Cross-Border Wealth Transfer Tax Planning

You’ve spent decades building your business and expanding into international markets. Now, as you begin thinking about succession, a sale, or simply how to protect what you’ve built for your family, a new set of challenges will emerge, ones that go far beyond the domestic tax code.

For multinational business owners, generational wealth transfer is complex because it sits at a critical intersection: U.S. federal and state tax law, the tax rules of the countries where you operate, and the structure of the business itself. To properly navigate the rules and facilitate a successful transfer, you need to prioritize early, coordinated planning.

Why Is Cross-Border Wealth Transfer So Complex?

The U.S. taxes its citizens and permanent residents on worldwide income and assets, regardless of where they live or where their wealth is held. This means that even if your business operations are headquartered in Colombia, Mexico, or another Latin American country, your U.S. tax obligations follow you and can reach into the assets you plan to pass on to your heirs.

But the complexity doesn’t stop at the federal level: U.S. states have their own estate and inheritance tax regimes, and some (for instance, Massachusetts, Oregon, and Washington) impose estate taxes with exemptions far lower than the federal threshold. If you own real property or business interests in multiple states, each state may assert a right to tax a portion of your estate. That’s why it’s important to understand your domicile and the legal location of your assets as you kickstart the planning process.

At the same time, the countries where your business operates may impose their own wealth, inheritance, or capital gains taxes upon a sale or transfer. If there is no tax treaty or if the treaty doesn’t cover the specific type of transfer you’re contemplating, then you may face double taxation on the same assets.

What is the Role of Business Structure in Your Estate?

Whether you run a U.S. C-corporation, an S-corporation, a partnership, or a foreign entity, the way in which your business is structured directly affects how your wealth will be transferred and what tax consequences follow. For example, S-corporation shares cannot be held by foreign nationals or most trusts, which can complicate succession planning when family members live outside the U.S.

Furthermore, foreign corporations and partnerships held by U.S. taxpayers trigger a separate layer of reporting obligations (including Forms 5471 and 8865) and may be subject to Net CFC Tested Income (NCTI), which is the new GILTI after the changes made by the One Big Beautiful Bill Act (OBBBA). When a business sale occurs, these structures influence the character and sourcing of the owner’s income, which in turn determines how much of the gain is taxable in the U.S. versus abroad.

As you start the wealth transfer planning process, it’s essential for you to enlist the help of a qualified international tax team who can help you evaluate restructuring options that may reduce your overall tax burden while preserving the value you pass to your heirs. That way, your advisory team can suggest techniques such as entity conversions, pre-sale reorganizations, or shifting ownership into tax-efficient structures well before a liquidity event.

How Does a Business Exit Affect Your Personal Wealth Transfer Plan?

The eventual sale of your business likely will be the single largest liquidity event in your lifetime. It can generate significant capital gains in a single tax year, dramatically increasing your taxable estate and potentially pushing your heirs into a higher estate tax bracket. This is why you must coordinate the timing and structure of your sale with your broader personal wealth and estate planning strategy.

If you’re facing or planning for a near-term exit, there are several tools you can consider:

• Grantor Retained Annuity Trusts (GRATs): If you properly structure a GRAT before your business sale, it can enable you to transfer the appreciation of your business interest to your heirs with little or no gift tax, provided your business value grows faster than the IRS hurdle rate.
• Irrevocable Life Insurance Trusts (ILITs): Life insurance held inside an ILIT can provide estate tax liquidity while enabling you to keep the proceeds outside your taxable estate. An ILIT can be especially valuable when your primary asset is illiquid equity in a private business.
• Intentionally Defective Grantor Trusts (IDGTs): This strategy lets you to sell your business interests to an IDGT in exchange for a promissory note, effectively freezing the value in your estate while enabling future growth to benefit your heirs income-tax-free.
• Foreign Trusts and Non-U.S. Structures: If you have significant business connections to Latin America or other regions, you must practice caution when leveraging foreign trusts. U.S. rules governing foreign trusts are strict, and improper planning can result in significant penalties. However, with proper structuring, you can use them as powerful tools for international wealth transfer.

Lastly, it’s important to factor state tax considerations into your exit and wealth transfer plans. If you are domiciled in a state with an estate tax, relocating your domicile before a sale can meaningfully reduce your estate tax exposure. At the same time, keep in mind that domicile changes require you to make genuine, documented shifts in your lifestyle and ties, and some states aggressively audit domicile claims. If you plan to change your domicile, try to accomplish it at least two years before any major liquidity event.

Tax Treaties: What They Do and Don’t Cover

The U.S. has estate and gift tax treaties with only a small number of countries, and Latin American countries are notably absent from most of these agreements. This means that if you have assets or family members in Mexico, Colombia, Brazil, Chile, or other Latin American nations, you generally cannot rely on treaty relief to refrain from double estate taxation.

In the absence of a treaty, U.S. law permits a foreign death tax credit for taxes paid to foreign governments on assets also subject to U.S. estate tax; however, this credit is limited and does not always remove the double-tax burden. Therefore, it’s essential to understand the specific tax rules of each country where you hold assets and proactively coordinate with both your U.S. and foreign advisors.

Final Thoughts: Start Your Cross-Border Wealth Transfer Plan Now

For multinational business owners, the window between making the decision to exit and executing that exit is often shorter than it needs to be for effective planning. To take full advantage of the strategies that produce the most meaningful tax savings, you need to make time to implement your wealth transfer plan properly and satisfy all legal and compliance requirements.

The intersection of state, international, and business tax is genuinely complex, but you can navigate it successfully if you have the right team in your corner. The earlier you engage with advisors who have deep experience in cross-border planning, the more options you have available.

Whether you are five years from an exit or actively in the deal process, now is the time to make sure your personal wealth transfer plan is aligned with your business strategy, across every jurisdiction that matters.

Please connect with your advisor if you have any questions about this article.

This article was written by Aprio and originally appeared on 2026-07-09. Reprinted with permission from Aprio LLP. © 2026 Aprio LLP. All rights reserved. https://www.aprio.com/insights-events/cross-border-wealth-transfer-for-multinational-business-owners-ins-article-intl/

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