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With the acceleration of the globalization process, a growing number of high-net-worth families have implemented cross-border asset allocation. As the world's core asset aggregation hubs, China and the United States have become the preferred allocation destinations for many high-net-worth individuals. However, cross-border wealth succession is never a simple "asset handover", but a complex systematic project involving the laws, tax regulations and identity rules of both China and the United States — different identity determinations, asset types and succession methods will directly affect the cost, efficiency and security of wealth succession.

For China-US cross-border high-net-worth families, their core confusions are generally centered on the following questions: What is the essential difference between estate tax and inheritance tax? How to calculate the tax and fee costs of asset succession under different identities? What are the key nodes in the practical operation process of cross-border succession?

Today, in light of the laws, regulations and tax rules of China and the United States, we will conduct a comprehensive dissection of the core points of cross-border wealth succession for international high-net-worth families with connections to both China and the United States, sort out relevant logic, mitigate potential risks, and provide actionable reference directions for such high-net-worth families.

I. Core Concepts: Estate Tax vs Inheritance Tax

Many high-net-worth families often confuse the two concepts of "estate tax" and "inheritance tax" in the first place when handling cross-border succession matters. While both are related to wealth succession, they are completely different in terms of taxing entities, tax calculation logic and applicable rules, and directly determine the tax cost of succession, hence the two shall be thoroughly distinguished first.

(I) Estate Tax: It is a tax levied on "the estate of the decedent", and follows the principle of "tax payment prior to estate distribution".

The core of Inheritance Tax is "levying tax on the gross estate of a decedent after their death". Colloquially, it follows the rule of "tax payment first, estate distribution thereafter". Its core features are as follows:

• Taxation Subject: The taxpayer shall be the executor of the decedent's will or the administrator of the estate, rather than the heir. For simple understanding, it follows the principle of "taxes on the estate are paid first, and the remaining portion shall be distributed to the children thereafter".

Tax Assessment Basis: The tax is calculated on the basis of the gross value of the decedent's worldwide estate. (Where the decedent is a U.S. tax resident, his or her worldwide assets shall be accounted for; where the decedent is a non-U.S. tax resident, only his or her assets located within the territory of the United States shall be accounted for.)

### Scope of Application Estate tax is uniformly levied at the federal level of the United States. At the state level, only 6 states (Connecticut, Hawaii, Illinois, Massachusetts, New York and Oregon) impose state estate tax, and no state estate tax is levied in the remaining states.

• Core Influencing Factor: It is only relevant to the tax status of the decedent, and bears no relation to the status of the heir (i.e. whether the heir is a U.S. citizen or holds a U.S. green card).

(II) Inheritance Tax: Tax is levied on "the heir's share of the estate" under the principle of "distribution prior to taxation".

The core of inheritance tax is "taxation on the shares obtained by heirs from the estate", which is commonly referred to as "distribute the estate first, pay tax thereafter". Its core features are as follows:

• Taxation Subject: Taxpayers refer to heirs such as children and relatives who actually inherit the estate, and the principle that whoever inherits the estate shall pay the tax applies.

l Tax Basis: The tax is levied on the basis of the share of the estate acquired by the heir, rather than the total value of the estate. In addition, the tax rate is usually determined by the kinship between the heir and the decedent (a lower tax rate applies to lineal relatives, while a higher tax rate applies to non-related persons).

l Scope of Application: No inheritance tax is levied at the federal level of the United States. At the state level, only 6 states (Iowa, Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania) impose state inheritance tax, and no such tax is collected in the remaining states.

l Key Reminder: No state in the United States levies both state estate tax and state inheritance tax at the same time. The two types of taxes are mutually exclusive, so high-net-worth families do not need to worry about "double taxation".

(III) Conclusions on Core Tax Categories for Sino-U.S. Cross-Border Succession

In light of the characteristics of asset allocation of China-U.S. cross-border high-net-worth families, the core conclusions that directly affect wealth succession costs are set out as follows:

• Within the territory of China: No estate tax or inheritance tax is levied for the time being. Only basic fees such as a small amount of stamp duty (0.05%) and real estate registration fees are payable, with extremely low succession costs.

• Within the territory of the United States: Only the federal estate tax requires due attention. Where assets are located in the aforesaid six states that impose estate tax, the state estate tax shall be additionally calculated; where assets are located in the aforesaid six states that impose inheritance tax, the state inheritance tax shall be additionally calculated (the two taxes do not apply concurrently).

• Key Risk Point: Where the decedent or heir is determined as a "U.S. Tax Resident", such person shall bear the obligation of tax filing for global assets, and the exemption amount and taxable scope of the estate tax will be subject to material changes, which will directly affect the succession cost.

II. Core Rules: Exemption Amount and Tax Rates of the U.S. Estate Tax

For high-net-worth families with cross-border ties between China and the United States, U.S. estate tax is the core source of tax costs in cross-border succession. Its exemption amount and tax rate directly determine the level of tax burden on estate succession, while the application of the exemption amount is primarily determined by the "U.S. tax resident status" of the decedent (irrelevant to the status of the heir).

