Are US ETFs worth the (estate tax) troubles?

Right, the 60K is US situs, the (Trump’) 11 Mio is global, both absolute (once you cross 11 Mio comes the relative calc as you showed, only above 11 Mio global you pay at all). Ok, I could have highlighted this more, agreed.

The point remains: if you go for (b) your heirs will have to declare to the IRS…whether you have to pay or not… doesn’t matter… they unblock your broker or bank only with the form… that’s what I termed “mess” (after consulting the NZZ article)

Still… it’s a non topic. If you have 11Mio assets, just let them pay a lawyer.

But it applies at 100’000$ already

I might have misunderstood, but it applies at 100k if you have 10.9 Mio in Swiss assets and 100k in US assets. That’s what I understood.

You still are going to leave 11Mio to your heirs…

Ok, if you have a huge mansion and some Trucks, maybe it’s an issue.

sounds like you misunderstood indeed. Let’s say you have 100’000 US situs and 200’000 IE assets (so 300’000 worldwide assets). This triggers the US estate tax process since the US part is above 60’000… even if you’re way below 11 Mio… so then what happens is:

  1. Your US situs assets will be frozen (or maybe they call it blocked)
  2. Your heirs must file that 31 page form to the IRS within 9 months
  3. Once they process those documents they will declare that your heirs don’t have to pay taxes and transfer the assets to your heirs

That’s how I read all of this. < 11 Mio == no taxes, but still IRS form fiesta

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Just wondering… if you gave a family member your passwords and instructions on how to sell US ETFs in case of your death, would the IRS figure it out? Let’s say you die and on the next day your wife or son sells your US ETFs. Do they have a system to verify if any transactions were made after the death date? I’m aware that we’re entering some very shady area here, but what’s the harm in simply discussing it theoretically…

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you could even do an auto-liquidate and -transfer to your CH account 1 month out and keep moving the dates 1 week out every week - no need to share secrets - automate

Nevermind the legality, I don’t think that’s a solid plan for practical reasons, the main problem being that few of us can control the circumstances of our own deaths. There was a discussion on Mr RIP’s blog recently, and I think the following comment sums up some of the potential problems with such a plan pretty well:

As for your death scenarios (sad thing), the estate opens de facto with your death (certified by a doctor, he will know when you died) and from there things go legal (involving local authorities, courts, notary, etc.), meaning all of your scenarios are basically fantaisies from an IT guy (no offense) : )

It would imply that your wife would have full (illegal- not declared to the Bank) access over your accounts (red flag by itself, is it not?) and the capacity to act (what if she dies with you? Physically or psychologically incapacited? Not the person who find you dead? etc.). This is also assuming you die peacefully during the night at home withhout her having to call the doctor to assist your passing (very unlikely). She would then have to get a solid grasp over herself, leave your dead body rotting and liquid all your assets in a minute (we are allegedly talking millions here) withhout raising any flag (probably 0% chance). How hard and how long do you think it will take the authorities and all third-parties to question this little scheme? And that’s the best scenario, assuming everyone plays their part… which is hardly the case when money is at stake. How realistic is this scenario do you think?

I have no idea whether the IRS will really catch on to you, but all this seems like a lot of stress and potential legal trouble for your grieving relatives. Better leave them some instructions on how to pay an expert to fill out the IRS form in case you die.

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Right, the 60K is US situs, the (Trump’) 11 Mio is global, both absolute (once you cross 11 Mio comes the relative calc as you showed, only above 11 Mio global you pay at all).

It’s just important to know that one might have to pay estate tax even when having far less than 11 Mio, as this treshold gets lowered to the percentage of your US assets / total assets. This is even before Democrats probably will want to lower that amount again.

The point remains: if you go for (b) your heirs will have to declare to the IRS…whether you have to pay or not… doesn’t matter… they unblock your broker or bank only with the form… that’s what I termed “mess” (after consulting the NZZ article)

Yes, that’s the hassle. I am not quite sure whether only qualified intermediaries rat you out to IRS. Cornertrader, for example, shouldn’t have this status. I assume this since they seem not to give their clients the W-8BEN option.

As for your death scenarios (sad thing), the estate opens de facto with your death (certified by a doctor, he will know when you died) and from there things go legal (involving local authorities, courts, notary, etc.), meaning all of your scenarios are basically fantaisies from an IT guy (no offense) : )

To go on with this morbid turn: In Switzerland, you are dead when a doctor signs the death certificate (with time of day). The people set to receive your assets, in your scenario, would have to liquidate your US-assets before that. Money held in a non-US brokerage is not a US situs asset. Getting the money out is another thing. IB for instance wrote that they would not immediately free large sums, but making checks first, which could take days (at least, I assume).

