You may love US stocks but what happens to them when you die?

A little-known US tax can claim up to 40% of your US portfolio when you die. Here’s what non-US investors need to know.

Dear Investors,
Benjamin Franklin once wrote: “In this world nothing can be said to be certain, except death and taxes.” For non-US investors with US stocks, the two are more closely connected than most realise.

Low-cost platforms have made it easier than ever to buy US shares and ETFs directly. With US equities hitting new highs in a row in May, many investors now hold more US exposure than they originally planned, often without considering what happens to those assets at death.

If you hold Apple, Nvidia, Tesla, or an S&P 500 ETF, you are almost certainly exposed to a tax very few non-US investors have planned for. It doesn’t appear on any brokerage statement. There’s no annual bill, no withholding notice, no warning. It only triggers the moment you pass away.

It’s called the US estate tax and for non-US residents, the numbers are stark.

US$60K¹
Only the first US$60,000 of
your US portfolio is protected from tax

40%
Maximum estate tax rate on
US-situs assets above the threshold

US$376K
Potential tax bill on a US$1M
portfolio – leaving only US$624K for your family

“The estate tax exemption for US citizens is US$15 million². For a non-US resident, it is US$60,000. That gap is 250 times.”

The US estate tax applies to what the IRS calls “US situs” assets³ – property legally situated in the United States. For non-US investors, this includes shares in US-incorporated companies (Apple, Microsoft, Amazon), US real estate, certain US mutual funds, and critically, US-listed ETFs even if the ETF’s underlying holdings are entirely outside the US.

If you hold Vanguard’s VWO or any other US-domiciled ETF to access emerging markets, those holdings are still considered US situs property.

USING A NON-US BROKER DOES NOT SOLVE THE PROBLEM
A common assumption is that buying US stocks through a brokerage account outside the US places those assets outside the US estate tax net. This is not the case.

For US estate tax purposes, what matters is the nature and legal domicile of the asset, not where the brokerage account is held.⁴ A non-US investor who buys Apple shares or a US-domiciled ETF like VOO through Tiger Brokers, Moomoo, or DBS Vickers is still holding US-situated assets in the eyes of the IRS.⁵

The platform you invest through does not change your exposure. What matters is what you own, not where you bought it.

WHY INVESTORS IN NON-TREATY COUNTRIES ARE EXPOSED
The US maintains estate tax treaties with just 17 countries: Australia, Austria, Canada, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Netherlands, Norway, Republic of South Africa, Sweden, Switzerland, and the United Kingdom.⁶

Investors who are resident in countries without such a treaty generally do not benefit from pro-rata relief, a higher exemption threshold or other negotiated concessions. Instead, the default US$60,000 estate tax exemption for non-US persons may apply.

The administrative burden your family will face
The tax liability doesn’t disappear if ignored. Under US law, your executor must file IRS Form 706-NA within nine months of your death. Until the form is filed and any tax settled, US custodians and brokers may legally refuse to release or transfer your assets to your beneficiaries.

Processing a Form 706-NA typically requires legal assistance, certified valuations, and official documentation from the relevant authorities in the investor’s home jurisdiction, often at a time when your family is least equipped to deal with it. The IRS’s own guidance notes that transfer certificate processing can take 12-18 months from receipt of all documentation.

Strategies worth considering
The good news is that with the right structure in place, this exposure is manageable.

HOW AAM CLIENTS INVEST IN US MARKETS WITHOUT THE ESTATE TAX EXPOSURE
As a MAS-regulated asset manager, AAM manages Singapore-domiciled funds that invest in US and global equities. When you invest through an AAM fund, you hold units in a Singapore entity – not US securities directly.

Under IRS Treasury Regulation 20.2104-1, shares issued by a non-US corporation are classified as foreign situs property – outside the US estate tax net. As one US wealth management puts it: “upon your death, you do not own US stocks (a US situs asset); you own shares in a foreign company (a non-US situs asset), which is not subject to US estate tax”.⁷

In plain terms: AAM’s fund structure allows you to access the returns of US equities while eliminating the US estate tax exposure that comes with direct ownership.

Other common approaches include:

Invest through a Singapore-domiciled fund manager or hold US securities through another non-US corporate structure such as a BVI company or Singapore Variable Capital Company (VCC).
Keep direct US stock holdings below US$60,000 and obtain broader US exposure through non-US-domiciled fund structures.⁸
For new contributions, switch to Ireland-domiciled UCITS equivalents (e.g. London or Dublin-listed funds) which offer the same market exposure without triggering US estate tax.⁹
Purchase a life insurance policy sized to cover the anticipated estate tax liability – ensuring your family is not forced to liquidate investments under pressure to settle an IRS bill.¹⁰

None of these strategies is one-size-fits-all. The right approach depends on your portfolio size, concentration, residency structure, and long-term estate planning goals, which is exactly why this conversation is worth having now, not later.

If you want to talk to us about investing, your portfolio or any other matters – you are welcome to contact us, email us, call us or visit us at the office. We look forward to hearing from you.

______________________________________________

This newsletter is for informational purposes only and does not constitute legal, tax, or financial advice. Tax rules are subject to change. Investors should consult a qualified cross-border tax advisor before making any structural changes to their portfolio.

References

Categories: News

You may love US stocks but what happens to them when you die?

References

Aggregate Asset Management

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