Investment Strategies / Mechanical Investing
No. of Recommendations: 12
Like so many here, I've been severely overweighted BRK for 26 years now. At some point, any advantage of holding BRK over an equal-weighted index ETF (QQQE, particularly, RSP in second place) will be very small if at all. If the markets weren't as richly valued while BRK still is below intrinsic value, I'd be switching over a sizable percentage (never all, until completely convinced the BRK machine isn't engineered to succeed better in down markets). Yet, I can't quite do it. I did put a limit order in on a starter position in QQQE that was hit last year and is now up over 20% since. But I'm still some 80%+ in BRK.
I also hold positions in GOOGL, MKL, Fairfax, KMX, NOBL (ETF), and a single share of MMM (3M) that even with steady dividends and fractional purchases is still down 47.37% in the over 6 years that I've held it. (Man, does anyone own this in any quantity? Be sure you only buy it when it's super low!) and I have a limit order open for COST if it should fall back a little ways.
I'm an admitted lazy moron when it comes to this. I read about WEB in 1996 and found the AOL board soon after and by 1997 felt comfortable enough to say why not? Haven't found any other investing philosophy that makes as much sense to lay people. Or any other pro-investor who has provided returns as rewarding to common people like me. Jim Simons, tear down that wall!
I'm grateful for any sound advice. Thanks in advance.
SD
No. of Recommendations: 1
I've owned some Berkshire since '98. Slowly bought more as funds came in and prices seemed good. I think I've done just fine. But now, like you and others here, I've got a (relatively) large position. I increased it a lot during the COVID crash. I've been thinking about diworsifying a bit. Did sell some last March, and what I bought has done a little better, not much.
There's Jim's tripod of Berkshire, QQQE and RSP. Likely do just fine.
I don't want all our money in the US, and not convinced equal weight is the way. I guess I still believe in the valuation fairytale somewhat.
No. of Recommendations: 1
I don't want all our money in the US
Btw if being a nonresident one should only have all money in the US if being fully aware of the US 40% inheritance tax for US stocks, real estate and tangible personal property (applies even to the spouse).
No. of Recommendations: 0
No. of Recommendations: 3
if being a nonresident one should only have all money in the US if being fully aware of the US 40% inheritance tax for US stocks, real estate and tangible personal property (applies even to the spouse).
I am curious to know what this means - would you mind rephrasing it? I don't understand the 'if... if' structure, nor even what the main verb is!
danke schön, DTB
No. of Recommendations: 0
"All I want to know is where I'm going to die So I'll never go there"..... and make sure you liquidate before you do.
I think Jim discussed this on the old boards....
No. of Recommendations: 3
I'm at 50% Berkshire, 50% indexes (SPY mostly and some RSP)
The hard truth is that since 2002-ish, Berkshire is basically in-line with the SPX on a total return basis, obviously in a taxable account you've saved taxes on the dividends along the way. While I understand and feel VERY comfortable owning Berkshire in such a large quantity, likely going forward 20 years performance will be in line the the index.
What I have been doing for almost a year is selling off 3.2% annualized (.8%) each quarter within IRA accounts, and taking the proceeds and adding to SPY or RSP whichever has done the worst recently. Even doing this very modest amount of selling likely won't reduce the position.
As much as I understand how Berkshire operates now and trust management, I think when Buffett is no longer with us there will be some trying moments when the inevitable stumble happens to Abel and the new management team. This is why I am selling off the amount that I am. I know my psychology.
No. of Recommendations: 7
Sorry for my English. Some years in school, some living in New Zealand = not enough apparently. Maybe I should write in German and leave the rest to Mr. Google's translator. Ok, I try again in programmer's language instead as my mastery of that might be better:
IF you are a US non-resident THEN
.....Your inheritance in form of either US stocks OR US real estate OR personal tangible property in the US is subject to 40% inheritance tax. This even applies if you leave all to your spouse.
.....IF you are fully aware of that THEN
..........You might nevertheless decide to have all your money in the US
.....ELSE
..........You should not do so but first research this tax issue and talk with your spouse etc. as it can be highly dramatic for your heirs
.....END IF
END IF 😉
No. of Recommendations: 1
END IF 😉
Ok, gotcha. I appreciate the information, although I have my doubts about whether it is true. I have always assumed that a non-US resident with US shares in a Canadian/European/Japanese/Australian etc. account would have no tax to pay in the US, perhaps by virtue of a tax treaty, but if I'm wrong, I'd better think about this. Obviously, if you have a predictable death, you could just sell your assets before you kicked the bucket, but an unpredictable death is also a possibility of course. I'd better look into this, and vielen Dank für das Umschreiben!
