Help with doubt about heritage with assets in the whole world in a Interactive Brokers IB account

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frombrazil2world
Posts: 10
Joined: Sun Jan 22, 2017 5:56 pm

Help with doubt about heritage with assets in the whole world in a Interactive Brokers IB account

Post by frombrazil2world » Sat Aug 12, 2017 7:51 pm

Hello everybody!

I started my investments with Interactive Brokers. As you can see, I'm from Brazil but I have some stocks in US and some ETF in Ireland and another in Swiss.

My doubt is concern about heritage. Once I use IB that's is from US, in case of death, the heritage for US stocks is 40% but how about ETF in Ireland and others country?

Does anyone knows about that? In case of heritage the taxes is according to assets in country like, US = 40%, Ireland = nothing ..... or I pay everything 40%?

I have this big doubt because the ETF are domiciliated in Ireland but I use IB that's in US.

Thanks everybody for help!

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Hyperborea
Posts: 120
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Location: Silicon Valley

Re: Help with doubt about heritage with assets in the whole world in a Interactive Brokers IB account

Post by Hyperborea » Sat Aug 12, 2017 11:17 pm

Ireland's inheritance tax is on the beneficiary. See page 30 of this document from Deloitte - https://www2.deloitte.com/content/dam/D ... e-2017.pdf

Note, that if you have cash at a US broker that is considered a US asset (cash at a US bank is not). It counts towards your US$60K for estate tax exemption. More than that for all US assets and you will owe estate tax on the amount over that.

TedSwippet
Posts: 1303
Joined: Mon Jun 04, 2007 4:19 pm

Re: Help with doubt about heritage with assets in the whole world in a Interactive Brokers IB account

Post by TedSwippet » Sun Aug 13, 2017 4:26 am

Hyperborea wrote:
Sat Aug 12, 2017 11:17 pm
frombrazil2world wrote:
Sat Aug 12, 2017 7:51 pm
In case of heritage the taxes is according to assets in country like, US = 40%, Ireland = nothing ..... or I pay everything 40%?
Ireland's inheritance tax is on the beneficiary.
See page 30 of this document from Deloitte - https://www2.deloitte.com/content/dam/D ... e-2017.pdf
Right, although this is rather a dense document to plough through.

To answer your core question: it is US = 40%, Ireland = nothing. The US will not apply its estate tax to your non-US holdings at Interactive Brokers, and you have nothing to worry about from Irish inheritance tax. (In estate tax terms, if you give away your holdings or if you die and someone inherits them, you are the 'donee/deceased' and they are the 'beneficiary'. So your heirs might face Irish inheritance tax but only if they are resident in Ireland!)

You also mention Switzerland. That too has an inheritance tax paid by the beneficiary. So if you hold Swiss domiciled investments, shares or ETFs it is the same answer as for Ireland. Not subject to the US estate tax as they are not US situated assets, and no Swiss estate tax issues.

While there may be some others that do this, the US is the only country I am currently aware of that levies estate taxes on shares, ETFs, mutual funds and so on held by people who are neither citizens nor residents of the country.

Finally, as already mentioned by Hyperborea, do pay attention to how much cash you hold in Interactive Brokers.

You want to keep it to below $60k to avoid the US taking a slice of that if you die while holding it. A broker is not the right place to keep long term cash, so staying below $60k should be fairly easy. (Just make sure not to die while rebalancing!)

frombrazil2world
Posts: 10
Joined: Sun Jan 22, 2017 5:56 pm

Re: Help with doubt about heritage with assets in the whole world in a Interactive Brokers IB account

Post by frombrazil2world » Sun Aug 13, 2017 10:09 pm

I understood. Maybe the best way is to keep money in Ireland. I'm not planning to die soon but, who knows? :D

Thank you guys!

frombrazil2world
Posts: 10
Joined: Sun Jan 22, 2017 5:56 pm

Re: Help with doubt about heritage with assets in the whole world in a Interactive Brokers IB account

Post by frombrazil2world » Wed Aug 16, 2017 5:52 am

Hyperborea wrote:
Sat Aug 12, 2017 11:17 pm
Ireland's inheritance tax is on the beneficiary. See page 30 of this document from Deloitte - https://www2.deloitte.com/content/dam/D ... e-2017.pdf

Note, that if you have cash at a US broker that is considered a US asset (cash at a US bank is not). It counts towards your US$60K for estate tax exemption. More than that for all US assets and you will owe estate tax on the amount over that.
Thanks Hyperborea, I'll think in something good.

frombrazil2world
Posts: 10
Joined: Sun Jan 22, 2017 5:56 pm

Re: Help with doubt about heritage with assets in the whole world in a Interactive Brokers IB account

Post by frombrazil2world » Wed Aug 16, 2017 5:58 am

TedSwippet wrote:
Sun Aug 13, 2017 4:26 am
Hyperborea wrote:
Sat Aug 12, 2017 11:17 pm
frombrazil2world wrote:
Sat Aug 12, 2017 7:51 pm
In case of heritage the taxes is according to assets in country like, US = 40%, Ireland = nothing ..... or I pay everything 40%?
Ireland's inheritance tax is on the beneficiary.
See page 30 of this document from Deloitte - https://www2.deloitte.com/content/dam/D ... e-2017.pdf
Right, although this is rather a dense document to plough through.

To answer your core question: it is US = 40%, Ireland = nothing. The US will not apply its estate tax to your non-US holdings at Interactive Brokers, and you have nothing to worry about from Irish inheritance tax. (In estate tax terms, if you give away your holdings or if you die and someone inherits them, you are the 'donee/deceased' and they are the 'beneficiary'. So your heirs might face Irish inheritance tax but only if they are resident in Ireland!)

