USA – CALIFORNIA Law and Practice Contributed by: Jennifer J. McCall, Matthew Perotti and Ashley E. Huh, Pillsbury Winthrop Shaw Pittman LLP
1. Contemporary Cultural Considerations in Succession Planning 1.1 Social and Cultural Attitudes Succession planning in the United States is shaped by both a strong legal tradition of freedom of disposition and a high degree of cultural and family diversity. As family structures and priorities vary widely, planning approaches often differ even among similarly situated clients. Some families favour earlier lifetime transfers and a more collective, multi-generational planning process, while others prefer to maintain control dur- ing life and defer meaningful control until later stages. In practice, US families frequently favour trust-based planning and entity-based structures over outright dispositions, reflecting a broader cultural emphasis on privacy, control, continuity, and risk management across generations. Trusts and family limited partner- ships are commonly used to centralise management of assets, to provide guardrails for younger benefi- ciaries, and to create longer-term governance frame- works for family wealth. Planning also increasingly addresses modern realities such as blended families, multi-generational households, and geographically dispersed beneficiaries. Additionally, dynasty trusts, which are long-duration trusts, are also commonly used to support multi- generational wealth preservation and provide control in how and when beneficiaries receive distributions. These trusts offer many advantages, such as credi- tor protection and spendthrift risk, and also minimise transfer tax exposure. 1.2 Wealth Profiles and Industry Influences A longstanding “established wealth” cohort includes multi-generational families whose wealth is concen- trated in assets such as (including but not limited to) family-controlled businesses and income-producing real estate. These clients focus on continuity-focused planning, such as family governance, fiduciary selec- tion, and co-ordinated business-transition planning (eg, management succession and liquidity planning). A prominent “new wealth” cohort includes entrepre- neurial and growth-sector wealth (including venture- backed businesses), where assets are often illiquid,
concentrated, and event-driven (founder equity, options, and pre-liquidity stock). Planning commonly centres on implementing structures ahead of liquidity events, and co-ordinating tax and diversification plan- ning around concentrated equity.
2. Residency and Domicile for Purposes of Wealth and Estate Planning 2.1 Determining Domicile
Persons domiciled in the United States are subject to US transfer taxes on their worldwide assets. A person residing in the US with no present intent to leave is considered domiciled in the US. The US domiciliary test evaluates several factors, including the length of US residence, ties to foreign countries, green card status, and lifestyle indicators such as voter registra- tion, driver’s licence and club affiliations. Individuals who are not domiciled in the US are not subject to US transfer taxes (gift, estate, and Genera- tion-Skipping Transfer (GST) taxes) on their worldwide assets at death. However, assets with a US situs are still subject to US transfer taxes, even if the individual is not US-domiciled. 2.2 Income Tax Residency The key question for US federal income tax purposes is whether an individual is a “United States Person” (“US Person”) or a foreign person. All US Persons are subject to federal income tax. A US Person is any individual who (i) is a US citizen, or (ii) is a “resident” of the United States. Residency for tax purposes is determined under one of two tests: the green card test or the substantial presence test. The green card test is straightforward – an individual who holds a US green card is considered a resident for US tax purposes. The substantial presence test is more complex and is based on the number of days an individual spends in the US over a three‑year period. To meet this test, an individual must:
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