With ever-growing globalization, wealthy families have taken the opportunity to live and maintain homes all across the world, including in the United States. One of the potential challenges facing such individuals is planning their estates in an effort to maximize tax efficiencies and to retain their hard-earned wealth.
Internal Revenue Code § 2001 establishes a transfer tax on the worldwide assets of any individual who is a citizen or resident of the United States at the time of his or her death. It is important to note, that when dealing with the estate tax, a “resident of the United States” is not defined in the conventional way, but rather, is defined as a person who is domiciled in the United States at the time of their death. A person is considered domiciled in the United States when they reside in the country with the intent to remain there indefinitely. Once domicile is established, it is presumed to continue until shown to have been changed.
The current estate tax rate ranges anywhere from 18% to 40%, however, the first $5.49 million of assets per individual is exempt from the tax. This exemption amount is up from $5.45 million in 2016, and has historically risen in the past years. The current administration has hinted at removing the estate tax completely, however nothing definitive has yet been proposed. Despite recent events, those that might find their estates subject to the tax should still seek out a tax professional as even if the estate tax is repealed by the current administration, it can always be imposed again by a future administration.