(I) Core Criteria for the Determination of U.S. Tax Resident Status

Whether a decedent is a U.S. tax resident directly determines the estate tax exemption amount and the scope of taxable estate, which is also a common point of confusion among many high-net-worth families. Many people mistakenly hold that "only U.S. citizens or U.S. green card holders are eligible for the high exemption amount", which is not the actual case. There are two core criteria for the determination of U.S. tax residency (satisfaction of either is sufficient). As long as a person is identified as a U.S. tax resident, he or she shall be entitled to the same high federal estate tax exemption amount regardless of whether he or she holds U.S. citizenship.

• Green Card Test: Any holder of a U.S. green card, regardless of whether he or she actually resides in the United States, shall be deemed a U.S. tax resident, be liable for federal estate tax on his or her global assets, and enjoy the high-value exemption amount exclusive to U.S. tax residents.

l Substantial Presence Test: If you have accumulated 183 days of physical presence in the United States within the past 3 years (calculation formula: number of days of physical presence in the current year + 1/3 of the number of days of physical presence in the previous year + 1/6 of the number of days of physical presence in the year before the previous year), even if you do not hold a U.S. green card or are not a U.S. citizen, you will be deemed as a U.S. tax resident. You shall be entitled to the same high tax exemption quota as green card holders and U.S. citizens, and shall be liable for federal estate tax on all your global assets.

If the decedent fails to meet any of the aforesaid criteria, he/she shall be deemed as a "non-U.S. tax resident". It is only this group of persons that are eligible for a very low exemption amount (USD 60,000), and are only liable for U.S. federal estate tax on assets situated within the territory of the United States. Assets located within the territory of China shall not be included in the tax calculation scope of U.S. estate tax. To summarize briefly: Entitlement to the high exemption amount for U.S. federal estate tax depends principally on "whether the person is a U.S. tax resident", rather than "whether the person is a U.S. citizen or a green card holder". Non-citizens and non-green card holders who meet the substantial presence test shall also be entitled to the high exemption amount.

(II) Federal Estate Tax Exemption Amount under Two Statuses

The U.S. Federal Estate Tax applies an excess progressive tax rate, with its core preferential provision being the "lifetime exemption amount" — that is, the portion of a decedent's total estate that does not exceed the exemption amount shall be exempt from estate tax, while the portion in excess of such limit shall be taxed at the corresponding applicable tax rate. The exemption amounts vary significantly for decedents of different statuses:

1. The decedent is a U.S. tax resident (U.S. citizen / U.S. green card holder / individual meeting the substantial presence test)

In 2026, the lifetime federal estate tax exemption for individual U.S. tax residents is USD 15 million, and the combined exemption for spouses totals USD 30 million. The tax assessment scope covers global assets (including assets within the territory of China). It shall be clearly specified here that U.S. citizens and green card holders are naturally recognized as U.S. tax residents; non-citizens and non-green card holders who satisfy the substantial presence test are also classified as U.S. tax residents, and the three aforesaid categories of persons enjoy exactly the same exemption quota.

In 2026, the lifetime federal estate tax exemption amount for individual U.S. tax residents is USD 15 million. Married couples are entitled to a combined exemption amount of USD 30 million, and the taxable scope covers global assets.

For example: Where the parents are U.S. tax residents, and the total value of the couple's combined estate amounts to USD 25 million (including real property situated within the territory of China, real property situated within the territory of the United States and deposits), which does not exceed the USD 30 million estate tax exemption threshold, the entire estate may be passed on in full free of tax, and no federal estate tax shall be paid.

2. The decedent is a non-U.S. tax resident (without a green card and not meeting the Substantial Presence Test)

Non-U.S. tax residents are only entitled to a federal estate tax exemption of USD 60,000, and tax is only levied on assets located within the territory of the United States (assets located within the territory of China are not subject to U.S. federal estate tax). The portion exceeding USD 60,000 shall be taxed at excess progressive tax rates, with the maximum tax rate reaching 40%.

For example: Where the parents are non-U.S. tax residents and own a real property valued at USD 1,000,000 within the territory of the United States (with no other assets situated in the United States), the amount in excess of the USD 60,000 tax exemption threshold is USD 940,000, and federal estate tax shall be paid on such amount in accordance with the excess progressive tax rate, resulting in a relatively high tax burden.

(III) U.S. Federal Estate Tax Excess Progressive Tax Rate Schedule

Whether the decedent is a U.S. tax resident or a non-U.S. tax resident, the portion exceeding the corresponding tax exemption threshold shall be taxed in accordance with the following excess progressive tax rates (the higher tax rate shall apply only to the portion exceeding the corresponding tax bracket, and the highest tax rate shall not apply to the full amount):

Important Notice: If the decedent is a U.S. tax resident, the couple shall be entitled to the "Portability of Estate Tax Exemption" policy — upon the death of one spouse, the unused exemption amount may be transferred to the surviving spouse, so as to maximize the utilization of the exemption space and reduce the tax burden.