Trading is of course cheaper for US-funds, but this is arguably not the main point. Vanguard US funds have a considerably lower TER. Your selection is also better (probably not relevant for you).
You should just avoid dropping dead (holding them as a Swiss, tax implications).
This question has been covered several times on this forum. I refer you to my post:
@Bojack Thanks for confirming the advantages, I apologize, I realize most of my questions now have been answered already. i was surfing through some old topics and was astonished to find so much information and valuable discussions hidden away under broad subject lines
@cray You are referring to the estate tax. This is an aspect I am still pondering on. 2 years ago the limit was 60’000 and everyone was avoiding US-domiciled ETFs, now its somethink like 5Mio, just recently changed to ~11Mio.
I dont like these quick changes, what are the chances its back to 60’000 when the next US president comes along? Does anyone have any insghts here?
What are you talking about? I thought the treaty between US and Switzerland is in effect since 1952.
And the limit was increased from 5 to 11 million not as a change in the treaty. It applies to everyone, also the US citizens.
I am not talking about the treaty per se. I am talking about the specific amounts. within a very short span we went from 60k->5Mio->11Mio
I remember when MP made his blog post about his portfolio he mentioned he will think about switching from VT to something non-us-based before he hits 60k. Around that time alot of comments appeared stating that they rather not use US-domiciled funds because of this low limit.
I am wondering how easy these limits get changed, I am wondering if it will ever be reduced to the likes of 60k
60k is and always has been the treaty exemption limit. There is talk about renegotiating it, but nobody seems to be in a hurry.
The other figures are the domestic U.S. limit that can be invoked. That limit is often changed (or the estate tax even abolished) by different administrations. This does not touch the 60k treaty limit.
Edit: Just keep on living. If the situation is too much for your nerves, it could be that DeGiro or CT are maybe better for you.
Edit2: The tax consequences are ugly though.
https://www.nzz.ch/finanzen/bitte-keine-us-aktien-vom-erbonkel-1.18379127
Well maybe I’m not long enough in the early retirement business, but I haven’t yet heard that the exemption is valid since only two years. As far as I know, the treaty I mentioned lets the Swiss get treated as US citizens, and it dates back to 1952.
I don’t know what you’re talking about. 60’000 is the exemption for non-resident aliens WITHOUT a treaty. Like, if I lived in Poland and would die, there would be a 40% estate tax on my US domiciled stock above 60’000.
Exactly. Art. III. That’s the Swiss one.
Gotcha, the 60’000 limit was never touched.
So in my opinion IB has two negatives, which still keep me from using it:
I calculated, that CT will cost me 0.5% more of my wealth compared with IB… is this worth it, what do you think?
What’s the problem if - as said - Switzerland ‘has’ the treaty ?
No man (woman?). This article is about you being able to write off the whole 5 million, like the people in USA can. 60’000 is the default for countries without a treaty.
Dont the things mentioned in cray’s article still apply though?
The “cray’s article” is the treaty from 1951. It applies, and it says that “if you are domiciled in Switzerland at the time of death, you shall be treated as if you were domiciled in the US”. The estate tax exemption has been going up for years, and you can see the history on the wiki page I linked.
Is there a risk they will abolish this exemption? Sure. But then you should close all your positions in USA and buy the Irish ETFs. Sure, you might as well stick with the Irish ones from the start, but as you said, you get 0.5% taken away every year. Over 30 years that’s 14% difference on your portfolio.
They are held in broker’s name (but segregated) in both cases, you’re not a big enough of a fish to deal with central securities depositories (like SIX, DTCC) directly are you. In US you have SIPC guarantees on top of that. In UK/CH nothing.
Is it clear with IB what kind of assets are under SIPC and which ones are not? You mentioned somewhere that assets managed by the IB US get protection, but assests managed by IB UK dont.
Another thing I am scared about is, somewhere in a post somebody found IB’s “emergency fund”, basically the amount they have to cover ALL clients assets, if they had to and it was a ridicoulus low amount…
Well in Switzerland my shares are held in my name, is this not enough of a gurantee?
If a broker goes bust and misplaces my shares in my name, arent there legal consequences?
The broker’s name is on the books at CSD, not yours, both in Switzerland and abroad
If you want your name there, you’ll need to deal with CSD directly which probably means you’ll need to buy yourself a small bank for a start.
An alternative existing in US is DRS system, where you can opt to transfer shares from broker to the company directly whose stock you bought, and then company’s name will be on the CSD books. It goes bankrupt, well, its stock’s a zero anyway.
Read up on MF Global bankruptcy as a case study
Well, good question. I googled a bit and here it is:
It’s mentioned in the first two points.
- Interactive Brokers (U.K.) Ltd. (“IB UK”) is authorised in the United Kingdom by the Financial Conduct Authority (“FCA”). This Agreement (“Agreement”) governs the relationship between Client (You) and IB UK for trading certain products carried by IB UK, including certain index options, futures and futures options and Over-the-Counter (“OTC”) Products such as Contracts for Differences (“CFDs”), Foreign Currencies, and/or Foreign Currency CFDs (“Forex”) and Precious Metals (collectively “Covered Products”).
- This Agreement does not cover trading in stocks or shares, bonds, mutual funds, or any product carried in accounts held at IB UK’s U.S. affiliate Interactive Brokers LLC (“IB LLC”)
So cash and metal in IB UK, stocks and bonds in IB LLC.
Interesting stuff thanks hedgehog!
I was refering to this from esisuisse
That gave me the impression my assets would be safe no matter what. What is your source for the brokers name at CSD?
@Bojack Thanks for providing that. I guess now there is nothing keeping me from using IB, I just have to decide on a portfolio now
I’m also about to buy VWRL with IB and my only concern about choosing CHF is that IB charges you negative interests for holding cash in CHF and VWRL alas is a distributing ETF; so I should check the distributing days and immediately withdraw or invest the CHF dividends.
I was wandering if the negative interests I could pay if I forgot the dividend day is more than the conversion rates USD>CHF…
Last but not least, maybe with IB you have different costs if you buy it on the SIX (CHF version) or on the LSE (USD version), still have to check this.
The negative interest over one day is probably negligible but anyway VWRL distributes in USD.