formation of family entities are common planning strategies.

Each state has laws that allow individuals to create trusts and other legal entities, such as corporations, general and limited partnerships, and limited liability companies. Legal entities are generally required to register with the Secretary of State in any state where they conduct business. Most states do not require the registration of non‑charitable trusts; however, charitable trusts must be registered with the state’s Attorney General and must report their activity on a regular basis.

Family companies are almost always structured as legal entities, allowing the family to control the administration of the company and the succession of ownership interests upon the death or divorce of its owners. Additionally, most legal entities offer significant creditor protection, shielding an owner’s personal assets from creditors of the entity.

Family wealth succession is frequently carried out through one or more irrevocable trusts. A trust is a legally recognised arrangement between the person creating and transferring assets to the trust (known as the grantor, trustor, or settlor) and the person responsible for holding those assets (the trustee). The trustee holds legal title to the trust assets for the benefit of the beneficiaries, who are typically the grantor’s descendants. The trust is usually documented in a written agreement that outlines how the trustee must administer and manage the trust assets, as well as the terms and conditions under which trust assets may be distributed to beneficiaries. Certain states permit trusts to exist in perpetuity. If a trust is established in such a state and the grantor allocates their GST exemption to the trust, the trust may continue indefinitely under current US law without being subject to US transfer taxes (ie, gift, estate and GST tax).

In the United States, the availability and attractiveness of common lifetime succession structures – such as gifts, trusts, and family entities – are significantly influenced by a combination of federal transfer‑tax rules and federal income‑tax characterisation rules. Key considerations include the following.

The Federal Estate, Gift, and GST Framework

As mentioned, lifetime planning is often centred around the unified federal estate and gift tax system, along with the parallel GST regime. The size of the federal exclusion plays a major role in determining how aggressively taxpayers pursue lifetime transfers.

Federal Inclusion Rules Under Section 2036

Many planning structures must take Section 2036 into account, as lifetime transfers may be pulled back into the transferor’s estate if they retain certain enjoyment, rights, or control over the transferred property.

Interest‑Rate “Hurdles” Tied to the Section 7520 Rate

These rates influence whether certain planning techniques – such as Grantor Retained Annuity Trusts (GRATs) – are advantageous. A favourable Section 7520 rate can make these structures more appealing.

Basis Rules Affecting Lifetime Gifts

A donee of a lifetime gift generally receives a carryover basis, whereas assets transferred at death typically receive a step‑up in basis. These income‑tax implications may influence whether individuals prefer making lifetime gifts or relying on testamentary transfers.

State‑Level Estate or Inheritance Taxes

A minority of states impose their own estate or inheritance taxes, often with exemptions far lower than the federal exclusion. This can significantly affect both the timing and structure of transfers, as well as the use of trusts to manage exposure to state‑level “death taxes”.

The Revised Uniform Fiduciary Access to Digital Assets Act (RUFADAA) governs access to digital assets. Most states have enacted RUFADAA, which establishes default rules specifying when a fiduciary may access the digital assets of an account holder. In general, if the account holder grants authorisation within their estate‑planning documents, the fiduciary is permitted to access the account.

Cryptocurrency presents unique challenges due to its reliance on private keys. Access to these assets is typically governed by the custodian’s account terms and internal security procedures, rather than by traditional mechanisms alone.

The holder of the account should identify all relevant accounts and devices where digital assets are stored, along with the practical steps needed to access them. The platform’s online tools should be used whenever possible and co-ordinated with the overall estate plan. Estate planning documents should also clearly specify the individual who is granted the authority to access and manage these digital assets.

For cryptocurrency, the estate plan should include detailed instructions for key recovery and secure storage solutions.

Most states have adopted RUFADAA‑style statutes, or are currently in the process of doing so. As a result, fiduciary access to digital assets has become more uniform under RUFADAA.

A common strategy for family business succession planning is to form a closely held entity (eg, a limited liability company, family limited partnership, or an S corporation) as a means of separating control from economic ownership.

Interests in a family company can also be owned by a trust rather than by individual family members. The trust may be a living (revocable) trust or an irrevocable trust. Depending on how the trust is structured, the owner of the family business can retain complete or limited control over the trust during their lifetime.

