Death/Inheritance Estate Tax for Non-US Citizens investing in US Stocks/Bonds

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Topic Author
michoco911
Posts: 7
Joined: Sun Jul 14, 2019 4:13 am

Death/Inheritance Estate Tax for Non-US Citizens investing in US Stocks/Bonds

Post by michoco911 » Sun Jul 14, 2019 6:33 am

Hello,

I am a Non-US Resident Alien NRA living in LEBANON and would like to invest in US Stocks and Bonds ETFs. The country does not have TAX treaties with the US (Neither

My concern is related to the high taxes (up to 40%) for estate taxes in case of death for amounts above 60K$.

I've read that this can be only mitigated somehow but investing in NON-US Domiciled ETFs, such as Ireland ETFs.

My portfolio distribution is mainly in ETFs between VTI (Total US Stock Market Index ETF) and Intermediate Term Treasury Bonds VGIT.

Did anybody constructed a similar portfolio using Ireland ETFs to reduce his Dividends Tax and mainly to avoid the high 40% Estate tax in case of sudden death?

Any advise is appreciated.

Regards,

TedSwippet
Posts: 2262
Joined: Mon Jun 04, 2007 4:19 pm

Re: Death/Inheritance Estate Tax for Non-US Citizens investing in US Stocks/Bonds

Post by TedSwippet » Sun Jul 14, 2019 8:21 am

Welcome.
michoco911 wrote:
Sun Jul 14, 2019 6:33 am
Did anybody constructed a similar portfolio using Ireland ETFs to reduce his Dividends Tax and mainly to avoid the high 40% Estate tax in case of sudden death?
Yes. Unpleasant US tax rule for non-US citizens mean that it is fairly common these days for non-US investors to use Ireland domiciled ETFs instead of US domiciled ones. Our wiki page for non-US investors should point you to all the details necessary. As a quick starting point, you can probably look at the example portfolios here:

EU investing, Sample Portfolios - Bogleheads

Although written with EU investors in mind, it is also applicable to nearly any non-US investor. For you, a combination of VWRD and IGLO might work well. Or maybe IWDA, EIMI and AGGG. You have plenty of non-US domiciled ETFs to choose from. If you search around the older posts in this forum you can also find details on what other people in situations similar to your own have done.

Topic Author
michoco911
Posts: 7
Joined: Sun Jul 14, 2019 4:13 am

Re: Death/Inheritance Estate Tax for Non-US Citizens investing in US Stocks/Bonds

Post by michoco911 » Sun Jul 14, 2019 2:24 pm

Thank you for your reply and clarifications.I really appreciate it.

I checked the iShares website now to see the list of ETFs with Domicile as Ireland and found out the below:
"CSPX - iShares Core S&P 500 UCITS ETF USD"
"IBTM - iShares $ Treasury Bond 7-10yr UCITS ETF"

Knowing that i want to replicate 60% VTI and 40% Mid-Term Treasury Bonds VGIT ETFs portfolio, do you think the CSPX would be a better choice than VWRD since it simulates the US stock market only and not worldwide market? and the IBTM would be a similar equivalent to the VGIT? Or do you have other suggestions?

Regards,

TedSwippet
Posts: 2262
Joined: Mon Jun 04, 2007 4:19 pm

Re: Death/Inheritance Estate Tax for Non-US Citizens investing in US Stocks/Bonds

Post by TedSwippet » Mon Jul 15, 2019 2:55 am

michoco911 wrote:
Sun Jul 14, 2019 2:24 pm
Knowing that i want to replicate 60% VTI and 40% Mid-Term Treasury Bonds VGIT ETFs portfolio, do you think the CSPX would be a better choice than VWRD since it simulates the US stock market only and not worldwide market? and the IBTM would be a similar equivalent to the VGIT?
I am not sure why you have chosen to ignore nearly half of the world's companies and market cap by using only US stocks. But since you have and that you wish to stick with that, then yes, these ETFs seem to me to make perfect sense.

CSPX tracks the S&P500, so strictly that makes it equivalent to VOO rather than VTI. However, if you compare VOO and VTI over time you should find that there is no discernible difference. And VGIT has bonds with durations from 3-10 years, so you will have slightly longer bond duration here overall. Minor differences, but if this were my portfolio, I would be entirely happy with these choices.

Topic Author
michoco911
Posts: 7
Joined: Sun Jul 14, 2019 4:13 am

Re: Death/Inheritance Estate Tax for Non-US Citizens investing in US Stocks/Bonds

Post by michoco911 » Mon Jul 15, 2019 3:14 am

The reason i am looking at the US market only, is because all those big companies are always covering the worldwide market and not the US only (The likes of Technology companies such as Apple, Google, Dell and others) and hence any changes outside the US (China or emerging markets) will affect them as well, so i am considering that as diversified enough.

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