Jungle TaxUS Estate Tax Exposure for Senior Law Firm Partners: What to Do Now US estate tax senior law firm partners rarely see it coming. A UK-based equity partner in a global firm, born in the United States or holding a green card, spends decades building a career, a home in Hampstead, and a portfolio of […]
US estate tax senior law firm partners rarely see it coming. A UK-based equity partner in a global firm, born in the United States or holding a green card, spends decades building a career, a home in Hampstead, and a portfolio of investments. They assume that because they live and work in London, their estate will be governed by UK inheritance tax rules—generous spouse exemption, the residence nil-rate band, and a 40% rate on the rest. What they do not realize is that their US citizenship or green card status drags their worldwide estate into the maw of the Internal Revenue Service’s estate tax regime, with an exemption that is far less generous for non-resident aliens and a rate that can reach 40% on US-situs assets even for those who are not US citizens. The US estate tax senior law firm partners overlook can quietly consume a lifetime’s accumulated wealth, leaving their families with a devastating bill—and their law firm partnership with a sudden, destabilizing liquidity crisis.
At Jungle Tax, we help senior partners navigate the intersection of US estate tax, UK inheritance tax, and the professional obligations that make this a uniquely dangerous trap. This article explains why law firm partners are so exposed, what the US-UK Estate Tax Treaty does and does not do, and precisely what steps you can take now to neutralize the threat—before a sudden death turns a theoretical risk into an irreversible estate disaster.
A law firm partner’s wealth profile is fundamentally different from that of a salaried professional. The partner often holds a capital account in the firm, an equity participation right, deferred compensation arrangements, and possibly a personal stake in the firm’s property vehicles. If any of these interests are classified as US-situs assets—because the firm has a US office, US real estate, or US securities—they fall directly into the US estate tax net. The US estate tax senior law firm partners must contend with is not just a tax on a holiday home in Florida; it is a tax on the very source of their professional income and retirement security.
Moreover, many UK law firm partners are US citizens by birth without realizing it. A partner born in New York to British parents who returned to the UK as a child may never have set foot in the United States as an adult, yet remains fully subject to US estate tax on their worldwide estate. For US citizens, the exemption is higher—$13.61 million per person in 2024—but for non-US citizen green card holders, the rules are complex, and for those who have surrendered a green card or are non-resident aliens, the exemption drops to just $60,000 on US-situs assets, with a 40% rate on the excess. This cliff edge is lethal. If a UK partner with a $1 million US brokerage account dies, the US estate tax bill is approximately $376,000—payable in cash within nine months of death—before the UK inheritance tax has even been filed. Our guide on cross-border estate planning for private equity executives details similar asset concentration risks for high-net-worth professionals.
Many partners assume the US-UK Estate and Gift Tax Treaty will protect them. The treaty does provide significant relief—it grants a pro-rata unified credit to UK-domiciled individuals that can increase the effective US estate tax exemption above the $60,000 floor, and it provides a marital deduction for transfers to a surviving spouse, even if that spouse is not a US citizen, under certain conditions. But the treaty must be affirmatively claimed on the US estate tax return (Form 706-NA for non-resident aliens), and it does not eliminate the filing obligation. Furthermore, the treaty does not override domestic US situs rules that determine which assets are taxed: shares in a US corporation, US real estate, and US-situs debt obligations are all within the net. A law firm partnership interest that holds US-situs assets through a US-registered entity can expose the entire value of that interest to US estate tax, depending on the structure.
Even for US citizens resident in the UK, who benefit from the higher exemption and the unlimited marital deduction for US citizen spouses, the US tax is imposed on worldwide assets, and the UK inheritance tax applies concurrently. The treaty coordinates the two, but the mechanics of claiming a foreign tax credit on the UK side for US estate tax paid require meticulous planning, especially when the UK inheritance tax is due before the US return is even filed. This double-filing burden means that US estate tax senior law firm partners cannot afford a reactive approach. Planning must be in place during life, because the executor will have no time to structure after death. Our recent article on the true cost of non-compliance for senior law firm partners highlighted how unfiled taxes can unravel a career; the estate tax poses a similar, if slower-burning, threat to the capital you have spent a lifetime building.
A precise inventory is the first step to managing US estate tax senior law firm partners face. The following commonly held assets are US-situs for estate tax purposes:
For non-resident aliens, UK-situs assets including UK real estate, UK bank accounts, and shares in UK businesses are typically exempt from US estate tax. However, for US citizens, worldwide assets are includible, and the treaty provides credits but not exclusion. This means a US citizen partner living in London faces the worst of both systems: worldwide US estate tax and UK inheritance tax on worldwide assets as a UK-domiciled individual. Our trust planning guide for accidental Americans with family wealth discusses the domicile tangle and how to use trusts to protect non-UK assets from UK inheritance tax, a technique that can also shift US-situs assets out of the estate.
