HNW clients and trusts: contemporary trends and challenges in Latin America
Beatriz Manterola
NYU, Santiago
beatriz.manterola@nyu.edu
Report on a session at the 17th IBA/ABA US and Latin America Tax Practice Trends Conference in Miami
Wednesday 18 June 2025
Session Chairs
Heather Fincher Kostelanetz, Washington, DC
Hermano Notaroberto Barbosa BMA, São Paulo
Speakers
José Mauricio Abreu Farroco Abreu, São Paulo
Alil Álvarez Alcalá Álvarez Alcalá, Mexico City
Myriam Bril Goldman Sachs, Miami
Corina Laudato Mitrani Caballero, Buenos Aires
Javier Otegui Guyer & Regules, Montevideo
Jennifer Wioncek Bilzim Sumberg, Miami
Introduction
Co-chair Heather Fincher opened the session by highlighting the diversity of trust frameworks across jurisdictions. She noted that the panel would explore the legal structures governing trusts in each speaker’s country, practical issues arising in their use, and emerging trends and challenges. The discussion aimed to provide a comparative overview of how trusts operate globally, focusing on both similarities and jurisdiction-specific complexities in their legal and practical applications.
Panel discussion
Overview of tax systems
Mexico
Alil Álvarez outlined Mexico’s taxation framework, which is based on a worldwide income principle. Individuals are taxed progressively up to 35 per cent, and corporations face a flat 30 per cent tax rate. Although Mexico does not levy a federal wealth tax, certain gifts may be taxed with income tax under specific conditions (gifts between spouses and linear family are exempt). If the recipient is a non-Mexican resident and the gift is of Mexican companies or real estate, withholding tax applies generally at a 25 per cent tax rate.
Trusts in Mexico are treated as contractual arrangements rather than separate legal entities. As such, they are not subject to inheritance, estate or gift tax. However, they are subject to Mexico’s controlled foreign corporation (CFC) rules. Depending on the circumstances, these rules may trigger either mandatory disclosure or a voluntary tax return.
Brazil
José Mauricio Abreu explained that Brazil also adheres to a worldwide taxation system, with income tax rates up to 27.5 per cent and, from 2024, a 15 per cent tax rate on offshore assets. Brazil imposes inheritance, gift and estate taxes up to 8 per cent, with rates varying by state.
Brazilian tax law considers trusts as transparent entities. If a trust is deemed irrevocable, tax obligations may arise for its beneficiaries. As of January 2024, new CFC rules apply to individuals, particularly affecting trusts that hold offshore assets. These rules now impose reporting obligations and potentially treat the underlying assets of the trust as attributable to Brazilian beneficiaries.
Argentina
Corina Laudato noted that Argentina has operated under a worldwide income tax regime since 1998. Although there is no federal inheritance or gift tax, the Province of Buenos Aires imposes such taxes. Argentina has a longstanding wealth tax, which has prompted many high-net-worth individuals to adopt trusts for asset protection.
Trust taxation in Argentina distinguishes between revocable and irrevocable trusts, with the classification depending largely on the grantor’s control. Irrevocable trusts without grantor control are treated as separate entities and subject to CFC rules. These rules were strengthened in 2018 to close prior loopholes. Trusts remain useful vehicles in Argentina for minimising exposure to wealth, estate and succession taxes.
Uruguay
Javier Otegui described Uruguay’s tax system as unique in the region. While it employs a worldwide taxation model, it only applies to income such as dividends and interest taxed at a flat 12 per cent rate. Notably, Uruguay offers a ‘tax holiday’ for new residents, exempting them from taxation on foreign income for up to 11 years. Capital gains and real estate income are largely excluded from taxation.
Wealth tax applies only to Uruguayan assets, and there is no inheritance tax. CFC rules may trigger taxation, but only with respect to jurisdictions classified as ‘low or no tax.’
Trusts are treated as entities and taxed at a 12 per cent rate, regardless of whether they are revocable or irrevocable. In addition, there is no disclosure obligation for assets held in trust.
United States
Jennifer Wioncek provided an overview of the US system, emphasising its complexity and the strict application of worldwide taxation. US citizens and resident aliens are taxed up to 37 per cent on ordinary income. Trust taxation is guided by three key questions:
- is the structure a trust for tax purposes?
- is it domestic or foreign?
- is it a grantor or non-grantor trust?
The answers to these questions determine both classification and tax treatment. Additionally, CFC rules can apply through attribution from trusts to beneficiaries.
Myriam Bril added that US trusts use has expanded in Latin America, evolving from a tax planning tool to one focused on family governance and long-term succession planning, in part due to the growing impact of international information exchange.
Practical uses of trusts
Argentina
In Argentina, domestic trusts are rarely used for wealth management. Instead, they are more common in securitisation, guarantees and real estate development. Offshore trusts, however, play a significant role in family wealth planning. A typical strategy involves establishing a revocable trust that becomes irrevocable upon the death of the family head. This transformation allows the trust to be treated as a separate entity, which offers benefits such as tax deferral, reduced exposure to wealth tax and more efficient inheritance and succession processes.
Brazil
Brazilian families increasingly use trusts for succession planning and asset protection, particularly given the ongoing legal and tax reforms. The 2024 legislation clarified the treatment of offshore trusts, though it did not provide explicit tax benefits. The legal clarity brought by the reform has encouraged more predictable outcomes, which are especially useful in organising estates and improving corporate governance. Despite the lack of tax incentives, trusts remain a strategic choice for long-term wealth management in Brazil.