The primary advantage of holding family business interests in one or more trusts is that the trust structure governs how the company will be passed on upon the owner’s death and typically helps ensure that ownership remains within the family. Additionally, trusts can provide substantial protection from creditors, since the trust – not the individual who transfers property into it – legally owns the assets.

Valuation discounts may also be available when transferring non-voting interests, because such interests lack control and are not readily marketable. This can reduce the taxable value of the transferred interests for transfer tax purposes.

LLCs, limited partnerships, and corporations are organised and governed under state law, and their governance and transfer rules are defined by both the applicable state statute and the entity’s governing documents. Generally, operating agreements, partnership agreements, and shareholder agreements determine who controls the business, what interests can be transferred, and what approvals are required. These state‑law constraints are often used intentionally to separate control interests (voting or managing interests) from economic interests (non-voting interests).

However, even when an entity is properly formed and valid under state law, federal transfer tax rules may still apply. Under IRC, Section 2036, the transferred interest can be pulled back into the transferor’s taxable estate if the transferor retains certain rights or powers associated with that interest.

The most commonly used structures for US residents (and frequently for non‑residents with US connections) include the following.

Revocable living trusts are used to centralise the management of assets during the trustor’s lifetime, maintain privacy, and facilitate the transfer of assets outside of probate at death. Trust law is primarily state‑based, though many states follow the Uniform Trust Code. A revocable trust allows the trustor continued access to assets during life and provides for the disposition of those assets upon the trustor’s death.

Irrevocable trusts are used to implement long‑term governance of assets and to shift value out of the taxable estate. Common irrevocable trust structures include IDGTs, ILITs, GRATs, SLATs, and directed trusts.

Philanthropic structures are typically established through private foundations (generally Section 501(c)(3) entities classified as private foundations unless they qualify as public charities) or donor‑advised funds maintained by a sponsoring Section 501(c)(3) organisation.

Qualified Domestic Trusts (QDOTs) may be used when the surviving spouse is not a US citizen, enabling preservation of the marital deduction deferral if statutory requirements are met.

Non‑US persons with US assets may use US trusts and entities to manage US situs holdings and administration.

These vehicles are typically selected to address considerations related to control and governance, tax efficiency (estate, gift, GST, and income tax), asset protection, privacy, and – particularly for cross‑border families – jurisdictional co-ordination (including situs, trustee selection, treaty interactions, and differing succession regimes).

The One, Big, Beautiful Bill Act introduced several changes that affect US estate planning. The Act increases the basic exclusion amount to USD15 million starting in 2026, makes this increase permanent, and indexes the amount for inflation going forward. As a result, fewer estates are expected to be subject to federal estate taxes, allowing more wealth to pass to beneficiaries without triggering transfer tax liabilities.

The Act also raises the Qualified Small Business Stock (QSBS) exclusion cap to the greater of USD15 million or ten times the investor’s stock basis, and increases the gross asset threshold to USD75 million. These changes expand access to QSBS benefits and incentivise investment in qualifying businesses.

In addition, the Act broadens the excise tax regime that applies to tax‑exempt organisations, extending it more widely to current and former non-profit employees. This expansion may create operational challenges for larger tax‑exempt institutions. The Act also replaces the previous 1.4% flat excise tax on the net investment income of private colleges and universities (with assets of at least USD500,000 per student) with a tiered excise tax system. The new structure applies only to institutions with at least 3,000 tuition‑paying students.

Corporate fiduciaries – such as banks and trust companies – are frequently appointed to serve as trustees or executors. These institutions must generally be authorised to conduct fiduciary business and are typically chartered, authorised, and regulated as a bank, trust bank, or trust company under applicable banking laws.

While all trustees have fiduciary duties, including but not limited to prudent administration and loyalty, a corporate fiduciary is usually held to a higher standard because of its specialised skills and expertise. Corporate fiduciaries must also adhere to the prudent investor rule, unless this requirement is waived under the terms of the trust agreement.

In addition, many states permit the formation of private trust companies. The regulatory requirements for these entities vary by state and may include standards for capitalisation, governance and reporting.

