USA Law and Practice Contributed by: Christopher Boyett, David Scott Sloan, Max Angel and Eric Bracy, Holland & Knight LLP
third to one half, unless waived through a valid pre - nuptial or postnuptial agreement. These rights are automatic and apply regardless of the terms of the will, though they can be modified or waived by agreement. Such agreements must be in writing, entered into voluntarily, and based on fair disclosure. Beyond spousal protections, US law does not require individuals to leave assets to children or other heirs, and testamentary freedom is a founda- tional principle of estate planning. As a result, trusts and marital agreements are commonly used to tailor succession plans to individual family circumstances. 2.4 Marital Property Separate Property Regime Marital property laws in the United States vary by state, but most states follow a “separate property” regime rather than a community property system. In separate property states, assets acquired during the marriage are not automatically considered jointly owned unless titled as such. However, in the event of divorce, the courts typically apply equitable distribu - tion principles, dividing marital property fairly, though not necessarily equally. Property acquired before mar - riage, by gift or by inheritance is generally treated as In community property states, assets acquired dur - ing the marriage are considered jointly owned and are typically divided equally upon divorce or death. Some separate property states allow couples to opt into a community property regime through a commu - nity property trust, which can offer favourable income tax treatment by allowing a full step-up in basis at the death of the first spouse. One spouse generally cannot transfer jointly owned property without the other spouse’s consent. In many states, this includes restrictions on transferring or encumbering a primary residence. Prenuptial and Postnuptial Agreements Prenuptial and postnuptial agreements are recognised and enforceable in all US states if properly executed. These agreements must be in writing, signed volun - tarily, and based on fair and reasonable disclosure of separate unless commingled. Community Property Regime
assets and liabilities. The courts may also consider whether each party had independent legal counsel and sufficient time to review the terms. Valid agree - ments can address property rights, alimony, and inheritance rights, and are commonly used to clarify expectations and avoid future disputes. 2.5 Transfer of Property In the United States, the tax basis of property depends on whether the transfer occurs during life or at death. If property is transferred during life, the recipient gen - erally receives a carryover basis, meaning they take the same cost basis as the donor. This can result in capital gains tax if the property is later sold for more than the original basis. If property is transferred at death, the recipient typical - ly receives a step-up in basis to the fair market value as of the decedent’s date of death. This adjustment can significantly reduce or eliminate capital gains tax if the asset is sold shortly after inheritance. The step-up applies only to assets included in the decedent’s tax - able estate and does not apply to items classified as income in respect of a decedent, such as retirement account distributions or unpaid compensation. As mentioned in 2.4 Marital Property above, several separate property states allow married couples to cre - ate community property trusts. Assets held in these trusts are eligible for a full step-up in basis on the death of the first spouse, not just the decedent’s half, offering a valuable planning opportunity for reducing capital gains tax. 2.6 Transfer of Assets: Vehicle and Planning Mechanisms The US offers several planning tools to help transfer assets to younger generations in a tax-efficient or tax- free manner. Intentionally Defective Grantor Trust (IDGT) One common strategy is the use of an intentionally defective grantor trust (IDGT). This type of irrevoca - ble trust allows the grantor to transfer appreciating assets, such as real estate or business interests, using their lifetime gift tax exemption. The trust assets grow outside the taxable estate, and the grantor continues
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