STEP

Title Research

USA

The United States (US) is a union of 50 sovereign states plus the District of Columbia and 15 dependencies. Property affecting trusts and estates are a matter of state law, consisting of statutes and court precedents, and vary from state to state. The Uniform Probate Code (UPC), a model set of laws governing the devolution of property at death, has been adopted in whole or in part by at least 18 states. The Uniform Trust Code (UTC), a codification of the common law of trusts, has been adopted in whole or in part by at least 20 states. The Hague Convention on the Law Applicable to Trusts and on their Recognition, 1 July 1985 has not been approved by the US Congress.

STEP USA branch pages

New developments
  • 2010 federal budget proposals stop scheduled repeal of estate tax. Federal estate tax will likely continue with 45 per cent top rate and unified credit sheltering USD3.5 million from tax. Final budget expected prior to 2009 calendar year end.
  • Ongoing legislative initiatives impacting international tax and estate planning include proposed legislation to reduce or eliminate ‘check-the-box’ classification election for foreign entities, expand application of qualified intermediary rules to foreign financial institutions, and target accounts in so-called tax haven jurisdictions.
  • Report of Foreign Bank and Financial Accounts, TD F 90-22.1 (commonly known as 'FBAR') revised for all filings beginning 1 January 2009.
Practice trends
  • Offshore tax matters becoming IRS priority: attention focused on undisclosed foreign accounts, new voluntary disclosure guidelines issued, increased reporting requirements and compliance efforts targeting non-US bank and other financial accounts and offshore structures, such as foreign trusts and companies controlled by US persons.
  • Increased use of private trust companies: changing state laws have reduced the cost of forming and operating private trust companies while enhancing their attractiveness.
  • Directed trustees and protectors: trend in some US states towards use of investment advisors and distribution committees to segregate trustee duties and to include trust protectors as presumptive fiduciaries.

1. Introduction

a. History and background

The United States (US) is a union of 50 sovereign states plus the District of Columbia and 15 dependencies. Property affecting trusts and estates are a matter of state law, consisting of statutes and court precedents, and vary from state to state. The Uniform Probate Code (UPC), a model set of laws governing the devolution of property at death, has been adopted in whole or in part by at least 18 states. The Uniform Trust Code (UTC), a codification of the common law of trusts, has been adopted in whole or in part by at least 20 states. The Hague Convention on the Law Applicable to Trusts and on their Recognition, 1 July 1985 has not been approved by the US Congress.

The currency is the US dollar (USD).

b. Legal system

The US operates under a federal legal system whereby the federal government has specific, enumerated powers under the US Constitution. The states retain those powers not enumerated in the US Constitution. The US Constitution creates a tripartite system of government made up of the legislative, executive and judicial branches. The legislative branch, or Congress, consisting of the House of Representatives and the Senate, enacts federal laws. The executive branch, consisting of the President and advisors, has administrative and regulatory authority to carry out federal laws. The judicial branch, consisting of the Supreme Court and a network of subsidiary lower courts, interprets federal laws.

c. Taxation

Tax in the US is imposed at both the federal and state levels, and in some instances at the local county or city level. Federal tax authorities must rely on state law to determine a taxpayer’s property rights. Almost all transactions have a federal-level tax consequence as well as a state one. Partial offsets for state taxes are usually available in determining federal tax.

Editorial board
Tina Albright TEP
Kozusko Harris Vetter Wareh LLP, New York, USA
Dean C Berry
Baker & McKenzie LLP, New York, USA
Steven L Cantor TEP
Cantor & Webb PA, Miami, USA
Jennie Cherry TEP
Kozusko Harris Vetter Wareh LLP, New York, USA
G Warren Whitaker TEP
Day Pitney LLP, New York, USA

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