Mexico
Mexican law recognises foreign trusts as legal arrangements rather than separate entities. Certain contributions may trigger a 25 per cent withholding tax if taxed as gifts to non-residents under the income tax. A notable feature of Mexican trusts is the ability to reverse contributions under certain conditions.
Another practical consideration is the differentiation between active and passive income. These issues emphasise the importance of careful planning in structuring trusts involving Mexican residents or entities.
Uruguay
In Uruguay, the application of CFC rules depends on whether the trust is located in a low or no-tax jurisdiction. Trusts in such jurisdictions are treated as transparent entities. All other foreign trusts allow Uruguayan residents to benefit from tax deferral. This is a key incentive for using foreign trusts. Additionally, Uruguay’s heirship provisions apply only to domestic assets, making foreign trusts an attractive tool for families managing wealth across borders.
United States
Trusts are deeply embedded in US legal and tax planning. They serve a broad range of purposes – tax planning, succession, asset protection, philanthropy and more. US-based trusts are especially appealing to Latin American investors seeking stability and flexibility.
Although non-tax goals may drive the creation of a trust, any cross-border structure involving the US requires rigorous tax analysis and compliance. US trusts offer strong asset protection and can be tailored for specific goals, such as education or healthcare. They are also effective vehicles for managing multi-generational wealth and minimising intra-family disputes.
Trends and challenges
The panel concluded by considering the future of trust use across jurisdictions, focusing on the impact of global transparency, tax reform and legal ambiguity. Co-chair Hermano Barbosa presented two key questions that shaped the discussion:
- how is the global exchange of tax information influencing trust planning?
- how will each jurisdiction’s tax framework evolve to address cross-border trust structures?
Brazil
Abreu identified three primary challenges in Brazil. First, Brazilian tax legislation was designed to be straightforward, which makes it unsuitable to the complexities of modern trust structures. Second, there is uncertainty around what constitutes a ‘true irrevocable trust’ under Brazilian law. Third, tax authorities have adopted an aggressive posture toward trusts, leading to heightened scrutiny. These issues highlight a structural disconnect between the legal framework and the practical use of trusts in wealth and succession planning.
Uruguay
Otegui explained that Uruguay offers very limited flexibility for domestic assets held in trust, but significantly more for foreign assets. The main benefit for foreign trusts is tax deferral and succession planning. However, a key challenge is substantiating the legal and economic ownership of trust assets. Inadequate documentation or weak legal structuring can result in the loss of tax benefits, particularly under scrutiny from Uruguay’s increasingly aligned tax authorities.
Mexico
In Mexico, the most pressing challenge is the lack of clarity on when and how trusts must be reported for tax purposes. Trusts are treated as legal arrangements, and whether income is attributed to the beneficiary, determines if the trust is transparent. However, this determination is not always straightforward. Uncertainty remains around filing obligations – particularly the filing of ‘operations through a transparent entity’ – and there is no definitive guidance outlining the compliance pathway. This regulatory vagueness creates significant risk for taxpayers and advisers alike.
Argentina
According to Laudato, Argentina’s trust-related challenges are closely tied to the global exchange of information, particularly the Common Reporting Standard (CRS). There is a need for clearer guidance on the capitalisation of distributions and contributions to trusts. Additional uncertainty arises in the Province of Buenos Aires, where there is ambiguity around the treatment of fiduciary asset transfers where no beneficiary has control, particularly for local inheritance tax purposes.
United States
The US faces a distinct set of challenges. The intersection of trust structures and CFC rules is critical, as CFC exposure can often be mitigated by using irrevocable US non-grantor trusts treated as domestic taxable entities. However, evolving tax legislation has introduced uncertainty that could affect the structure and utility of many trust arrangements. A further complexity is the rise of multi-jurisdictional or ‘joint’ trusts, particularly those involving beneficiaries in different countries or even unborn generations. These raise novel issues in both tax and legal planning and require careful coordination across jurisdictions.
Cross-jurisdictional themes
Across all five jurisdictions, the panellists emphasised that the era of using trusts primarily for aggressive tax avoidance is over. The global exchange of financial information, rising enforcement capacity and stronger CFC regimes are transforming the landscape. Today’s challenges revolve around compliance, transparency and the alignment of tax treatment with the real purpose of trusts: long-term wealth preservation, succession and family governance.
Conclusion
The panel offered a rich comparative analysis of how trusts are treated across jurisdictions in Latin America and the US. Despite differing legal classifications and tax treatments, several common themes emerged: a global shift from tax-motivated planning toward family governance and succession goals, the growing influence of CFC rules and international transparency standards and an increasing need for clarity in trust regulation.
Jurisdictions like Argentina and Brazil are grappling with legal and structural inconsistencies, while others, such as Uruguay and the US, offer relatively stable frameworks for cross-border trust planning. Mexico’s hybrid approach – recognising trusts as contractual but transparent arrangements – underscores the legal diversity that practitioners must navigate.
Ultimately, the panel underscored the enduring relevance of trusts in a post-transparency era. As tax authorities become more sophisticated and information exchange agreements proliferate, the strategic use of trusts will rely not only on technical structuring, but also on aligning with long-term non-tax objectives such as inheritance efficiency, asset protection and intergenerational stability.