Cross-Border Estate Planning for Tech Founders After an Exit Estate planning tech founders after an exit is a race against valuation and the clock: the day your shares turn into cash, your worldwide estate can jump from illiquid paper into a taxable pile exposed to 40% US estate tax and 40% UK inheritance tax at […]
Estate planning tech founders after an exit is a race against valuation and the clock: the day your shares turn into cash, your worldwide estate can jump from illiquid paper into a taxable pile exposed to 40% US estate tax and 40% UK inheritance tax at once. Plan before the wire clears, not after.
By the Jungle Tax Cross-Border Tax Team — reviewed by a US-UK dual-qualified adviser (CPA / Enrolled Agent).
Because liquidity crystallizes exposure, while your equity sat as restricted founder stock in a private company, it was hard to value, hard to gift, and easy to ignore. A trade sale, secondary, or IPO converts that into a number the tax authorities can price on the day you die — and for an American founder living in London, two death-tax systems reach for the same assets.
The United States taxes the worldwide estate of every US citizen and US domiciliary, wherever they live. The United Kingdom, since 6 April 2025, taxes the worldwide estate of any long-term UK resident. A founder who is a US citizen resident in Britain can sit squarely inside both nets. Getting ahead of that overlap is the whole point of estate planning for tech founders after an exit; they should be doing it in the months before, not after, the deal signs.
|
Regime |
Tax-free threshold (2026) |
Top rate |
Assets in scope |
|---|---|---|---|
|
US estate & gift tax |
$15,000,000 per person (unified exclusion) |
40% |
Worldwide estate of US citizens/domiciliaries |
|
UK inheritance tax (IHT) |
£325,000 nil-rate band |
40% |
Worldwide estate of long-term UK residents |
The US figure sounds generous. A founder who nets $60m from an exit still has roughly $45m of exposed estate above the exclusion — a potential $18m federal bill before any UK IHT and before state-level tax. The UK band, at £325,000, is trivial compared with a nine-figure exit.
Two law changes reset the board. In the US, the One Big Beautiful Bill Act (OBBBA, P.L. 119-21, signed 4 July 2025) made the elevated exemption permanent and raised it to $15,000,000 per person for deaths and gifts from 1 January 2026 — $30,000,000 for a married couple using portability. That removed the feared TCJA “sunset” but did not remove the problem: a founder’s estate can dwarf even $30m.
In the UK, the old domicile and deemed-domicile rules were abolished for IHT from 6 April 2025 and replaced with a residence-based regime. You become a long-term resident — and taxable on your worldwide estate — once you have been UK tax resident for at least 10 of the previous 20 tax years. Leaving Britain no longer switches this off immediately; an IHT “tail” of between three and ten years keeps your worldwide estate in scope after departure.
The single most valuable move in estate planning for tech founders after an exit is not available afterward. Gifting equity before a liquidity event, while the company’s valuation is still low, uses only a small slice of your $15m exclusion and moves all future appreciation out of your taxable estate. Transfer $2m of stock into an irrevocable trust pre-Series C, watch it become $40m at exit, and that $38m of growth is outside your estate — potentially saving well over $15m of combined death taxes. Do the same transfer the day after the exit, and you burn far more exclusion for the same shares.
Answer first: a mix of lifetime gifting, grantor trusts and, where liquidity is the issue, life insurance held outside the estate. The right blend depends on how much control and cash flow you want to keep.
The cleanest lever. Each US person can gift up to the $15m lifetime exclusion (2026), plus an annual exclusion of $19,000 per recipient that does not touch the lifetime amount. Gifting low-basis, low-valuation founder stock early locks in today’s value against your exclusion and exports future growth. Valuation discounts for lack of marketability and minority interest can stretch the exclusion further on private shares.
A GRAT (grantor retained annuity trust) lets you transfer appreciation above an IRS hurdle rate with little or no gift-tax cost — powerful when a near-term exit will spike the share price. An IDGT (intentionally defective grantor trust) freezes value via an installment sale while you keep paying the income tax, which is itself a tax-free gift to the trust. A SLAT (spousal lifetime access trust) removes assets from your estate while your spouse retains indirect access — useful for founders reluctant to give away everything irrevocably. All three interact awkwardly with UK tax, so a UK-resident founder should use none without cross-border modeling.
Assets in a properly structured irrevocable trust sit outside your taxable estate. A dynasty trust aims to keep wealth sheltered across generations, which brings in the generation-skipping transfer (GST) tax — a separate 40% levy with its own exemption, also $15,000,000 per person in 2026. Allocating GST exemption to a trust at funding, while values are low, shelters all later growth from a skip-generation charge.
