For high-net-worth families from Latin America relocating to the United States — whether for business, education, or quality of life — the single most consequential planning window is the period before they become U.S. tax residents. Once residency is established, the United States imposes income tax on worldwide income, estate and gift tax on worldwide assets, and a suite of reporting obligations that reach every foreign bank account, foreign entity, and foreign trust the family may hold. The planning opportunities available before residency begins are dramatically more favorable than anything available after.

We see this scenario regularly in our Miami practice: a family from Brazil, Colombia, Argentina, or Mexico has decided to move to the United States. They have retained immigration counsel, secured a visa, and begun looking at homes in South Florida. What they have not done — and what will cost them dearly if they do not address it before arriving — is engage in pre-immigration tax and estate planning.

When Does U.S. Tax Residency Begin?

U.S. tax residency for non-citizens is triggered by one of two tests: the green card test (residency begins on the first day of physical presence in the U.S. as a lawful permanent resident) or the substantial presence test (residency begins once the individual meets a formula based on the number of days physically present in the U.S. over a three-year period). For families relocating permanently, the green card test is typically the operative trigger, and the clock starts the moment they enter the country as permanent residents.

This means all planning must be completed before the family enters the United States on their immigrant visa. Not before they file their first tax return. Not before the end of their first calendar year. Before they step off the plane.

Worldwide Income Taxation

A U.S. tax resident is subject to U.S. federal income tax on income from all sources worldwide. This includes interest, dividends, rental income, business income, and capital gains — regardless of where the income is earned or where the assets are located. A family that owns rental properties in Bogota, a business in Sao Paulo, and an investment portfolio in Zurich will owe U.S. income tax on all of it.

Pre-immigration planning can mitigate this exposure in several ways. One of the most important is recognizing built-in gains before residency. If the family holds appreciated assets — real estate, securities, business interests — those assets carry unrealized capital gains that will become taxable to the United States once the holder becomes a U.S. tax resident. By selling (or being deemed to sell) those assets before the residency start date, the gain is realized while the individual is still a nonresident alien, and the gain is generally not subject to U.S. tax (with certain exceptions, including U.S. real property interests). Alternatively, a step-up in basis can be achieved through certain restructuring transactions that reset the tax basis of assets to their current fair market value before the individual enters the U.S. tax net.

The Estate and Gift Tax Gap

This is where pre-immigration planning becomes most urgent. Under current law, U.S. citizens and domiciliaries receive a unified estate and gift tax exemption of approximately $13.99 million per individual (2025 figure, adjusted annually for inflation). A nonresident alien who is not domiciled in the United States receives an estate tax exemption of only $60,000 — and that exemption applies only to U.S.-situs assets.

Once a LATAM family member becomes a U.S. domiciliary, their worldwide assets are subject to U.S. estate tax at rates up to 40%. They gain access to the full exemption, but for families with significant wealth, the exemption may not cover the entire estate. More critically, assets that were previously outside the U.S. estate tax system entirely — because the owner was a nonresident non-domiciliary — are suddenly pulled in.

The planning opportunity before residency is to restructure asset ownership so that the future U.S. resident's taxable estate is minimized. Completed gifts made while the individual is still a nonresident alien and not domiciled in the U.S. are generally not subject to U.S. gift tax on non-U.S.-situs assets. A family member can gift foreign real estate, foreign business interests, and foreign financial assets to the next generation, to trusts, or to other family members without triggering U.S. gift tax — provided the transfer is completed before the donor becomes a U.S. person.

After the individual becomes a U.S. domiciliary, those same gifts would consume the unified exemption or, if they exceed it, trigger gift tax at 40%.

FIRPTA and U.S. Real Property

The Foreign Investment in Real Property Tax Act (FIRPTA) imposes U.S. tax on a foreign person's gain from the disposition of a U.S. real property interest. For families who already own U.S. real estate before immigrating — a common scenario in Miami — FIRPTA planning should be addressed before the change in residency status. The interaction between FIRPTA withholding obligations and the family's transition to U.S. tax residency can create cash flow complications and double-reporting issues if not coordinated properly.

Families should also consider the structure through which they hold U.S. real estate. Foreign persons frequently hold U.S. real property through foreign corporations to avoid U.S. estate tax exposure. Once the holder becomes a U.S. person, that structure may no longer be optimal and may, in fact, create adverse tax consequences — including being treated as a controlled foreign corporation (CFC) or a passive foreign investment company (PFIC), both of which carry punitive U.S. tax treatment.