Both state and federal tax laws apply to trusts and similar structures. Generally, property rights are determined under state law, while the taxation of various interests in property is governed by both federal law and the relevant state laws that may have a connection to the trust. Because each state has its own rules for determining how a trust, its settlor, or its beneficiaries are taxed, a careful review of applicable state law is essential before creating or administering a trust within the United States.

In general, a trust – other than a grantor trust discussed below – must file both state and federal income tax returns for any income it earns. If a distribution is made to a beneficiary during the trust’s tax year (generally the calendar year), that distribution will “carry out” distributable net income (DNI) to the beneficiary. The amount of DNI carried out is reported to the beneficiary on a Schedule K‑1, which is prepared as part of the trust’s federal income tax return (Form 1041) and then sent to the beneficiary. The trust receives a corresponding distribution deduction for such income, resulting in the beneficiary – not the trust – being taxed on that portion of DNI. Ordinary income is included in DNI, but capital gains generally are not. As a result, capital gains are typically taxed at the trust level. This may create a mismatch when claiming foreign tax credits in jurisdictions that tax the capital gain directly to the beneficiary – for example, under UK rules – because the US taxes the gain to the trust, not to the beneficiary.

A trust that qualifies as a grantor trust, however, is treated differently: all of its income is taxed directly to the grantor. In this case, the trust is generally not required to file its own tax return; instead, its income is reported on the grantor’s personal return. Various rules determine when a trust is treated as a grantor trust. Examples include: a trust that may use its income to pay premiums on insurance on the grantor’s life; a trust that allows the grantor, acting in a non‑fiduciary capacity, to substitute property of equivalent value for trust assets; a trust that the grantor has the power to revoke; or a trust where the grantor (or a person considered “related” or “subordinate”) has the power to determine the enjoyment of the trust’s income or principal.

From a planning perspective, a grantor trust regime may be advantageous because the grantor is responsible for paying the income tax attributable to the trust’s assets. Since this effectively allows the trust to grow without bearing its own tax liability, it enhances the value of the trust. Importantly, this tax payment is not considered a taxable gift under US law, because it is the grantor’s own tax obligation.

Certain states do not impose a state income tax. These currently include:

• Alaska;
• Florida;
• Nevada;
• New Hampshire;
• South Dakota;
• Tennessee;
• Texas;
• Washington; and
• Wyoming.

Thus, one planning strategy is to establish a non‑grantor trust in one of these states to avoid state‑level income taxation. However, care must be taken to avoid inadvertently creating tax exposure in another state. For example, appointing a trustee who resides in California may cause California to impose its own state income tax on the trust due to the presence of a California‑resident trustee.

Same-sex spouses are treated the same as opposite-sex spouses for inheritance and transfer‑tax purposes (see Obergefell v Hodges, 576 US 644 (2015)).

Unmarried partners generally do not receive spousal intestacy rights or spousal tax benefits by default, such as the unlimited marital deduction from gift and estate tax. Any rights for unmarried partners typically arise only through estate‑planning documents (eg, wills, trusts, or beneficiary designations) or, in some states, through registered domestic partnership regimes. These regimes and the rights they provide vary significantly by state.

Inheritance rights for non-marital children depend on establishing a legal parent‑child relationship under state law. Adopted children are generally treated the same as biological children for purposes of intestacy and class gifts. Parentage for children born through surrogacy is primarily governed by state parentage laws, and legal parent‑child relationships are usually based on the type of surrogacy arrangement. Parental rights in these cases are often established by court order before the child’s birth.

The inheritance rights of children conceived posthumously vary by state and depend on specific statutory requirements and the circumstances under which conception occurred.

Conflicts can arise in US succession planning when family status is defined differently across jurisdictions – whether between US states, between US law and foreign law, or between state‑law rules and federal classification standards. These inconsistencies matter because inheritance rights, the definition of beneficiary classes, and fiduciary decision‑making often depend on state‑law determinations of marriage and parent–child relationships, while federal tax outcomes may hinge on separate federal recognition criteria.