dtb
No. of Recommendations: 6
No. of Recommendations: 0
dtb, sorry for the - hopefully not too bad - joke with the "programmers language". I just couldn't resist. Here is info about it directly from the IRS:
https://www.irs.gov/individuals/international-taxp...https://www.irs.gov/businesses/small-businesses-se...As the first link says:
Estate tax treaties between the U.S. and other countries often provide more favorable tax treatment to nonresidents by limiting the type of asset considered situated in the U.S. and subject to U.S. estate taxation. But that of course depends on the individual's country of residence. New Zealand for example has no inheritance tax and because of that no double taxation treaty with the US covering such. Therefore if one partner of a New Zealand couple who has all of their assets in BRK dies their whole assets, all of their BRK stock, is subject to the full 40% US inheritance tax instead of the New Zealand 0% and the surviving partner gets just 60% of what they owned together.
There are ways around that. If you know you'll die as Blackswanny says liquidate everything before and transfer it - in this example - to New Zealand.
Another way is this tip which a fellow board member once gave me: As this law applies to legal persons only one can get around it by setting up a structure where not a person but a different entity, a trust or so, owns the US assets, the BRK shares or whatever. When the person dies it does not constitute an inheritance case because the owner is the trust, and that trust did not die.
No. of Recommendations: 1
Another way is this tip which a fellow board member once gave me: As this law applies to legal persons only one can get around it by setting up a structure where not a person but a different entity, a trust or so, owns the US assets, the BRK shares or whatever. When the person dies it does not constitute an inheritance case because the owner is the trust, and that trust did not die.Good point - many of my US shares are held in a corporate account, and that would protect me that way.
There is also a credit called 'Unified Credit' which allows for substantial exemption if one's assets are gifted (perhaps including imparted by will?) to another person, for instance, to one's spouse :
The unified credit allows a U.S. citizen to gift a certain amount of their assets to other parties without having to pay gift or estate taxes. Article XXIX B of the tax treaty allows a Canadian resident to claim a pro rata (proportionate) share of the U.S. unified credit amount against any U.S. estate taxes payable. For 2023, a Canadian resident's estate can reduce the U.S. estate tax liability by claiming the unified tax credit equal to the greater of:
The following is a calculation to illustrate the unified credit. For 2018, a Canadian resident estate can reduce its United States estate tax liability by claiming the unifed tax credit which is equal to the greater of: A) $13,000 or B) $4,425,800 multiplied by the ratio of your taxable United States estate value to your worldwide estate value.
Marital credit
The marital credit is an additional credit under the Canada-U.S. tax treaty and is available when a surviving spouse inherits U.S. property on death. The marital credit is equal to the lesser of the unified credit and the amount of U.S. estate tax owing.https://www.manulifeim.com/retail/ca/en/viewpoints...So if half a Canadian's assets were in US shares, you would have your first $2.2m worth of shares sheltered from this tax, if I understand it correctly.
No. of Recommendations: 0
So as a UK resident investing in individual US shares as a named individual through say interactive brokers and having filled out the W8BEN
https://www.optimiseaccountants.co.uk/americans-us...I'm liable for this 40% estate tax or not?
Always read the small print!?
No. of Recommendations: 23
So as a UK resident investing in individual US shares as a named individual through say interactive brokers and having filled out the W8BEN https://www.optimiseaccountants.co.uk/americans-us...
I'm liable for this 40% estate tax or not? Here is what I learned from my research on this. Bear in mind I may have been misinformed or out of date on a point or two.
You are liable.
The W8BEN doesn't make any difference. That's mainly to let the broker know what dividend withholding tax applies based on the tax treaty (if any) between the US and your country of domicile.
The tax treaty in question may also have something to say about double taxation on estates (testamentary trusts), but the general rule for double taxation treaties is that they merely prevent you from having to pay the tax twice.
Your total due (the sum of the amounts going to the two jurisdictions) is generally the higher of the two amounts requested by the two countries. (with exceptions)
i.e., you generally get a full tax credit in one place equal to the tax you already paid to the other place.
The general rule is that US inheritance tax is definitely due for any deceased natural person globally who owned US assets at the time of death.
(there is a fancy definition of what constitutes a US asset, but it generally includes the US-listed stocks of US-domiciled firms, including Berkshire, and US real estate)
You may further wish to note that some brokers, *if informed*, will require the estate of a non-US person to complete US probate before releasing funds.
e.g., Schwab, which is why I closed my account there.
It is illegal for the broker to require this (which they more or less agreed with), but they do it anyway.
But...
It should probably be noted that, though this tax is generally due upon the death of a non-US-Person holding US shares, almost nobody pays it.
The largest entirely legal loophole is to hold the shares through a holding company. A company doesn't die, so the decision has been that no tax is due.
I had a company in the British Virgin Islands for a long time, for this very reason.
The usual route is to have the holding company in an untaxed jurisdiction, an international business company (IBC) in the jargon.
