United States

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New Developments
  • New federal transfer tax rules for US persons enacted for 2010 through 2012 with top tax rate of 35 per cent and USD5 million exemption amount.
  • From 18 March 2010, uncompensated use of property held in a foreign trust by a US grantor, US beneficiary or US person related to either of them is treated as a distribution equal to the fair market value of the use.
  • Internal Revenue Service (IRS) Notices 2010–60 and 2011–34 contain further guidance for complying with foreign account reporting and withholding tax enacted by 2010 HIRE Act and Notice 2011–53 provides revised timeline for implementation.
Practice Trends
  • Following up on new laws that increase tax reporting, the IRS is issuing new forms and guidance to assist taxpayers with compliance.
  • Tax and succession planning for US citizens and residents focuses on maximizing the USD5 million exemption amount given that Congress may again modify estate and gift tax laws as of 2013.

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 laws 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 24 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
Jennie Cherry TEP
Kozusko Harris Duncan, US
Tina Albright TEP
Curtis, Mallet-Prevost, Colt & Mosle LLP, New York, US
Stanley A Barg TEP
Kozusko Harris Duncan, US
Thomas Kenney TEP
Fiduciary Trust International, Los Angeles, US


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