Re: Non-US citizen with US Brokers: Estate Tax risk?
Posted: Wed Jul 10, 2019 5:21 am
Investing Advice Inspired by Jack Bogle
That's pretty much it. SIPC covers missing securities. So if you have $50 million, and the broker goes bankrupt but it has followed the rules and nothing is missing, you have no loss. If assets are missing, SIPC covers up to their limit.
IB accounts offer CFDs on US ETFs and US stocks, my assumption is that since the CFDs are structured in UK and are merely contracts of difference shouldn't be subject to US estate tax. But on the other hand, CFD’s dividends are subject to withholding tax, so it is really counter intuitive because very often one thing is tight to the other. Is my assumption correct?TedSwippet wrote: ↑Thu Jun 29, 2017 7:20 amNo. It is the domicile ('situs') of the assets held in the account, not the domicile or location of the account's provider or custodian itself, that gives rise to potential US estate tax issues.rijk wrote:my understanding is that any assets, including us stocks and cash, in ib uk accounts owned by european nras do not run any us estate tax risk as these accounts are uk domiciled for tax purposes ... does this sound right?
If you are a US NRA in a country without a US estate tax treaty, you risk US estate taxes if you hold US domiciled ETFs in either a US or a non-US brokerage account, or if you hold cash in a US brokerage account. Other combinations are okay. Summarised in the table below:
A US estate tax treaty may provide some protection, but if covered you would want to read it very carefully to be sure.
Code: Select all
US broker Non-US broker Non-US domiciled ETF Okay Okay US domiciled ETF AVOID AVOID Cash AVOID Okay
A US broker is obviously closely bound by the rules and regulations of the IRS, and so in a much better position to enforce US estate taxes on NRAs. A non-US broker, on the other hand, may not be quite so strictly bound by US regulation. They may also it seems be "unaware" -- either genuinely or perhaps 'conveniently' -- that the US expects estate taxes from dead NRAs, and moreover kicks in its estate taxes at absurdly low levels, only a little over 1/100 of the allowance given to US citizens.
In most cases, the best method for NRAs to isolate themselves from US estate taxes entirely is to avoid US domiciled ETFs and directly holding US stocks or real estate, and instead invest into the US either through non-US domiciled ETFs or, if holding US stocks or real estate in excess of $60k, though intermediate holding companies.
Honestly, I have no idea. It sounds plausible (that CFDs are not in scope for US estate tax). But yours is an assumption based on logic. And as you may already have picked up from other threads around here, US tax contains no logic.Offshore_investor wrote: ↑Sun Aug 02, 2020 2:43 pm IB accounts offer CFDs on US ETFs and US stocks, my assumption is that since the CFDs are structured in UK and are merely contracts of difference shouldn't be subject to US estate tax. But on the other hand, CFD’s dividends are subject to withholding tax, so it is really counter intuitive because very often one thing is tight to the other. Is my assumption correct?