Trust Planning Before Residency

Trusts are a central tool in pre-immigration planning, but the rules governing foreign trusts with U.S. beneficiaries are among the most complex in the Internal Revenue Code. A trust established by a nonresident alien before becoming a U.S. person, funded with non-U.S. assets, and structured as a foreign grantor trust can provide significant income tax deferral and estate tax benefits — but only if the terms of the trust and the timing of funding are carefully calibrated.

Once the grantor becomes a U.S. person, the trust's status may change. A foreign trust with a U.S. grantor is generally treated as a grantor trust under Sections 671-679 of the Code, meaning all income of the trust is taxed to the grantor. The key planning objective is to ensure that assets transferred to the trust before immigration are not subject to U.S. income tax on pre-residency appreciation, and that distributions from the trust to U.S. beneficiaries are structured to avoid the punitive "throwback" rules that apply to accumulation distributions from foreign non-grantor trusts.

The reporting obligations for U.S. persons with interests in foreign trusts are extensive. Form 3520 (annual reporting of transactions with foreign trusts) and Form 3520-A (annual information return of the foreign trust) carry severe penalties for noncompliance — the greater of $10,000 or a percentage of the value of trust assets. These reporting obligations begin the moment the individual becomes a U.S. person.

Entity Reorganization

LATAM families frequently hold assets through a web of foreign entities — holding companies, operating companies, and investment vehicles organized in their home country or in jurisdictions like the BVI, Panama, or Uruguay. Each of these entities must be analyzed under U.S. tax law before the family member becomes a U.S. person.

The key classifications are: CFC (controlled foreign corporation), PFIC (passive foreign investment company), and disregarded entity. A foreign entity that is benign from a non-U.S. tax perspective — a simple holding company in Panama, for example — may be classified as a PFIC under U.S. rules, subjecting its U.S. shareholder to an excess distribution regime that effectively imposes tax at the highest ordinary income rate plus an interest charge. Alternatively, it may be classified as a CFC, requiring the U.S. shareholder to include certain categories of the entity's income on a current basis, regardless of whether any distribution is made.

Pre-immigration entity restructuring may involve liquidating certain entities to step up the basis of underlying assets, converting entities to disregarded entity status for U.S. tax purposes, or reorganizing ownership so that the future U.S. person does not hold sufficient ownership to trigger CFC or PFIC classification.

Coordinating with Home-Country Advisors

Pre-immigration planning cannot be conducted in isolation. Every action taken to optimize the family's U.S. tax position must be evaluated under the tax laws of their home country. A gift of assets that is tax-free for U.S. purposes may trigger capital gains tax, transfer tax, or exit tax in Brazil, Colombia, or Argentina. Entity restructurings must comply with both U.S. and home-country corporate and tax law.

Effective pre-immigration planning requires a coordinated team: U.S. tax counsel, home-country tax counsel, immigration counsel, and — in most cases — a U.S. tax accountant familiar with international reporting. The cost of this coordination is a fraction of the tax exposure it prevents.

Common Mistakes

The mistakes we see most frequently among LATAM families arriving in Miami include:

  • Starting too late. Many families engage U.S. tax counsel only after they have already entered on their immigrant visa. At that point, the most valuable planning opportunities have closed.
  • Assuming foreign structures are invisible to the IRS. The United States has extensive information-sharing agreements with foreign jurisdictions, and the penalties for failing to report foreign accounts (FBAR), foreign entities (Forms 5471, 8865), and foreign trusts (Form 3520) are severe.
  • Failing to recognize built-in gains before residency. Appreciated assets that could have been sold or restructured tax-free become permanently embedded with U.S. tax liability once residency begins.
  • Retaining foreign holding structures that become tax-toxic under U.S. rules. A Panamanian holding company that was perfectly efficient for a nonresident may become a PFIC nightmare for a U.S. tax resident.
  • Not updating estate plans. Wills and succession plans drafted under home-country law may not function as intended under the U.S. estate tax regime, and may fail to take advantage of the marital deduction, the unified credit, or trust-based planning strategies available to U.S. domiciliaries.

The window for pre-immigration planning is finite and closes abruptly. Families who use it wisely can save millions in U.S. tax liability over their lifetimes. Those who do not will spend years — and significant professional fees — attempting to unwind structures that should have been addressed before they ever boarded the plane.