Pre-Immigration Tax and Estate Planning
Becoming a U.S. tax resident changes how income, investments, companies, and trusts are taxed and reported. Assets generally enter the U.S. system with their existing tax basis, so gains accumulated before arrival may be taxed when the assets are later sold. Becoming domiciled in the United States also brings worldwide assets within U.S. estate and gift tax rules.
Planning before residency begins can address these consequences while a wider range of options remains available. Milvidskiy Law Group P.C. works with people moving to the United States, their families, and their advisers to coordinate assets, entities, and trusts before the move.
Key Takeaways:
- Establish the residency start date. Residency for income tax begins on a determinable date under the green card and substantial presence tests, and transactions completed before that date are outside the U.S. income tax system. Transactions completed after that date are subject to U.S. income tax rules.
- Three things are usually done before arrival: realizing built-in gains so that the U.S. taxes only future appreciation, restructuring foreign companies and funds that may create additional U.S. tax costs, and settling or reviewing trusts while the settlor is still a non-resident.
- Income tax residency and estate tax domicile are different tests. A person can plan to be a U.S. income tax resident without becoming a U.S. domiciliary for estate tax, or can accept both, and the plan for gifts and trusts depends on which is intended.
When U.S. Tax Residency Begins
A non-citizen becomes a U.S. income tax resident in one of two ways. A lawful permanent resident, meaning a green card holder, is a resident from the first day of presence in the United States as a permanent resident. Anyone else becomes a resident under the substantial presence test when they are present in the United States for at least thirty-one days in the current year and for one hundred eighty-three days over a three-year period, counting all the days in the current year, one-third of the days in the prior year, and one-sixth of the days in the year before that.
Certain visa holders, such as students and teachers, are exempt from counting days for a period, and a person who has a closer connection to a foreign tax home can avoid residency in some circumstances. Once the test is met, residency generally begins on the first day of presence in that year, which means a person who arrives in the spring and stays may be a resident retroactive to a visit in January. Establishing this date determines the time available to complete planning transactions.
Planning Before Arrival
Built-in gains
The United States does not adjust the basis of assets a new resident brings with them. Stock bought abroad for a small sum and now worth a great deal will be taxed on the entire gain when sold by a U.S. resident. Selling before residency, in a country that does not tax the gain, and repurchasing or reinvesting resets the basis to current value so that only appreciation after arrival is taxed here. Where an asset cannot be sold, contributing it to an entity, or a sale to a family member or a trust, may accomplish the same result. Losses are the mirror image: an asset with a built-in loss is worth holding into residency, where the loss may be usable.
Foreign companies and funds
U.S. tax rules require particular attention to foreign corporations controlled by U.S. persons and to foreign mutual funds and similar pooled investments. A U.S. resident who owns a controlling interest in a foreign company may be taxed currently on the company’s income whether or not it is distributed, and a U.S. resident who holds foreign fund units may face interest charges and ordinary income treatment on sale. Before residency, a foreign holding company can be liquidated, converted, or elected to be treated as transparent, and foreign fund holdings can be sold and replaced with U.S.-registered investments. Each decision has a home-country tax consequence as well, so the work is done with the client’s advisors there.
Trusts
A trust settled by a non-resident for the benefit of family members, including family members who will become U.S. residents, can be structured to hold assets outside the U.S. estate tax system indefinitely and, in some designs, to accumulate income free of U.S. tax during the settlor’s life. The same trust settled after the settlor becomes a resident is a U.S. grantor trust with the assets in the settlor’s estate. Existing trusts of which the new resident is a beneficiary or trustee are reviewed for the reporting they will generate and for accumulated income that may create significant tax costs when distributed, and are often restructured before the beneficiary arrives. Pre-immigration trusts are foreign-settled arrangements whose design must account for the rules governing irrevocable trusts and the settlor’s change in residency.
Gifts before domicile
A non-resident who is not domiciled in the United States may give intangible property, such as stock or cash held abroad, without U.S. gift tax, and may give without limit. Once the person is a U.S. domiciliary, gifts of worldwide assets above the $19,000 annual exclusion consume the lifetime exemption, which is $15,000,000 in 2026, and above that are taxed. Gifts to family members, to trusts, and to a spouse who is or will be a U.S. person are therefore made before arrival where the family intends to make them at all. Gifts of U.S. real estate and tangible property located here are taxable regardless of the giver’s status and are handled separately.
Income Tax Residency and Estate Tax Domicile
A person can be a U.S. income tax resident without being a U.S. domiciliary for estate and gift tax. Domicile is a question of intent to remain, shown by facts such as the location of the family home, family, business, and ties to the country of origin. A person who intends to work in the United States for several years and return home can arrange their affairs to remain a foreign domiciliary, keeping their worldwide assets outside the U.S. estate tax system and subject to it only on U.S.-situated property above a $60,000 exemption, and can hold U.S. investments in forms that are not U.S.-situated. A person who intends to stay accepts domicile and plans accordingly, with the $15,000,000 exemption available to citizens and residents in 2026 and the tools of a domestic plan. The plan should reflect the client’s intentions and the facts relevant to domicile. Estate and gift tax treaties with the client’s home country, where one exists, can change the answer.
Reporting Begins With Residency
From the first year of residency, foreign bank and financial accounts, foreign companies and partnerships, foreign trusts, and gifts and inheritances received from abroad carry annual U.S. reporting obligations with penalties for non-filing that do not depend on tax being owed. Foreign accounts are reported to the Treasury once they together exceed $10,000 at any time in the year; specified foreign financial assets are reported with the return once they exceed $50,000 at year end or $75,000 at any time for a single filer, or $100,000 and $150,000 for a married couple filing jointly; and gifts or inheritances from non-resident individuals or foreign estates are reported once they exceed $100,000 in a year.