In practice, these conflicts are usually managed by relying on formal court orders – such as parentage judgments – which typically receive strong interstate recognition. Succession planning documents also help mitigate inconsistencies by explicitly defining beneficiary classes and clearly stating intended succession outcomes.

Additional efforts to promote uniformity are being advanced through model‑law reforms, including the Uniform Parentage Act, which aims to reduce variation in how jurisdictions define and recognise family relationships.

Succession planning for cross‑border interests must take into account federal transfer taxes, federal income taxes, and any applicable treaty relief. US succession and tax consequences often depend on an individual’s domicile or residence and the situs of their assets.

US permanent residents (ie, green card holders) are subject to US income taxes and US transfer taxes in the same manner as US citizens. To avoid the application of these taxes on certain assets, individuals considering US residency may transfer assets to a “foreign trust” before becoming US residents. A “foreign trust” is a trust that is not classified as a domestic trust, meaning either a US court cannot exercise primary supervision over its administration or one or more non‑US persons control the trust’s “substantial decisions”. Individuals who control the substantial decisions of a trust may include trustees, trust advisers, and, in some cases, trust protectors or beneficiaries. Additionally, the trust must be created by the non‑resident more than five years before they become a permanent resident. If properly structured, a foreign trust is generally not subject to US income tax on non‑US source income and will not be included in a US resident’s estate for estate tax purposes.

Individuals who are not domiciled in the US are not subject to US transfer taxes (gift, estate, and GST taxes) on their worldwide assets. However, US‑situs assets are subject to these taxes even if the owner is not US‑domiciled. By contrast, persons domiciled in the US are subject to transfer taxes on all worldwide assets. A person living in the US with no present intention of leaving is typically considered US‑domiciled. The determination also considers factors such as length of US residence, ties to other countries, green card status, and lifestyle indicators (eg, voter registration, driver’s licence, and club memberships).

For cross‑border scenarios, the Foreign Investment in Real Property Tax Act (FIRPTA) is an important consideration. FIRPTA authorises the US to tax non‑residents on dispositions of US real property. Generally, a purchaser acquiring US real property from a non‑resident seller must withhold 15% of the amount realised.

Real property taxes in the US are imposed at the state and local levels, not the federal level. Each state and local jurisdiction sets its own property tax rates, which vary significantly. The US provides a federal deduction of up to USD10,000 per year for state and local taxes paid on real property for taxpayers who itemise in 2025. Dispositions of real property – including sales or exchanges that do not qualify under Section 1031 of the Internal Revenue Code – are subject to taxation for capital gains or, in some cases, ordinary income. Federal taxation of real property dispositions is complex.

The US has entered into numerous income tax treaties with other countries to reduce or eliminate double taxation. Treaty provisions vary by country. The US also has estate and/or gift tax treaties with a limited number of jurisdictions, which may increase exemptions, modify situs rules, or provide credits in cross‑border estates.

Succession of personal property should also be carefully considered. State law governs the succession of a decedent’s tangible and intangible personal property. The key factor is the decedent’s domicile, which is the place they intend to be their permanent home and where they intend to remain indefinitely. An individual may have only one domicile. If the decedent is domiciled in a state, that state’s succession laws apply. However, if a person has a valid will or living trust, that document generally governs the disposition of assets regardless of state succession laws.

The laws of the decedent’s domicile state govern the succession of personal property and any real property located within that state. Real property situated outside the decedent’s domicile is governed by the laws of the state where the property is located. When a decedent owns real property in a state where they were not domiciled, an “ancillary probate” proceeding in the property’s situs state is usually required. This proceeding disposes of the property either according to the decedent’s will or under that state’s intestacy laws.

Conflicts of law issues may arise when determining property characterisation, interpreting a testamentary instrument, or exercising a power of appointment. Courts may apply the “interest analysis” or “significant interest” theory, evaluating which state has the greater interest in resolving the issue and applying that state’s laws. Many conflicts can be avoided through provisions in the decedent’s will or trust. For example, a will or trust may contain a “choice of law” clause specifying which state’s law will govern its interpretation. Except in certain cases – such as marital property characterisation or matters contrary to public policy – courts generally honour the decedent’s selected state law.