US Estate and Gift Tax Rules: Planning Considerations for High-Net-Worth Families

For high-net-worth families, transferring wealth to the next generation requires careful planning. In the United States, estate and gift taxes apply to certain transfers of wealth made during life or at death. While recent legislative changes have increased the amount individuals can transfer without federal tax, the rules remain complex, particularly for families with international connections.

The US estate and gift tax system also treats US and non-US individuals very differently. In some cases, the US taxes worldwide assets. In others, it taxes only assets located in the United States. These distinctions are especially important for international families, globally mobile executives, and individuals who live, work, or invest across borders.

Understanding how these rules work, and how they apply to your specific situation, is essential for protecting wealth and avoiding unexpected tax exposure. This article explains the key elements of the US estate and gift tax system, highlights important differences for US and non-US individuals, and outlines planning considerations for high-net-worth families.

Who this affects

US estate and gift tax rules can affect several groups of individuals and families, including:

• High-net-worth families planning wealth transfers
• US citizens living or investing internationally
• Non-US individuals who own assets in the United States
• Globally mobile executives with cross-border investments
• Families with US and non-US spouses

Understanding how the rules apply to your situation is an important first step in effective estate and gift tax planning.

How the US estate and gift tax system works

The US uses a unified estate and gift tax system to tax transfers of wealth made during an individual’s lifetime or at death. Instead of taxing each transfer separately, the system combines taxable lifetime gifts with assets transferred at death once certain thresholds are exceeded.

Under this framework, an individual’s cumulative taxable lifetime gifts and taxable estate at death are combined and subject to a unified, graduated rate structure, with a top rate of 40%. A unified credit offsets the tax otherwise due, effectively sheltering cumulative taxable lifetime gifts and transfers at death up to $15 million per individual (for 2026) from federal estate and gift tax. Transfers exceeding the available exclusion amount are subject to tax at applicable rates.

In addition to the lifetime exclusion, the Internal Revenue Code (IRC) provides an annual gift tax exclusion. This allows individuals to make qualifying gifts each year to any number of recipients generally without using their lifetime exemption and, in most cases, without triggering gift tax reporting. For calendar year 2026, the annual exclusion is $19,000 per recipient, subject to inflation adjustments.

Married couples may also benefit from the unlimited marital deduction and portability rules. The unlimited marital deduction generally allows assets to pass to a surviving US-citizen spouse without triggering federal estate or gift tax. In addition, portability generally allows a surviving US-citizen spouse to utilize the deceased spouse's unused federal estate tax exclusion amount if a timely election is made. When properly implemented and timely elected, these provisions can significantly increase the amount of wealth a couple can transfer without federal transfer tax. 

Practical note: Portability is not automatic. A timely Form 706 must be filed, and the election must be properly made. Failure to do so can permanently forfeit millions of dollars of available exemption.

The One Big Beautiful Bill Act: What changed

The federal estate and gift tax landscape changed with the enactment of Public Law 119-21 (commonly referred to as the ‘One Big Beautiful Bill Act’) on July 4, 2025.

One of the most significant provisions was an increase in the estate, gift, and generation-skipping transfer (GST) tax exclusion amounts. The legislation removed the previously scheduled reduction under prior law and established a $15 million base exclusion amount beginning in 2026, subject to future legislative changes.

Key federal transfer tax parameters

• Unified estate and gift tax exclusion: $15,000,000 per individual
• Top federal estate and gift tax rate: 40%
• Annual gift tax exclusion: $19,000 per recipient (2026)
• Annual exclusion for gifts to a non‑US citizen spouse: $194,000 (2026)

These thresholds apply per individual. For married US-citizen couples, the exclusion may effectively be doubled through proper planning and timely elections. Unlike the estate tax exclusion, the GST exemption is not portable between spouses and generally requires separate planning.

Core differences between US and non-US individuals

For US estate and gift tax purposes, the IRC classifies individuals based on citizenship and domicile. Unlike income tax residency rules, domicile determines whether the US taxes an individual’s worldwide assets or only assets located within the US.

On January 1, 2026, the $15,000,000 exclusion amount became effective. However, how the exclusion applies, and which assets are subject to tax, differs significantly for US and non-US individuals.

US citizens and US-domiciled individuals

US citizens and individuals domiciled (i.e., the place a person is considered to have their permanent home) in the US are subject to estate and gift tax on their worldwide assets, regardless of where the property is located.

This includes:

• Foreign real estate
• Non-US investment accounts
• Closely held businesses
• Intangible property

Key planning tools include the $15,000,000 lifetime exclusion, the annual gift exclusion, and the portability election.

