Estate tax treaty US-Switzerland [2024]

Taxes
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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

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Edit: @Abs_max I’ve started thinking that conventional wisdom is
well
conventional for a reason, and that reason is
it works for most, most of the time.

I am not quite about to forget and throw to waste all the countless hours I’ve spend reading the theorycraft and all the “past performance” and “diversification is the only free lunch” warnings and yolo all in QQQ, but do feel some bit of envy towards anyone looking at VOO/QQQ the last
13 years and going “HEY LOOK LINE GO UP OLOL MKAY”.

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No more WEBG because of the FX fees at SQ?

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I typically use WEBG at IBKR
For SQ , Indeed due to fx , ACWI is more convenient

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Actually there is a follow up on that same post that says that he had US stocks at Postfinance and they get transferred with 0 issues.

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To simplify, to avoid the potential American inheritance tax, you just need not to own more than 60,000 USD of American (US) stocks, real estate in the US and so on 


Most likely we all invest in ETFs and in the S&P 500 index.

An ETF domiciled in the United States, ISIN USxxxxxx falls within the 60,000 USD.

ETFs not domiciled in the United States but that invest in the S&P 500 index or with American stocks. For example VWRL with ISIN IE00B3RBWM25 or IE00B88DZ566 or LUxxxxx or CH xxxxx fall within the 60,000 USD.
In my opinion, this is the most important question to ask? Or am I wrong?
Those who invest in Tesla, Nvidia and American stocks or American funds are aware that the IRS could “call” them

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The US estate tax affects neither of those because of the stocks they hold. It only affects US situs holdings of persons that died (i.e. humans).

The US fund is US situs and there will be US estate tax.
The IE, LU, CH funds are not US situs and there won’t be US estate tax

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Yes, you are wrong to simplify.
Read the whole thread(s).
Most of the time, here in CH that amount is wrong (for now).

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Dear ma0,
with this statement: “Most of the time, here in CH that amount is wrong (for now)” what do you mean ?

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:slight_smile:
[I know how you feel, you’d do anything but search on the forum lol. ]

  1. The 60k limit is I believe general for all countries.
  2. For Switzerland they signed an agreement to put it to 11M
  3. For now: They might change that agreement. I doubt but who knows. Just don’t die with this president.
  4. Apparently (if you read above) even that limit (11M) can be annoying for the amount of paperwork involved if you use an US company.
  5. The 11M (or was it 15?) Is calculated in a special way. I don’t even remember because I am (and will probably always be) far away from that amount.
  6. I might lie. Just read the whole post.
    Edit: “Most of the time” it’s mainly because I have no idea what happens if a foreigner dies here but his/her family is elsewhere.
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Have to say, I found this paper very good about the estate tax topic :

Also the actuals threshold for IRS :

For 2025 == $13,990,000

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Including the calculation method, thank you!

So: the higher the ratio of US assets to total assets (ideally 100%) and until USD 14 Mio. (for now) the safer you are.

Or you can just transfer regularly to a Swiss broker/bank and forget about the estate topic.
If one is just buying through IBRK and holding only through a Swiss broker, costs probably are justified, compared with the (potential) hassle in future.

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Your reasoning isn’t entirely correct.

  1. US-Switzerland tax treaty
    The tax treaty currently provides some protection through a proportional exemption, but this isn’t a guarantee. If US tax laws change - like lowering exemptions or removing treaty benefits - your heirs could face significant tax exposure on your US investments.

  2. Transferring to a Swiss broker
    Moving a US-domiciled ETF (like VT) to a Swiss broker doesn’t change its status as a taxable US asset. To avoid the estate tax altogether, you’d need to invest in non-US domiciled ETFs which are outside the scope of the US Estate Tax.

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I think OP’s point is that unlike US brokers, Swiss brokers won’t block the release of funds. Your heirs can decide how much they care about the IRS (who won’t even know about the situation) but they will be able to access it.

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If you want total peace of mind, you are right that one need to reduce all US situ assets to less than 60K . This is what most Swiss asset managers, robo advisors do.

However if you are ok with partial peace of mind , using Swiss broker might reduce the headache but won’t eliminate it completely.

Investor should decide - what’s more important

~0.1% return per annum or hassle free life for heirs.

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I agree with Abs_Max. The prudent risk management choice is to limit your US situs holdings to less than 60000 $ or to even forego that investment avenue completely. I’ve also decided a while ago that I will limit my US situs holdings to the $60000 limit.

But of course, risk preferences are different for every investor. What’s important is a concious decision and not to just look at the - undoubtedly - many benefits of US ETFs.

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Isn’t that the paper I posted a while ago?
Edit: Yes! Karma leecher :smiley: It’s the 3rd post on this very own thread.

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Just off the phone with IB (CH based in Zug). I asked them specifically what my wife would need to do in case of my death. Specifically for a CH resident (non US citizen)

US tax NOT involved

email estateprocessing@interactivebrokers.com
with 3 items
1 copy of ID / passport
2 Sterbeurkunde (certificate of death)
3 Erbschein oder Eröffnungsprotokoll (inheritance certificate?)

NO certificates or anything like that needed from US (tax) authorities.

Heirs can decide if they want to liquidate and cash out or if they open an IB account to transfer the assets.

I told them that there is a lot of uncertainty out there in the web. Told them to read this forum. They will check it out.

EDIT: above documents do NOT need to be translated. They speak German.

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It seems my memory is playing tricks on me
 At first glance, I’m not the only one: the people who reacted to your post are almost the same as those who reacted to mine. Are we losing our minds? Who are you? What were we talking about again? Oh yes, I remember now - my pizza order, no pineapple. Thanks! :slight_smile:

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Thank you for the information, that’s good to know! I’m glad to hear they speak German - it’s always useful. But are they also able to read/speak French and Italian? (Not to mention if they have to read a death certificate in Romansh
)

This could make a great article for @_MP, or at the very least a useful (and even necessary, I’d say) clarification, given how much uncertainty and concern there is at the moment.

If what you mentioned above is sufficient, then it would be the same documents and procedure as for any bank in Switzerland: prove the death, prove the identity of the person making the request, and identify the heirs. That’s it!

That said, an official written clarification would be much better. I hope IB CH takes the initiative to take a look at this post, address this and provides more detailed information.

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