Founders with philanthropic intent can convert a portion of their taxable estate into both a deduction and a legacy. A donor-advised fund (DAF) lets you contribute appreciated pre-exit stock, take an income-tax deduction, avoid capital gains on the donated shares, and recommend grants over time. A charitable remainder trust (CRT) goes further: you transfer stock into the trust, it sells free of immediate capital gains tax, pays you an income stream for life or a term of years, and the remainder passes to charity — removing the asset from your estate while retaining cash flow. For a US-UK founder, the interaction with UK gift aid and charitable relief rules must be checked, as a US charitable deduction does not automatically translate into UK relief.
Death tax is due within months; a founder’s wealth may be tied up in a new venture, property, or an earn-out. An irrevocable life insurance trust (ILIT) holds a policy outside the estate and delivers tax-free cash exactly when the estate needs liquidity to pay HMRC and the IRS, so heirs are not forced to fire-sale assets.
Answer first: the US-UK Estate and Gift Tax Treaty (1980) coordinates domicile and grants credits so the same asset is not fully taxed twice — but it does not eliminate exposure, and it can produce a higher combined bill than either country alone if planning is naive.
The treaty sets tie-breaker rules for domicile and allocates primary taxing rights, generally allowing one country to tax while the other gives credit for taxes paid. In practice, a US citizen who is a long-term UK resident often finds that the UK taxes the worldwide estate and the US allows a credit, or vice versa, depending on situs and domicile. Because both top rates are 40%, the credit mechanism frequently caps the total at roughly 40% rather than 80% — provided the estate is structured to claim it.
Many founders assume their exit qualifies for the US Qualified Small Business Stock (QSBS) exclusion under §1202, which can exclude a large slice of gain from US capital gains tax. It applies only to stock in a domestic US C-corporation that meets the gross-assets test (raised to $75m for shares issued after OBBBA). A UK Ltd never qualifies. British founders who incorporate at home receive no §1202 relief on exit, which changes the after-tax cash available for estate planning and often supports establishing a US holding structure early.
US-situs assets held at death generally receive a step-up in basis to date-of-death value, wiping out unrealized capital gains for heirs. This creates genuine tension: gifting removes assets from the estate but carries over your low basis, while holding until death preserves the step-up but keeps the asset exposed to 40% estate tax. Modeling that trade-off is central to any credible plan.
A US-citizen founder — resident in London for 12 years, so a long-term UK resident — built a SaaS company through a UK Ltd. Eighteen months before a $70m trade sale, we restructured the group under a US C-corporation. We moved a tranche of founder shares (then valued at nearly $4m) into a US irrevocable grantor trust with full GST exemption allocated, plus an SLAT for their spouse. At exit, the trust-held shares were worth roughly $22m — entirely outside both the US estate and UK IHT nets. We layered an ILIT to fund the residual liability and mapped treaty credits so the combined death-tax rate on the retained estate stayed near 40%, not 80%. Net position: an estimated eight-figure combined death-tax saving versus doing nothing until after the wire cleared. Because the group was a UK Ltd for most of its life, no §1202 relief was available on the retained shares — a cost we quantified rather than discovered too late.
Jungle Tax specialises in US-UK cross-border planning for American founders. If a liquidity event is on the horizon — or has just happened — the window to act narrows fast. Talk to a dual-qualified adviser before you sign.
Email hello@jungletax.co.uk | Call 0333 880 7974 | Visit jungletax.co.uk
Related reading: The US-UK tax treaty explained · Structuring a US founder’s UK company · QSBS and §1202 for expat founders · UK inheritance tax for Americans · GRATs and SLATs across the Atlantic
Model your combined US-UK death-tax exposure before the deal closes. The highest-value moves — gifting low-valuation shares and funding grantor trusts — only work fully while the company is still cheap, so timing beats every other variable.
A US person has a $15,000,000 unified exclusion (gift and estate combined), $30,000,000 for a married couple using portability, plus a $19,000 annual exclusion per recipient. The UK nil-rate band is only £325,000, so most nine-figure estates incur 40% IHT on the portion above it.
The 1980 estate and gift tax treaty coordinates domiciles and grants credits so that the same asset is not fully taxed by both countries, usually capping the combined burden at around 40% rather than 80%. It reduces double taxation; it does not remove exposure.
No. Section 1202 only applies to stock in a domestic US C-corporation meeting the gross-assets test. A UK Ltd never qualifies, which is why founders eyeing a US exit often re-domicile the holding company to a US C-corp early.
Gifting removes future growth from your estate but carries over your low cost basis; holding preserves a step-up in basis at death but keeps the asset exposed to 40% estate tax. The right answer depends on expected appreciation, your health, and your liquidity, and needs modeling.
Since 6 April 2025, a long-term UK resident’s worldwide estate stays within IHT for a “tail” of three to ten years after departure, scaling with how long you were resident. Leaving does not immediately switch off UK exposure.
