Interactive Brokers - Account Inheritence

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Topic Author
mooudn
Posts: 90
Joined: Sun Jan 05, 2020 10:28 am

Interactive Brokers - Account Inheritence

Post by mooudn »

This question is for those who are non US residents and hold accounts with IB. I recently asked IB if I could add a beneficiary and 'transfer on death' configuration to my account and this is what they said:

"Unfortunately, only US residents are eligible to set up an beneficiary or transfer on death provision in the account.

For non US Residents, in case of death of an account holder, legal heir or beneficiary should contact IBKR. Beneficiary need to send an email to 'estateprocessing@interactivebrokers.com' with account details. Procedures and required documents with details will be provided by the corresponding team to the beneficiary as per probate or will."

What constitutes "legal heir or beneficiary"? Is anyone familiar with the procedures and how easy or difficult the process would be? I want to make sure that my brother who is also a non US resident will have access to the full funds of my portfolio after my death...based on the above does this mean I need to create a legal will naming my brother as my beneficiary?

Thanks
manu
Posts: 6
Joined: Wed Aug 26, 2020 10:04 am

Re: Interactive Brokers - Account Inheritence

Post by manu »

If your account is large enough you can also consider keeping it in a holding company. My tax adviser keeps recommending that. Downside is that it adds a few thousand in annual overhead for maintaining the company. It may be worth it for older Bogleheads.
thibaulthib
Posts: 197
Joined: Mon Nov 12, 2018 8:46 am

Re: Interactive Brokers - Account Inheritence

Post by thibaulthib »

manu wrote: Mon Jan 11, 2021 8:31 pm If your account is large enough you can also consider keeping it in a holding company. My tax adviser keeps recommending that. Downside is that it adds a few thousand in annual overhead for maintaining the company. It may be worth it for older Bogleheads.
That's something I am contemplating too! Where are you based?
NRA, LSE-based ETFs only | 2-funds portfolio powered by Vanguard: 90% VWRA + 10% VAGU
Topic Author
mooudn
Posts: 90
Joined: Sun Jan 05, 2020 10:28 am

Re: Interactive Brokers - Account Inheritence

Post by mooudn »

manu wrote: Mon Jan 11, 2021 8:31 pm If your account is large enough you can also consider keeping it in a holding company. My tax adviser keeps recommending that. Downside is that it adds a few thousand in annual overhead for maintaining the company. It may be worth it for older Bogleheads.
What is the benefit of a holding company?
AlohaJoe
Posts: 5655
Joined: Mon Nov 26, 2007 2:00 pm
Location: Saigon, Vietnam

Re: Interactive Brokers - Account Inheritence

Post by AlohaJoe »

mooudn wrote: Mon Jan 11, 2021 7:24 pm What constitutes "legal heir or beneficiary"?
Why don't you ask IBKR? Send an email to that email address, give them complete details of the countries involved, and ask what precise paperwork they require (Does it have to be in English? If so, what translations are allowed? Do they need to be legalized by an English-speaking consulate? Etc).

What if someone here tells you "you need X" and then, after you die, your brother discovers that the person on the internet was wrong? Is your ghost going to argue "but somebody on Bogleheads told me!" Just ask the people who actually set the rules.
Tylenol Jones
Posts: 300
Joined: Mon Sep 14, 2009 6:54 am

Re: Interactive Brokers - Account Inheritence

Post by Tylenol Jones »

Does anyone know a bit more about these holding companies? For example,

- What type of corporation should it be?
- Should it be a pass through entity or not?
- How should the ownership be setup if a family involved for inheritance purposes?
- How does one properly keep track of ownership of funds?
- Who can open a brokerage for such a company and invest? A director, an owner, or anyone showing on incorporation documents?
- What would be a good place to form a holding company for non-US residents?
- Any idea of approximate costs?
- Is it possible to achieve tax free growth until retirement?
- When funds are taken out how does one keep track of what is just originally invested and what are the gains that one has to pay taxes on?
glorat
Posts: 801
Joined: Thu Apr 18, 2019 2:17 am

Re: Interactive Brokers - Account Inheritence

Post by glorat »

My assumption is that the answer to questions of "legal heir" and for companies is that it will depend on the country and the laws of that country - and that they will differ greatly. For example, I suspect that in Hong Kong where it is relatively cheap to set up new companies AND investment taxes are nil for both individuals and companies, things are simple. In Europe, it is probably a big mess... and the US, the most complex tax code of the lot will probably get you.

