Non-US residents holding US stocks are liable to US estate tax of 40%!

[Maverick2608]

"The biggest thing to keep in mind though is that non-US residents holding US assets (including shares, ETFs or property) are liable to US estate tax (up to 40%).

If you are a non-US resident you should try to hold stocks based outside the US. There are ETFs that trade US stocks that are domiciled outside the US.

There is big exemption for US residents from estate tax (5.45 million) but only $60,000 for non-U.S. residents.

It is nuts and it is amazing that this isn’t more widely known. It has nothing to do with whether the brokerage is based in the US or outside. It is about where the assets (i.e. the company that the shares are in) is domiciled. Although note, money on deposit in a US bank is not considered to be US “in situ” but money in a US brokerage is.

IRS link: https://www.irs.gov/individuals/int...s-with-us-assets-must-file-estate-tax-returns
Deloitte: https://www2.deloitte.com/content/d...rules-for-resident-and-nonresident-aliens.pdf"

The above excerpt is taken from this link:
https://www.quora.com/What-is-the-b...ctable-companies-allow-International-accounts

My comment: WTF!?

 

[Cuddles]

form us based llc and trade through it?

 

[Maverick2608]

... or make sure to die of cancer instead of a stroke.

Not sure an llc will be enough.

 

[otctrade]

form us based llc and trade through it?

Most brokers don't accept accounts of foreign owned LLCs unless they have a US based partner.

 

[Maverick2608]

... also do not die in a traffic accident.

Disclosure: I live in one of the countries that have an estate tax treaty with the US. But apparantly only a few countries have that. Sweden apparently not nor Monaco, Dubai etc.

 

[traider]

This applies at time of death right? What if the holdings were liquidated before death?

 

[Maverick2608]

This applies at time of death right? What if the holdings were liquidated before death?

As I understand it (with the caveat that I have just become aware of this and as goes for all things related to tax it is (immensely and overly) complicated): 1) If you liquidate and the funds are with a US bank/brokerage. Tough luck. Up to 40% tax. Tax start at USD. 60.000 in assets. 2) If you liquidate and the assets are transferred to a non-US bank/brokerage = no tax.

In other words instruct your wife to do CPR, if unsuccesful in this order: 1) sell stocks; 2) transfer funds; 3) call ambulance.

 

[otctrade]

Exceptions: Assets that are exempt from U.S. estate tax include securities that generate portfolio interest, bank accounts not used in connection with a trade or business in the U.S., and insurance proceeds.

I believe as long as you are only engaged in stock trading in the US and nothing else, then that does not count as a "connection with trade or business in the US" as per IRS Pub 519 (https://www.irs.gov/pub/irs-pdf/p519.pdf)

Trading in stocks, securities, and commodities. If your only U.S. business activity is trading in stocks, securities, or commodities (including hedging transactions) through a U.S. resident broker or other agent, you are not engaged in a trade or business in the United States. For transactions in stocks or securities, this applies to any nonresident alien, including a dealer or broker in stocks and securities.

So you could have the cash in a bank account from what I'm reading but if you held securities at the time of your death you'd be liable for that

 

[otctrade]

Thanks for posting about this btw. The IRS is a major PITA.

 

[nooby_mcnoob]

Own your stock through a foreign corporation that never dies. Can't imagine that would be impacted.