You also mention Switzerland. That too has an inheritance tax paid by the beneficiary. So if you hold Swiss domiciled investments, shares or ETFs it is the same answer as for Ireland. Not subject to the US estate tax as they are not US situated assets, and no Swiss estate tax issues.

While there may be some others that do this, the US is the only country I am currently aware of that levies estate taxes on shares, ETFs, mutual funds and so on held by people who are neither citizens nor residents of the country.

Finally, as already mentioned by Hyperborea, do pay attention to how much cash you hold in Interactive Brokers.

You want to keep it to below $60k to avoid the US taking a slice of that if you die while holding it. A broker is not the right place to keep long term cash, so staying below $60k should be fairly easy. (Just make sure not to die while rebalancing!)
TedSwipet, thank you again but I have another doubt.

In case of death, what's goes to the beneficiary? Money or assets?

If the beneficiary take the assets in Ireland and sell it and the money needs to go to a bank in US, does it become assets in US? I mean, will be necessary to pay 40% about that?

In my interpretation everything in Ireland goes will be marked as inheritance and the beneficiary can sell it, send money to US, take to Brazil again without pay tax. Am I right?

TedSwippet
Posts: 1303
Joined: Mon Jun 04, 2007 4:19 pm

Re: Help with doubt about heritage with assets in the whole world in a Interactive Brokers IB account

Post by TedSwippet » Wed Aug 16, 2017 9:14 am

frombrazil2world wrote:
Wed Aug 16, 2017 5:58 am
In case of death, what's goes to the beneficiary? Money or assets?
It could be either, depending on the way the executor winds up the estate. Read on below for why it should not matter which occurs.
frombrazil2world wrote:
Wed Aug 16, 2017 5:58 am
If the beneficiary take the assets in Ireland and sell it and the money needs to go to a bank in US, does it become assets in US? I mean, will be necessary to pay 40% about that?
No, for two reasons.

Firstly, common sense tells you that a cash deposit in a US bank is an 'asset in the US'. But for reasons known only to the people who put these idiotic laws together, although a cash deposit in a US broker is not exempt from US estate taxes, a cash deposit in a US bank is exempt from US estate taxes. You should find that this document gives you a decent summary of what is and is not 'US situs' for estate tax purposes. Observe the complete lack of logic at many points.

And secondly, if your beneficiary moves the money as cash then they too would have to die before US estate tax becomes a worry again (and they would have to have put it somewhere other than in a normal US bank account, too). Your US estate tax falls on what you hold when you die (see form 706NA instructions for the gory details). In this case, the non-US stocks are sold to cash after your death and by your beneficiary, or perhaps by your estate's executors, and this does not magically make the cash realised on them subject to US estate tax on your estate.
frombrazil2world wrote:
Wed Aug 16, 2017 5:58 am
In my interpretation everything in Ireland goes will be marked as inheritance and the beneficiary can sell it, send money to US, take to Brazil again without pay tax. Am I right?
Yes.

Again, if you pick apart the instructions for form 706NA you can see how this works. The form is quite specific in asking for details of precisely what was owned "as of the date of the decedent's death". So anything that happens to your money after that date will not have any effect on the US estate tax return or tax calculation for your estate. This form's instructions also show you why you do not want to die on rebalancing day and with a temporary single-day cash balance in a US broker of more than $60k (so make sure you arrange to die either one day earlier or one day later!).

If all of this seems completely insane to you, you are not alone.

frombrazil2world
Posts: 10
Joined: Sun Jan 22, 2017 5:56 pm

Re: Help with doubt about heritage with assets in the whole world in a Interactive Brokers IB account

Post by frombrazil2world » Wed Aug 16, 2017 8:31 pm

TedSwippet wrote:
Wed Aug 16, 2017 9:14 am
frombrazil2world wrote:
Wed Aug 16, 2017 5:58 am
In case of death, what's goes to the beneficiary? Money or assets?
It could be either, depending on the way the executor winds up the estate. Read on below for why it should not matter which occurs.
frombrazil2world wrote:
Wed Aug 16, 2017 5:58 am
If the beneficiary take the assets in Ireland and sell it and the money needs to go to a bank in US, does it become assets in US? I mean, will be necessary to pay 40% about that?
No, for two reasons.

Firstly, common sense tells you that a cash deposit in a US bank is an 'asset in the US'. But for reasons known only to the people who put these idiotic laws together, although a cash deposit in a US broker is not exempt from US estate taxes, a cash deposit in a US bank is exempt from US estate taxes. You should find that this document gives you a decent summary of what is and is not 'US situs' for estate tax purposes. Observe the complete lack of logic at many points.

And secondly, if your beneficiary moves the money as cash then they too would have to die before US estate tax becomes a worry again (and they would have to have put it somewhere other than in a normal US bank account, too). Your US estate tax falls on what you hold when you die (see form 706NA instructions for the gory details). In this case, the non-US stocks are sold to cash after your death and by your beneficiary, or perhaps by your estate's executors, and this does not magically make the cash realised on them subject to US estate tax on your estate.

Just what I was thinking. This is logical for me.

frombrazil2world wrote:
Wed Aug 16, 2017 5:58 am
In my interpretation everything in Ireland goes will be marked as inheritance and the beneficiary can sell it, send money to US, take to Brazil again without pay tax. Am I right?
Yes.

Again, if you pick apart the instructions for form 706NA you can see how this works. The form is quite specific in asking for details of precisely what was owned "as of the date of the decedent's death". So anything that happens to your money after that date will not have any effect on the US estate tax return or tax calculation for your estate. This form's instructions also show you why you do not want to die on rebalancing day and with a temporary single-day cash balance in a US broker of more than $60k (so make sure you arrange to die either one day earlier or one day later!).

If all of this seems completely insane to you, you are not alone.
Thanks again TedSwippet, you are very helpful.

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