Dividend Stocks without Estate Tax

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michoco911
Posts: 144
Joined: Sun Jul 14, 2019 4:13 am

Dividend Stocks without Estate Tax

Post by michoco911 »

If a non resident alien is interested to build a portfolio based on Dividends Stocks (In parallel to his bogglehead total world VWRD/AGGG one), what is the alternative of holding Stocks like XOM, T, and other US dividend stocks that are subject to estate/death ~40% Tax?
Do you recommend any ETF domiciled in Ireland that is tailored for high dividend?
60% VWRD 40% AGGG until further notice
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Schlabba
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Joined: Sat May 11, 2019 9:14 am

Re: Dividend Stocks without Estate Tax

Post by Schlabba »

michoco911 wrote: Sat Jun 12, 2021 1:13 am If a non resident alien is interested to build a portfolio based on Dividends Stocks (In parallel to his bogglehead total world VWRD/AGGG one), what is the alternative of holding Stocks like XOM, T, and other US dividend stocks that are subject to estate/death ~40% Tax?
Do you recommend any ETF domiciled in Ireland that is tailored for high dividend?
Hi,

I hold a very large chunk of my portfolio in Vanguard FTSE All-World High Dividend Yield UCITS ETF (USD) - https://www.vanguard.nl/portal/instl/nl ... /?overview

With 1500 positions it has enough positions that I think it should match the performance (although with a value tilt) of the total market. And it has a decently low TER.

The yield normally varies from 3.5 up to 4%. Right now it has a low number on the website because of the lower june 2020 distribution, but I think that the yield will go up when the june 2021 distribution replaces the june 2020 distribution.

I like that the +/-4% yield range because it matches the safe withdrawal rate, you can put your money in and never sell but instead rely on the dividends.
Topic Author
michoco911
Posts: 144
Joined: Sun Jul 14, 2019 4:13 am

Re: Dividend Stocks without Estate Tax

Post by michoco911 »

Schlabba wrote: Sat Jun 12, 2021 6:29 am
Hi,

I hold a very large chunk of my portfolio in Vanguard FTSE All-World High Dividend Yield UCITS ETF (USD) - https://www.vanguard.nl/portal/instl/nl ... /?overview

With 1500 positions it has enough positions that I think it should match the performance (although with a value tilt) of the total market. And it has a decently low TER.

The yield normally varies from 3.5 up to 4%.
Thank You. Appreciate the advise.
60% VWRD 40% AGGG until further notice
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BeBH65
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Re: Dividend Stocks without Estate Tax

Post by BeBH65 »

Schlabba wrote: Sat Jun 12, 2021 6:29 am I like that the +/-4% yield range because it matches the safe withdrawal rate, you can put your money in and never sell but instead rely on the dividends.
This seems like a dangerous strategy.
- The 4% SWR was calculated to the US situation. Teh SWR for worldwide investments is differently.
- The SWR is typically calculated on a 60/40 and 50/50 portfolio. 100% stocks have less protection in drawdown.
- The total return for funds like VHYL is lower then for the complete stock market.
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence). | Have a look at https://www.bogleheads.org/wiki/Outline_of_Non-US_domiciles
tibbitts
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Joined: Tue Feb 27, 2007 6:50 pm

Re: Dividend Stocks without Estate Tax

Post by tibbitts »

Schlabba wrote: Sat Jun 12, 2021 6:29 am I like that the +/-4% yield range because it matches the safe withdrawal rate, you can put your money in and never sell but instead rely on the dividends.
As far as I know "the" SWR wasn't established at 4% for:

1. a very high equity allocation (you don't specifiy);
2. a high-dividend-yield focused equity portion;
3. a global equity portion.

So I wouldn't have much confidence in that strategy.
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Schlabba
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Re: Dividend Stocks without Estate Tax

Post by Schlabba »

My main point with the 4% comment is that if you receive a 4% yield, your portfolio will probably still grow. If you reach for too much yield you might be having a shrinking portfolio value, either in nominal or real terms.

About my withdrawal strategy, just to be clear, I never mentioned I don't hold bonds. I still hold (and would recommend if asked) bonds to handle the downturns of the portfolio and/or the dividends.
My withdrawal strategy is not the same as the standard 4% rule. I'll let the dividends decide my spending (my spending is flexible) and I hold bonds in case they get cut too much.
I don't think its dangerous; dividends have been relatively stable: https://www.simplysafedividends.com/int ... ar-markets and according to firecalc and portfolio charts value stocks support an even higher SWR than the total market.
BeBH65 wrote: Sat Jun 12, 2021 12:18 pm ...
- The total return for funds like VHYL is lower then for the complete stock market.
Do you have any evidence?
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BeBH65
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Re: Dividend Stocks without Estate Tax

Post by BeBH65 »

Schlabba wrote: Sat Jun 12, 2021 7:15 pm
BeBH65 wrote: Sat Jun 12, 2021 12:18 pm ...
- The total return for funds like VHYL is lower then for the complete stock market.
Do you have any evidence?
Total return numbers as published by Vanguard.

of the neutral fund: FTSE All-World UCITS ETF (USD) Distributing (VWRL) https://www.vanguard.nl/portal/instl/nl ... erformance
and of the High Dividend Yield subset: FTSE All-World High Dividend Yield UCITS ETF (USD) Distributing (VHYL) https://www.vanguard.nl/portal/instl/nl ... erformance

Code: Select all

Fund	1 Year	3 Years	5 Years	
VWRL	41.79%	13.76%	14.11%	
VHYL	40.90%	8.44%	9.36%	
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence). | Have a look at https://www.bogleheads.org/wiki/Outline_of_Non-US_domiciles
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