A new resident’s advisors should know before arrival what will need to be reported, which accounts and entities should be closed or simplified to reduce the burden, and how the first-year return will be prepared, including the option to file as a dual-status taxpayer for the year of arrival. We prepare the inventory and coordinate with the accountant who will file.
The U.S. Estate Plan
The new resident also needs the ordinary documents: a will or revocable trust for U.S. and, where appropriate, worldwide assets, a durable power of attorney, and health care documents, all coordinated with any wills and documents that remain in force at home. Where the new resident’s spouse is not a U.S. citizen, estate planning for the family must account for the marital deduction rules requiring a qualified domestic trust. The documents are prepared so that they take effect when residency begins and do not disturb the pre-immigration transactions.
What Our Pre-Immigration Planning Service Includes
- Determination of the residency start date under the green card and substantial presence tests, and of the intended estate tax domicile.
- An inventory of assets, entities, and trusts with the U.S. tax treatment of each after residency.
- Planning and coordination of pre-arrival sales, basis resets, gifts, and entity restructurings with home-country advisors.
- Design of trusts settled before residency, and review and restructuring of existing trusts.
- Planning to preserve foreign domicile for estate tax where that is the client’s intention.
- A U.S. estate plan that takes effect on arrival, coordinated with documents that remain in force abroad.
- An inventory of the reporting obligations that begin with residency, and coordination with the accountant on the first-year return.
- Coordination with our tax planning and cross-border estate planning attorneys.
Timing and Limits
Pre-immigration planning generally requires months to coordinate sales, entity restructuring, and trust funding before the residency start date. Starting early preserves more options. We work with advisers in the client’s home country on local-law requirements and with immigration counsel on visa or green card timing.
Schedule a Pre-Immigration Planning Consultation
If you or a family member are planning to move to the United States, an early consultation can establish the planning timeline. Bring a list of assets, entities, and trusts by country, the expected arrival date and immigration status, and the names of your advisors at home. Our attorneys practice in New York, New Jersey, and Connecticut. Contact Milvidskiy Law Group P.C. to schedule a consultation.
This page is provided for general informational purposes only and does not constitute legal advice. Laws differ by state and change over time. For advice about your situation, consult a qualified attorney.
Frequently Asked Questions
What is pre-immigration planning?
Arranging assets, entities, and trusts before a person becomes a U.S. tax resident, so that built-in gains are not taxed here, foreign structures that create additional U.S. tax costs are restructured, trusts are settled while the settlor is still a non-resident, and gifts are made before U.S. gift tax applies. Most of it can be done only before the residency start date.
When does U.S. tax residency begin?
A green card holder is a resident from the first day of presence as a permanent resident. Anyone else becomes a resident under the substantial presence test when present at least thirty-one days in the current year and one hundred eighty-three days over three years, counting all days in the current year, one-third of the prior year’s days, and one-sixth of the days in the year before that. Residency then generally begins on the first day of presence in that year.
Does the United States adjust the basis of assets I bring with me?
No. The basis is what you paid, and a U.S. resident who sells is taxed on the entire gain, including appreciation that occurred before arrival. Selling before residency and reinvesting resets the basis to current value, so that only later appreciation is taxed here.
What happens to my company at home when I become a U.S. resident?
If you control a foreign corporation, you may be taxed currently on its income whether or not it is distributed, and foreign mutual funds and similar pooled investments are subject to separate U.S. tax rules. Before residency, the company can be liquidated, converted, or elected to be treated as transparent, and fund holdings can be replaced. Each choice has a home-country consequence that is reviewed with your advisors there.
Can I set up a trust before I move?
Yes, and it is one of the main tools. A trust settled by a non-resident can hold assets outside the U.S. estate tax system and, in some designs, accumulate income without U.S. tax during the settlor’s life. The same trust settled after residency is a U.S. grantor trust with the assets in the settlor’s estate.
Should I make gifts before I arrive?
If you intend to make them at all, usually yes. A non-resident who is not domiciled in the United States may give intangible property held abroad without U.S. gift tax and without limit. After domicile, gifts of worldwide assets above the $19,000 annual exclusion consume the lifetime exemption, which is $15,000,000 in 2026. Gifts of U.S. real estate and tangible property located here are taxable regardless of status.
Is estate tax domicile the same as income tax residency?
No. Income tax residency is a day-count or green card test. Estate tax domicile is a question of intent to remain, shown by the facts of a person’s life. A person can be an income tax resident while remaining a foreign domiciliary, which keeps worldwide assets outside U.S. estate tax and exposes only U.S.-situated property above a $60,000 exemption, or can accept U.S. domicile and plan with the $15,000,000 exemption. The choice is made deliberately.
What reporting starts when I become a resident?
Foreign bank and financial accounts once they together exceed $10,000 at any time in the year, specified foreign financial assets above $50,000 at year end or $75,000 at any time for a single filer ($100,000 and $150,000 for a married couple filing jointly), foreign companies and partnerships, foreign trusts, and gifts and inheritances received from abroad above $100,000 in a year each carry annual information reporting with penalties for non-filing that do not depend on tax being owed. An inventory is prepared before arrival so that the first-year return is complete.
How long does pre-immigration planning take?
Planning generally takes months. Sales must settle, entities must be restructured under home-country law, and trusts must be funded before the residency start date. Beginning early allows time to coordinate these steps with advisers in each country.
Do you handle the immigration application?
No. Immigration questions, including the timing of a green card or visa, are referred to immigration counsel, and we coordinate the tax and estate plan with that timing. We also do not advise on the law of other countries and work with your advisors there.
