I’ve carefully reviewed an excellent post from 2020 about US Estate Taxes for non-US Persons on Assets (such as VT) on Mustachian Post. As someone who’s a bit older and closer to retirement than the average, this topic has become increasingly important to me. However, since the post is somewhat dated, I have a few questions that I hope you can help clarify:
Estate Tax Threshold: After reading the post multiple times, I’m still not entirely clear on whether the estate tax threshold is an “absolute” USD 810,600 or if it’s 7% of the overall fortune until it reaches USD 810,600. Perhaps I’m not just old but also a slow learner!
Tax Treaty Changes: Has the tax treaty changed since the original post? Unfortunately, the link provided in the post is outdated.
US Domiciled ETFs and Assets: I understand that the limit includes all US-domiciled ETFs and assets, with domicile being the trigger for counting them as US assets.
Investment Strategy: Assuming someone has more than USD 810,000 to invest and is close to retirement, would it be best to consider investing in an ETF or assets with a non-USA domicile, taking into account the estate tax?
@jarjj70 CH has a treaty with us regarding estate, we get the same treatment as usa citizens. As long as your global worth does not exceed 7M you're fine, there is just a little more bureaucracy for the inheritor.
If you exceed that globally the portion of assets you hold in USA are taxed proportionally.
@annaad0617 Where do you get the 7M USD from? I see USD 11.58 million (exemption allowed on estate tax for a US citizen in 2020) in Mustachian Post and USD 13.61 million for 2024 if I visit the irs.gov website.
@jarjj70 Because 13.61 M is an exception. It is granted for a limited time and (I guess) constantly renewed to help whatever club of millionaires that pay for the MPs election campaigns. We ofc don't know whoe they are and when they will pass away. So unless the OP plans his death in the coming months, he should account to the "default" value imho since as per current state of affairs will eventually be re-enabled. Then if it becomes permanent it's a different story.
Regardless, it's also true that if one has more than 7M in assets he shouldn't listen to a random dude on Reddit. I'm not spending more than the minimum time necessary I need for myself on this topic (yeah, unfortunately I'm not in the 7M club) so I could totally be wrong on this detail and I don't care.
@jarjj70 A few comments on your points, from another reader of the Mustachian Post.
The post indicates that the formula is US Assets/World Wide Assets \ US exemption, where *US exemption is 11.5 M$, and the 7% is the specific ratio US Assets/World Wide Assets of Mr MP. You need to calculate the exemption for your ratio US/World.
Yes, the domicile of ETFs, funds and stocks is the key for US assets, basically anything having an ISIN starting with US.
Even if exempted from paying estate tax, I read that having US assets above 60’000 $ means that your heirs need to make a declaration and file documents to US tax authorities (see details in the post). I don’t know how complex this would be, nor if it would be really enforced… This is avoided by using non-US ETFs.
