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Estate / Inheritance taxes on US stocks and real estate for non Americans

Dec 2, 2021 | Private List update

death taxes inheritance taxes non us people

Many people invest in US stocks and/or real estate and just look at the immediate tax consequences.

A little-known fact is that the US has some extremely high estate / death / inheritance taxes on non-US people (aka non resident aliens / NRAs)

To be clear, this email is NOT tax advice as the topic is too complex and I am not a tax professional, but I will highlight a few points based on my (potentially flawed) understanding:

  • When you die, US real estate and US stocks worth above a combined $60,000 will get taxed at a progressive rate from 18% to 40%(!)
  • The definition of US stocks is stocks listed in the US. So this also applies to NYSE listed stocks held in a brokerage account in Europe or Singapore for example.
  • Non-US stocks, held in a US brokerage account do not count. But cash held in a US brokerage account does.
  • There is a network of about 15 estate tax treaties that the US has signed with other countries which help mitigate this tax, but mostly with large Western countries.

My key point is that you should speak with an accredited tax professional if you have significant US assets, and are getting a little old, frail, or just want very good forward planning.

I did a short video on the topic when I was in Cologne.

Here are some resources for your research:

https://youtu.be/xix5SOMTyZs
Alternatively, you can read the transcript below

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Full transcript of “Estate / Inheritance taxes on US stocks and real estate for non Americans”

Hello, everyone. Ladislas Maurice from thewanderinginvestor.com. So today, I’m in Cologne in Germany, but I’ll be discussing US estate taxes, so death taxes/inheritance taxes for non-resident aliens, which is the IRS terminology for non-US people. So this video is not for Americans.

So very few people are aware of the fact that America actually has some of the highest estate taxes in the world for non-residents. So, if you own US real estate, or US stocks, and a few other things such as life insurance products, and you die, then anything above the amount of $60,000 will get taxed between 18% and up to 40% for assets worth over a million dollars. So it goes up very quickly. Very few people are aware of this.

It’s quite a complex law in the sense that it applies so any US real estate that you own and then also any US stocks. And this includes US stocks that are in brokerage accounts in Europe, or in Hong Kong, for example. So as long as it’s listed in the US, it counts as a US stock. But you can also have Canadian or Australian stocks in a US brokerage account, but this will not be a taxable event in the United States because it’s not a US stock. However, if you have cash on a US brokerage account, this counts towards the estate tax, but if you have cash on a non-US brokerage account, this does not count. So there are a lot of complexities and details that you need to be aware of.

There are a few ways to mitigate it. One is if there is an estate tax treaty between the United States and your country of residency. The US has signed approximately 15 such estate tax treaties, mostly with big Western countries such as Australia, Canada, France, Germany, the UK, Switzerland, etc., even South Africa. But in most other cases, you will get slammed with these very high taxes. So you really need to go speak to a professional in your jurisdiction to fully understand the implications. Because even the estate tax treaties are very complicated to understand. I mean there’s a list down there, you can go through them. Just trying to understand what they actually mean really requires a professional opinion, and preferably not your local CPA because he won’t know. You need to find professionals in your jurisdiction that have a good understanding of, essentially, US taxes. So it gets quite expensive, but it’s something that you really need to know.

If you’re getting old, or you’re terminally ill, then if you have, for example, US real estate and you actually care about not paying all these taxes when you die, then you should really look into potentially shifting those assets into a foreign corporation. If you have US stocks, you can potentially sell the US stocks, buy other stocks instead. So those are things that you should be aware of and should be looking into. Obviously, none of these is tax advice because it’s so complicated, you really need a professional to help you with this.

Here’s to a long, happy, and healthy life.

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