I also wonder if an acceptable answer to the OP question is to leave a will and leave the username/password/2FA to the heir in the will and they can legally move the money.
manu
Posts: 6
Joined: Wed Aug 26, 2020 10:04 am

Re: Interactive Brokers - Account Inheritence

Post by manu »

thibaulthib wrote: Mon Jan 11, 2021 10:03 pm That's something I am contemplating too! Where are you based?
Based in Asia now, but moving back to Europe in a few months. So that consultation was EU-specific. The recommendation was for a Malta-based holding company for its tax-efficiency, (relatively) low cost and option to use nominee shareholders/directors.

mooudn wrote: Mon Jan 11, 2021 10:12 pm What is the benefit of a holding company?
One benefit of a holding company is that you can bundle different incomes (dividends, capital gains from different assets) into the profits of a single company, which can make tax planning easier in specific cases. Another is that the assets aren't in your name and you can e.g. have two directors with equal access. No problem with inheritance, since the company never dies. :D
manu
Posts: 6
Joined: Wed Aug 26, 2020 10:04 am

Re: Interactive Brokers - Account Inheritence

Post by manu »

Tylenol Jones wrote: Tue Jan 12, 2021 12:41 am Does anyone know a bit more about these holding companies? For example,

- What type of corporation should it be?
- Should it be a pass through entity or not?
- How should the ownership be setup if a family involved for inheritance purposes?
- How does one properly keep track of ownership of funds?
- Who can open a brokerage for such a company and invest? A director, an owner, or anyone showing on incorporation documents?
- What would be a good place to form a holding company for non-US residents?
- Any idea of approximate costs?
- Is it possible to achieve tax free growth until retirement?
- When funds are taken out how does one keep track of what is just originally invested and what are the gains that one has to pay taxes on?
I can't answer all of it, but will try my best:

- Usually a kind of private limited company that's only used to hold assets and does no business.
- Definitely NOT passthrough.
- For complex cases (big family, more money), a trust may be better than a simple holding company?
- Every company has books, an audit and records of shareholders.
- The director can open a brokerage account. IB will probably accept most jurisdictions. But would love to hear experiences here.
- Again, UK and Malta often come up and for Malta holding companies are very common and tax efficient. There may be more options. Singapore, Dutch B.V., Cyprus, Latvia. Depends on the country of residence.
- For Malta you look at EUR 2-3k per year. UK probably less. Rest I don't know

(Skipping the last 2 as they are too specific)
thibaulthib
Posts: 197
Joined: Mon Nov 12, 2018 8:46 am

Re: Interactive Brokers - Account Inheritence

Post by thibaulthib »

Hong kong incorporation is really easy too
NRA, LSE-based ETFs only | 2-funds portfolio powered by Vanguard: 90% VWRA + 10% VAGU
Tylenol Jones
Posts: 300
Joined: Mon Sep 14, 2009 6:54 am

Re: Interactive Brokers - Account Inheritence

Post by Tylenol Jones »

manu wrote: Tue Jan 12, 2021 3:54 am
Tylenol Jones wrote: Tue Jan 12, 2021 12:41 am Does anyone know a bit more about these holding companies? For example,

- What type of corporation should it be?
- Should it be a pass through entity or not?
- How should the ownership be setup if a family involved for inheritance purposes?
- How does one properly keep track of ownership of funds?
- Who can open a brokerage for such a company and invest? A director, an owner, or anyone showing on incorporation documents?
- What would be a good place to form a holding company for non-US residents?
- Any idea of approximate costs?
- Is it possible to achieve tax free growth until retirement?
- When funds are taken out how does one keep track of what is just originally invested and what are the gains that one has to pay taxes on?
I can't answer all of it, but will try my best:

- Usually a kind of private limited company that's only used to hold assets and does no business.
- Definitely NOT passthrough.
- For complex cases (big family, more money), a trust may be better than a simple holding company?
- Every company has books, an audit and records of shareholders.
- The director can open a brokerage account. IB will probably accept most jurisdictions. But would love to hear experiences here.
- Again, UK and Malta often come up and for Malta holding companies are very common and tax efficient. There may be more options. Singapore, Dutch B.V., Cyprus, Latvia. Depends on the country of residence.
- For Malta you look at EUR 2-3k per year. UK probably less. Rest I don't know

(Skipping the last 2 as they are too specific)
Thanks, that's very useful info.
hushroom
Posts: 14
Joined: Sat Apr 25, 2020 5:52 pm

Re: Interactive Brokers - Account Inheritence

Post by hushroom »

I have been wondering about inheritance issues too.

Which jurisdiction is actually relevant - the location of the broker, the client, the beneficiary, the assets themselves (e.g. Irish ETFs), ...?

The actual beneficiaries could be different depending on the jurisdiction - some countries (don't) recognize common law marriage, some have a mandatory minimum inheritance for children/spouse, different formal requirements for a valid will etc... :confused
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