Cross-border trust strategies: Maximising jurisdictional advantages

Why cross-border planning matters

Entrepreneurs and professionals with global interests face a unique challenge: the US tax system reaches far beyond its borders. US citizens and residents are taxed on worldwide income at graduated rates (10% to 37%), and on worldwide assets under estate and gift tax rules, which impose a 40% transfer tax on amounts exceeding approximately USD 13.99 million in 2025 and USD 15 million in 2026.

Without comprehensive tax treaties ­– or with treaties that include “saving clauses” – the risk of double taxation is real. For those planning to expatriate, the exit tax looms large. Individuals with a net worth of USD 2 million or more, or a five-year average US tax liability above USD 206,000 may face tax on unrealised gains, with only USD 890,000 exempted in 2025.

These realities underscore the need for proactive planning, especially before major liquidity events like selling a business. A well-structured cross-border trust strategy can mitigate exposure, optimise tax outcomes, and preserve wealth across generations. Ideally, planning should begin 3–5 years before a sale, allowing time to integrate Qualified Small Business Stock (QSBS) strategies and other advanced techniques. This is not to say beneficial planning cannot be accomplished with a shorter timeline.

Cross-border trusts are powerful tools for families seeking tax efficiency, asset protection, and long-term legacy planning. The foundation begins with core documents: a revocable trust to avoid probate, a pour-over will to capture untitled assets, and ancillary instruments such as powers of attorney and healthcare directives to ensure decision-making authority across borders. These elements establish seamless administration across jurisdictions.

Jurisdiction matters. US states including Nevada, South Dakota, Wyoming, and Delaware have become premier destinations for sophisticated planning, offering tax neutrality, robust asset-protection statutes, enhanced privacy, and modern trust features such as directed trusts, trust protectors, and flexible decanting statutes. These advantages help families adapt to changing tax rules, investment strategies, and multigenerational needs.

Tax considerations remain central. Cross-border structures must navigate complex issues such as throwback tax exposure for US beneficiaries of foreign trusts, migration and situs changes that may trigger taxable events, and foreign grantor trust rules that simplify compliance for non-US individuals. High-growth business owners benefit from QSBS planning, with gain exclusion opportunities of up to USD 15 million and faster phase-in after 05 July 2025. Effective planning requires years – not months – before a liquidity event.

Non-tax priorities are equally influential. Privacy protections, litigation shielding, dynastic trust options, and modification flexibility all support long-term stability. Selecting the right fiduciary, whether a corporate trustee, private trust company, or hybrid structure, is essential for cross-border compliance and governance.

The big picture: US tax rules reach global assets, double-tax exposure remains a risk despite treaty networks, and expatriation penalties persist. The proper planning runway, jurisdiction choice, and advisory team create efficiency, protection, and a foundation for multigenerational stewardship and strategic philanthropy.

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Kenny Jefferson advises high net worth individuals and families on estate, gift, and GST tax planning, wealth transfer, and business succession. A former Division I football player, he brings strategic focus and teamwork from IRS, Morgan Stanley, and leading law firm experience.