For a senior equity partner, the most significant US estate tax senior law firm partners risk often lies inside the partnership agreement. Many international firms are structured as UK LLPs, which for US estate tax purposes may be treated as partnerships, with the situs of a partner’s interest determined by the location of the partnership’s assets. If the firm owns a US office building, or holds US securities in a captive investment account, a portion of the partner’s capital account could be US-situs. The valuation of that interest, and the liquidity to pay the estate tax, become immediate concerns.
Partnership agreements rarely address US estate tax. They assume UK inheritance tax and provide for funding via life insurance or partner loans, but US obligations are overlooked. A demand for money that the partnership is not set up to satisfy may arise from the death of a partner. This can lead to a forced sale of the deceased partner’s interest at a discount, harming both the estate and the firm. Addressing this in the partnership deed, or through a personal holding structure outside the firm, is a matter of urgency. The IRS estate tax page provides a stark outline of filing and payment deadlines, but the specifics require expert navigation.
The toolbox for mitigating US estate tax senior law firm partners is well-developed, but it must be deployed before death. The most powerful tools include:
Our cross-border estate planning guide for entertainers with global income illustrates how these tools are applied in a multi-jurisdictional context, and the same principles apply to law firm partners.
Consider Eleanor, a senior equity partner at a US-based firm’s London office. She is a UK national and UK-domiciled, but she holds a green card from a prior secondment, which she never formally surrendered. She owns a Florida condominium worth $2 million, purchased years ago for family holidays. She has US stocks worth $500,000 in a Vanguard account. Her worldwide estate is £5 million. If Eleanor dies without surrendering her green card or restructuring her US assets, the US will treat her as a US person, bringing her worldwide estate into the US estate tax net, with an exemption that may be limited if she is no longer a permanent resident. Even if she is treated as a non-resident alien, her US-situs assets total $2.5 million; with a $60,000 exemption and 40% rate, the US estate tax approaches $976,000—due in cash. Her UK estate will also pay inheritance tax of 40% on the worldwide estate, with a credit for the US tax, but the cash flow problem is crippling. The solution, implemented years earlier, would have been to hold the condo in a non-US corporation and to transfer the US brokerage assets to a UK-situs account, reducing US-situs exposure to near zero. Planning after the fact is impossible.
The US estate tax senior law firm partners cannot afford to leave to chance can be neutralized with the following steps:
“A law firm partner’s estate is often the last piece of the puzzle they address. By then, it may be too late. The US estate tax does not allow for posthumous restructuring. The most valuable hour a partner can spend is the one in which they review their global asset situs—because that review can save their family millions and protect the partnership from a preventable crisis.”
— Jungle Tax Cross-Border Estate Planning Team
If you are a senior law firm partner with US estate tax exposure—whether through citizenship, a green card, or US-situs assets—we can help you design and implement a protective plan. At Jungle Tax, our dual-qualified US-UK team provides confidential estate tax analysis, QDOT structuring, trust coordination, and partnership advisory services. We understand the professional sensitivities and the absolute necessity of discretion.
Get in touch today for a confidential, no-obligation consultation.
The time to act is now—before the estate tax becomes an estate problem.
Yes, if you hold US-situs assets—such as US real estate, shares in US corporations, or US partnership interests—you are exposed to US estate tax as a non-resident alien. The exemption is only $60,000, and the rate reaches 40%. Planning, including restructuring ownership and ensuring liquidity, is essential.
The treaty can provide a larger exemption and marital deduction, but it must be claimed on the US estate tax return. It does not eliminate the tax, and it does not automatically apply. Professional advice is required to ensure treaty benefits are secured.
The unlimited marital deduction is available for transfers to a US citizen spouse, but transfers to a non-US citizen spouse require a Qualified Domestic Trust (QDOT) to defer the US estate tax. The QDOT must be established before death, typically as part of your estate planning documents.
Potentially, yes. If your partnership holds US-situs assets or is itself treated as a US-situs asset under US situs rules, your capital account could be exposed. The valuation and liquidity implications can be severe, and this should be reviewed with both your estate planner and your partnership board.
Begin with a situs audit of all your assets, determine your US status and domicile, and engage a dual-qualified US-UK tax adviser who can model the exposure and implement a plan. At Jungle Tax, we offer a confidential initial review to identify the risks and map the solutions. Do not wait until the tax is due—by then, the options are gone.
