Are US ETFs worth the (estate tax) troubles?

Helix · March 30, 2023, 5:50pm

Ok, I have sourced usefull information, I think.

tl;dr: You are not “US citizens, US permanent residents, and other clients who hold a 9 digit US Social Security Number, or US TaxID” then there is no reporting, and there is no freezing for the IRS in any case.

I asked IBKR:

And they answered:

Mr. Helix,

Thank you for contacting us. US Estate tax is reported for accounts of US taxpayers only. This means US citizens, US permanent residents, and other clients who hold a 9 digit US Social Security Number, or US TaxID.

We are aware there is a lot of misinformation on the internet regarding this subject. We can’t control what online authors decide to publish on the Internet, however we can confirm that accounts at Interactive Brokers do not have Estate tax applied at death, not even for US persons. There is no US Estate tax applied for any accounts directly. However, US taxpayers (and ONLY US taxpayers) will have his or her Estate account automatically reported under the account owner’s US taxID number.

Here is the procedure for account assets at death:

1. We would ask the family of the account holder to provide a copy of the official Death Certificate

2. We would ask the family of the account holder to provide any Court-Ordered documents (legal documents) that describe how the assets should be distributed. For example, if your legal documents show that your children should receive the assets evenly, we would work with your children to open an Estate account in your name. This steps is important, as it helps place the assets in an account that has a specific function the Estate and later to be distributed.

Note: if you are married, and wish for your partner to receive assets in the event of your sudden passing (or vice versa), you may be able to open a particular Joint account that gives what’s called automatic survivorship

3. In the above example, your children (or family) would then be asked if they would like to transfer the assets to another bank or broker, or if the beneficial owners would like to open new accounts at IBKR to continue trading and investing at our firm. If they choose to move the assets to an outside firm, we simply work with the outside firm to perform the transfer. If they choose to open new accounts at IBKR, we would perform an internal transfer. After all assets are distributed, the Estate account is closed.

4. At the time of this writing, there is no automatic reporting in Switzerland for Swiss accounts of any type, whether regular or Estate. If you were to pass suddenly, the above procedure would be applied. Your family would be responsible for filing the correct tax information for your Estate. They would be given a calendar-year statement that shows any transactions for your account. Your family would use the statement for any relevant tax filing that pertains to your Estate. Again, the reporting of the Estate account at IBKR would be performed by your family (the beneficial owners of the assets).

For a US person, with a 9 digit US TaxID number, the Estate account would be automatically reported to the US IRS (taxing body). For all other clients worldwide, there is no reporting of Estate accounts. Again, US Estate reporting * must * be done using a US taxID number. Any client who does not have a US TaxID number, does not have any US Estate reporting, as it would mean the person is not a taxpayer in the US.

Again, we understand there are a lot of incorrect details on the Intenet regarding this particular subject. We use the above-noted procedure worldwide and we have verified these procedures with tax professionals many years in a row.

We hope this information provides the clarification you are seeking.

Kind Regards,
Melissa, IBKR

The question is: Do my heirs still have to file if the IRS doesn’t know and it’s below the current exemption from the treaty?