Many non-U.S. investors assume that the federal estate tax only applies to investments physically located in the U.S. and associate this solely with owning property such as a holiday home—but they are wrong. This could signal an unpleasant surprise for the executors of those estates.
The U.S. imposes up to 40% estate tax rate (death duty) on U.S. assets above a $60,000 exemption threshold on assets of the deceased non-residents. Foreign estates become subject to U.S. estate taxation with respect to their U.S.-situated assets.
U.S.-situated assets include American real estate, tangible personal property, and securities of U.S. companies. Potentially, the most important point to know is a non-resident’s stock holdings in American companies are also subject to estate taxation.
Given the enormous value invested by foreign investors and that Foreign Account Tax Compliance Act (FATCA) and other mechanisms are now fully operational, the U.S. is increasingly looking into U.S. equities held by foreign investors, even if held in custody outside the U.S. The number of voluntary filings and discovered false or “forgotten” filings will continue to rise.
It is worth noting that informed non-U.S. financial institutions and intermediaries all over the world already started the required reporting concerning their deceased clients owning U.S.-situs assets to mitigate their risk years ago.
There are solutions available. By transferring US listed shares into a portfolio bond you could reduce or eliminate any liability to US estate tax for non-domiciles which would otherwise be assessable on the deceased’s estate.
Once the assets are held within the bond, the previous owner is deemed to have relinquished all legal and beneficial rights to the assets and therefore on death, the value of the shares are not assessable to US estate tax.
If you would like information on any of the above areas or any other areaa of financial planning, please contact.
Matt Baker, Managing Director, Singapore Expat Advisory
Email: advice@singaporeexpatadvisory.com
Tel/Whatsapp +65 9432 8781
www.singaporeexpatadvisory.com
Singapore Expat Advisory is an agency for Promiseland Pte. Ltd and are authorised and regulated by the Monetary Authority of Singapore (MAS).
General Information Only This article should not be construed as an offer, solicitation of an offer, or a recommendation to transact in any products (including funds, stocks) mentioned herein. The information does not take into account the specific investment objectives, financial situation or particular needs of any person. Advice should be sought from a licensed financial adviser regarding the suitability of the investment. This article has not been reviewed by the MAS