Are you prepared for an (IHT) liability by holding Apple or Tesla stock?
What is an Inheritance Tax (IHT)?
Inheritance tax is the value of the inherited assets paid from the estate before being passed to your beneficiaries.
Many investors assume that the U.S. estate tax only applies to those domiciled or resident in the U.S. or on investments physically located in the United States.?
If you hold U.S. equities, stocks you should read on
One tax that applies irrespective of where you live is Estate Tax (IHT). If an investment in shares or other U.S. situs assets is not structured correctly and exceeds $60,000, the U.S. Tax Man (IRS) can take up to 40% of the market value at your estate's death.
For example, if you have a stockbroking account in London, through which you purchased Apple shares, as example, Apple was incorporated in the U.S., this means that those shares would qualify as a U.S. asset in the event of your death.
Let's take other significant players if you hold stock on Facebook, Amazon, or Tesla. These companies were all incorporated in the U.S. Therefore, if not appropriately structured, they will qualify as U.S. situs assets and be liable for estate tax charges (IHT).
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Non-US domiciliary is subject to U.S. estate and gift taxation for certain U.S. assets at a maximum tax rate of 40% but with an exemption of $60,000, which is only available for transfers at death.
Many U.S. Non-citizens are unaware of the estate tax exposure of 40% on all investments in U.S. securities. As a result, the surviving family is often surprised by the application of the U.S. Estate Tax to the family's investment in U.S. securities (and other deemed US-situs assets, e.g., U.S. real estate), which results in a high administrative and U.S. tax burden for the heirs.
Shares held directly can be transferred to a tax wrapper outside and are not liable to U.S. estate tax. For example, if the tax wrapper is situs in the other jurisdiction. No tax implications exist for a non-US person transferring the shares on death.
Non-US citizens who own property in the U.S., including U.S. securities, need to understand the actual U.S. estate rules potential implications, as residency and domicile choices can have significant tax implications.
Please consult with a tax attorney to help determine the tax effects on any potential impact on your circumstances.