Care to explain how you reached that conclusion? If worldwide assets are below the 11M limit all the US situated assets will be exempted (it’s simple math :slight_smile:).

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I somehow have the feeling that I do not express myself clearly.

My sole point is that it’s designed to be a relative threshhold (which at the moment is so high that it’s hard to be triggered):

Art. III
Bei der Erhebung ihrer Steuer im Falle eines Erblassers, der zur Zeit seines Todes
weder Bürger der Vereinigten Staaten war, noch dort Wohnsitz hatte, sondern
Schweizerbürger oder in der Schweiz wohnhaft war, werden die Vereinigten Staaten
die besondere Steuerbefreiung zugestehen, die nach ihrem Gesetze gewährt würde,
wenn der Erblasser in den Vereinigten Staaten Wohnsitz gehabt hätte; diese Befreiung
wird mindestens mit demjenigen Teilbetrag gewährt, der dem Verhältnis entspricht,
in dem der Wert des gesamten der Steuer unterworfenen beweglichen und
unbeweglichen Vermögens zum Wert des gesamten beweglichen und unbeweglichen
Vermögens steht, das von den Vereinigten Staaten besteuert worden wäre,
wenn der Erblasser dort Wohnsitz gehabt hätte.

(Abkommen zwischen der Schweizerischen Eidgenossenschaft und den Vereinigten Staaten von Amerika zur Vermeidung der Doppelbesteuerung auf dem Gebiete der Nachlass-Erbanfallsteuern; SR 0.672.933.62).

I found this leaflet which looks correct to me and should be hopefully clearer:
http://www.aurenum.ch/pdf/userbschaftssteuern.pdf

Do you read the form 706 at least? Are you sure is trouble?
https://www.irs.gov/forms-pubs/about-form-706
BTW the irs clearly states is for US citizen w more than 11 million. Maybe there is another one for non-citizen but I couldn’t find it.
If you are worried, sit down and prefill it and leave a couple of post it to explain where to change number of stocks etc.

I mean let’s be honest we are all mustachian, we don’t have boats, paintings 3k+, multiple homes etc.

I mean there are freaky YouTube tutorial

Fill all the info and keep it updated every year or so

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Honestly, I have experience with a complicated inventar process after my father passed away. We still have family fights 20 years on.
I’d suggest you keeping it as simple as possible with your portfolio, even if you need to compromise on returns (higher fee).
Planning a way out by the heirs post-morten is a quite common deed where I come from. But illegal. I’d avoid that strategy also.
If your heirs are very tax savvy and well informed you could give it a try with letting good written information on how to proceed (not my preferred option though).

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It isn’t the inventory that is complicated, it is the estate tax situation. The value of equities is quite easy to evaluate and liquidate if necessary.

+1, public traded equities are not a problem at all, you can buy whatever you want. It’s the valuation of your other assets - real estate for example, or illiquid private shares, that can be a problem.

IRS will want to see valuation of everything, because this is used in calculating the prorated exemption limit for US tax

Dear all, by “inventar process” I only mean the inheritance process was difficult. Nothing to do with evaluating value of assets. The division between heirs and other sentimental stuff was already too much of a burden on its own, so better keep it simple as complexity and international factors are additional complications that may not be worth the trouble

I assume the problem is stuff that you can’t evenly divide, such as all the stuff or a house.

The way that you make your estate simpler is by writing a testament and keeping it up to date with all the valuable things you own. The difference between US and IE funds is at most a few hundred francs for a tax advisor.

US and IE funds are reported pretty much in the same way. Well, except you list US funds on the DA-1 form to get some extra money back (money which is lost with IE funds), but its format is the same as that of the main WV form + a field to enter foreign tax rate (15%). There, saved you a few hundred franks for a tax advisor to tell you this little bit of tax administrivia.

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I have a follow up question to this. IB has the option to create a “joint account” that two individuals can hold. They explicitly say this is for the family case. I wonder whether this would prevent the IRS taxation scenario if one of the two dies earlier?

EDIT: Sent them an email to clarify

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I talked to IB and it looks like no account setup (joint account, or multi user) can prevent the estate proceeds with IB and the IRS.

So in a death case, the surviving partner might have issues accessing the account.

I assume this might be easier with Swiss brokers vs IB, but the tax liability is the same, it’s maybe just slightly easier to deal with it.

My personal consequence is that I put a bit more money in my Swiss system (bank, maybe Swiss broker as well) as insurance.

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