Hi Folks,
There is always talk about the VT ETF and suddenly I read that you should only save up to 60,000 because of the estate law (In the blog of MP). Is this the case? Do you all save the VT up to 60000 USD and then switch to e.g. VWRL?
I’m new in this forum, so excuse me i’ve any other post does exist.
Have a nice day
See this topic: Estate tax treaty US-Switzerland [2024] - Taxes - Mustachian Post Community
It’s a little more complicated.
Sharing a latest comment on this topic at thepoorswiss blog
This gives some insights into practical issues people face with IRS & estate taxes. In this case it was unavoidable because of RSUs.
Thanks for sharing. Sounds painful…
Would one avoid all this hassle by holding US ETFs at a Swiss broker?
Sheesh, oh well, the dead don’t feel anything anyway 
A question I always had is what happens in these cases where the person liable for a big tax bill they didn’t incur directly just doesn’t have the money to pay it. Do they get a fine/criminal record for not paying their taxes as well? I mean the IRS should have thought of the scenario and defer tax payments until the case is settled. Even in third world Greece you’re not required to settle your tax bill when you have an open case, once it’s settled you get a recalculation of your tax bill and 3-6 months to cover it. In Greece it’s also possible to forego inheritance if you don’t want to pay, funding public sector workers’ pensions, and that makes the tax bill go away.
My understanding, but I haven’t given it much research because I don’t want the hassle, or Uncle Sam in my wallet, is that the answer is between a firm maybe and yes. Not sure the Swiss broker will block anything, and wonder if the US IRS has any power to request that they do.
I believe that the main problem lies with the US broker. When the relative died, the account was blocked, as Hans writes. I strongly suspect that the US broker is obliged to report this new status - this is probably different with a Swiss broker.
In my opinion, Hans did everything right and played with open cards (which he is obliged to do). You can now discuss whether there are other options, but I do not recommend any of them:
No
This problem will exist as long as we hold US stocks or US ETFs wherever they exist
This problem will only be solved by holding IE domicile ETFs & keep US domiciled assets to lower than 60K. This is my plan because I don’t want to have this drama anymore as it’s not really worth it. It would take few years to get there though.
SWQ might me more flexible than IB but they wouldn’t dare to mess with IRS as well
I thought the limit of USD 60k applies to other countries, but not to Switzerland, as Switzerland has a bilateral agreement with the US and the limit is somewhere around CHF 13 million?
Item, of course it makes sense to diversify here too and - even if US securities are superior to others in every respect in my opinion - to invest in other securities that have nothing to do with US law. The fewer the better.
It’s correct
But even with treaty , people (in Switzerland) need to go through drama as mentioned above to avoid the 40% tax. I already knew that there is paper work involved but this example just shows it’s not so simple as opening Facebook account. And I am very certain that if someone happen to own real estate then it’s more complex because the valuation of asset is not based on listed prices, they need to be done professionally
For other countries, people simply have to pay tax 40% so they most likely don’t indulge in US ETFs in first place
Would be interesting to have somebody sharing the experience with a Swiss Broker (SQ, etc.) in a similar situation holding US ISIN ETF’s or US Shares.
The approach from xerox5003 buying in the US and transferring to CH has also crossed my mind to save on ransaction costs (Stempelsteuer, SIX Steuer, Trading Costs, etc.) but it’s a pretty big hassle imo.
I am planning the approach to buy SPDR ACWI on IB & Transfer to SWQ occasionally.
But I think IBKR itself is not an issue in this scenario. The issue is the ETF itself
This must be common.
Imagine how many people leave an investment portfolio with direct holdings of US stock (above 60k).
I cannot imagine it’s always a hassle like the above mentioned story with unvested stock.
I am not sure about that. The ETF issues does not have to report you, if you die.
Let me give another example: if you die in Switzerland, your account will be blocked as well and the heirs have to start the document nightmare.
I am not sure how the situation looks like for a foreigner who dies and has a CH bank account - but I can imagine, that the Swiss tax bureau will check the situation as well - accordingly to the IRS.
Edit: Saying, having US ETFs at a CH Broker is probably the best solution since they are probably not obliged to report you to the IRS in case of your death.
There are people who bought e.g. Apple stocks years ago (with a Swiss bank account) and their children are now buying real estate in Switzerland - imagine the income tax for the US!
The post hint at it, they mentioned that they voluntarily included the US shares held at the swiss brokers (it wasn’t automatically blocked or anything).
BTW it confirms what I thought, if you work for a big US tech company, UCITS vs US ETFs is irrelevant since the auto vesting at death of your RSUs will make you above the threshold.
That said the tax issue for those is something I didn’t think of. Looks like they’re currently paying a 5% penalty on that (it’s weird, they didn’t have enough assets on the swiss side to cover it? Not even with the pillar release?) So make sure you have enough to cover that income tax in some accessible liquid assets (likely at the top marginal tax rate).
Ouch… As I do not want my spouse or children to face such a scenario, I got rid of all US ETFs some time ago. I’m aware of the higher TER and WHT, but peace of mind comes at a price.
Sorry in german , but if i read between the lines in the article correctly: nobody files to the IRS and they dont care…
I’ve had “the pleasure”. I described the experience with a big Swiss bank further up in this thread.
So, in summary , the bank just covers their ass by informing you of these US rules, and then transfers the US shares to wherever you tell them.
There is a follow up comment (at same blog) detailing the amount involved (1M) & various forms that had to be filled plus some other challenges described
I am starting to feel that conventional wisdom prevalent in CH to not use US ETFs (not talking about this group or Reddit users) might not be ill informed but well informed.
This whole setup can get messy especially in moment when you need to focus on other things