Estate and gift tax treatment for non-US individuals

Individuals who are not US citizens and not domiciled in the US are generally subject to US transfer tax only on US-located assets, meaning assets considered to be located in the United States for estate and gift tax purposes.

Domicile is determined under a facts-and-circumstances test that considers physical presence, intent, family ties, residence patterns, immigration status, business connections, and other indicators of whether the United States is considered the individual's permanent home.

While holding a green card is an important factor, a green card alone is not determinative for estate and gift tax purposes. If a green card holder is not considered domiciled in the US, the individual may still be treated as a nonresident for transfer tax purposes.

For US non-citizens who are not domiciled in the US, US estate and gift tax rules apply differently depending on whether the transfer occurs at death (estate tax) or during life (gift tax).

Estate tax

For non-US individuals and nonresident decedents, US estate tax may apply to certain assets located in the United States. Generally, this includes assets such as:

• US real estate
• Tangible personal property located in the US
• Stocks of US corporations
• US-situated real property
• US-situated tangible personal property

The executor of a nonresident decedent’s estate must file IRS Form 706-NA if the value of US assets subject to estate tax exceeds $60,000 at death. This threshold is not indexed for inflation and is significantly lower than the exclusion amounts available to US citizens and US-domiciled individuals.

Gift tax

For non-US individuals, US gift tax generally applies only to gifts of certain intangible assets connected to the US, such as stock in US corporations and are generally not subject to US gift tax when made by nonresident, non-citizen donors.

Unlike US citizens and domiciliaries, nonresident non-citizens generally do not have access to the unified lifetime gift tax exclusion. However, the annual gift tax exclusion may still be available for qualifying gifts.

Treaty considerations

Estate and gift tax treaties may modify asset location rules, provide additional exemptions, or prevent double taxation. For this reason, treaty analysis is often essential for non-US families with US assets.

The US has estate and gift tax treaties with only a limited number of countries. Treaty analysis is therefore not available in every cross-border situation.

Planning considerations for high-net-worth families

The current legislative environment creates new planning opportunities but also requires careful strategy and compliance.

1. Strategic use of the $15 million lifetime exclusion: Families may revisit lifetime gifting strategies to remove future appreciation from the taxable estate through structured gifting and trust planning.
2. Annual exclusion gifting: Regular use of the annual gift exclusion (i.e., $19,000/individual for 2026) can be highly effective, particularly for families with multiple beneficiaries.
3. Portability planning for married couples: Portability can significantly increase the amount of wealth transferred tax-free. However, it only applies if a timely estate tax return is filed (Form 706). Executors of estates can request an automatic 6-month extension by submitting IRS Form 4768 on or before the original due date of the return (which is generally 9 months after the decedent’s date of death).
4. Planning for non-US citizen spouses: While an unlimited marital deduction generally applies to transfers between US-citizen spouses, special limitations apply when a spouse is not a US citizen. At death, a Qualified Domestic Trust may be required to defer estate tax, subject to strict statutory and reporting requirements.
5. Cross-border asset structuring: International families should carefully review asset ownership, entity structures, and succession plans to comply with US asset location rules and broader global transfer tax considerations.
6. State tax implications: It is important not to overlook state estate tax planning. State estate tax exemptions are often substantially lower than the federal exclusion amount, creating tax exposure even where no federal estate tax is due. Twelve states and Washington D.C. levy a state-level estate tax while five states levy an inheritance tax (where the tax is payable by the recipient, not by the estate). Maryland is unique in that it is the only state to impose both an estate and an inheritance tax.

Navigating estate and gift tax planning

US estate and gift tax rules can create complex planning considerations, particularly for high-net-worth families with international connections, cross-border assets, or globally mobile family members. Differences between US and non-US individuals, combined with evolving legislation such as the One Big Beautiful Bill Act, make it important to evaluate how these rules apply to each family’s specific circumstances.

Thoughtful planning often involves coordination between tax advisors, legal counsel, and financial professionals. Key considerations may include the timing of lifetime gifts, the use of trusts and marital planning structures, and the treatment of assets located in different jurisdictions.

Because estate and gift tax rules interact with broader tax, financial, and succession planning decisions, reviewing these issues as part of a comprehensive planning strategy can help families avoid unexpected tax exposure and better preserve wealth across generations.

Global Tax Network works with individuals and families facing cross-border tax considerations to help interpret these rules and support effective planning in coordination with their broader advisory teams. If you would like to discuss how US estate and gift tax rules may apply to your situation, schedule a call with our team.