This does not get you magically out of any other taxes, as some shrill reporters dumping on "tax havens" might suggest.
Rather, the income taxes paid on profits is then a function of the domicile of the shareholder, not the domicile of the company itself...they aren't avoided, although depending where you live they may perhaps be delayed.
The main disadvantages are the cost of running the company (maybe $750-$2000/year), having to pay more for your data subscriptions because it's a corporate brokerage account,
the incremental paperwork hassle because of the first two things, and the much bigger hassle that some IBC jurisdictions now require a "real local activity" to let you have a tax free company.
There are some excellent super simple loopholes for the latter though, if anyone is interested.
Also, dividend tax may be higher.
However, perhaps more to the point, almost nobody outside the US actually pays the US estate tax even when it is due.
Look up how much is collected each year under this tax...the total is about the size of one really rich person's portfolio.
In essence, the US does not know when a non-US person dies. Therefore the US doesn't ask for the tax, and the individual doesn't take the initiative to offer it.
A typical situation: a married non-US couple has a joint brokerage account. One dies. The other simply withdraws the money without telling the broker that one holder died. Done.
Many non-US brokers don't care even if they did know.
This approach does not meet US law, but it's what people do.
I wouldn't feel good recommending this as your chosen course of action, but it wouldn't feel all that bad either.
If you are not American, the moral qualms of not paying the tax that the US deems due may be modest. Based on the stats, it seems most people feel that way.
In general, not paying a tax the US deems due may be against US law, but is probably not against the law where you live.
A lot of us do things every day that are, under the laws somewhere, unlawful. The invasion of Ukraine is a war, and the king of Thailand is self-enriching absentee.
Jim
No. of Recommendations: 1
some brokers, *if informed*, will require the estate of a non-US person to complete US probate before releasing funds. e.g., Schwab
Which ones do according to your knowledge not require that if informed?
(In some cases that's unavoidable to access the money, like when it's not a joint account and when passwords are not enough to transfer large sums; and even with a joint account at least Schwab years ago required signatures from me AND the other account holder to transfer a large sum; difficult if one of them is deceased :)
Btw Jim, thanks for the "natural person dies, trust/company does not" tip from years ago. I didn't mention your name as I was not sure whether that would be ok for you. So now I can tell the world openly: Naturally that 'fellow board member' was our super-helpful Jim.
No. of Recommendations: 0
wopger, it might concern you even as a German resident. It depends only on the amount. As Jim said double taxation treaties only avoid that you pay more than the tax which is the higher one of the 2 countries (there are exceptions; sometimes you actually do pay even more than the higher rate). They regulate which country has the right to tax what and to which amount. Their main purpose is to ensure the other country has to recognize this already paid tax --- to as the name says avoid double taxation.
It concerns Germans as the higher inheritance tax rate usually is on the US side. Their 40% rate is reached far before such a high rate applies in Germany to inheritances where you can inherit up to EUR 6,000,000 and still pay only 19% (Erbschaftssteuerklasse 1) respectively 30% (Klasse 2 und 3). Only much higher inheritances than that Germany taxes as high as the US --- and even that only if the heir is a distant or not a relative at all.
Result: If the double tax treaty Germany-USA does not limit the % the USA can charge (I had a quick look and didn't find such a limitation) a inheritance of for example $5,000,000 is taxed with around $2,000,000 in the US and those $2 Million are credited ("Anrechnung") against the FAR smaller inheritance tax you'd have to pay in Germany. Because of this tax credit you have to pay 0 in Germany - but you don't get back what you compared to Germany "overpaid" in form of the far higher US tax bill.
In other words: Regarding estate tax Germany usually is far cheaper than the US --- and that advantage lost if you have US assets.
No. of Recommendations: 7
some brokers, *if informed*, will require the estate of a non-US person to complete US probate before releasing funds. e.g., Schwab
...
Which ones do according to your knowledge not require that if informed?
No idea, sorry.
I suspect Interactive Brokers UK might fall in that category, but I don't have any information on that.
(their UK division handles non-US accounts for the majority of countries that don't have a local IB division)
So far as possible, our family plan is to avoid telling the broker if the funds withdrawal goes through OK, even if in theory it would be OK telling them.
The reason is that telling the broker can only make things more difficult, never easier. Why ask for trouble, if you're already having the worst week of your life?
Oddly enough, a bigger problem is our account in Monaco, which also holds investments.
The bank we use has extremely onerous terms, saying any joint account is immediately frozen then closed if one holder dies.
If you want to stay at the bank, the surviving spouse has to start a new application (a process of months) and open a brand new account.
Something to do with French law, I'm told. But this bank is also extremely officious. Something to do with having French headquarters, I guess : )
They do not recognize the concept of "joint tenants with right of survivorship" (JTWROS) which is our marital regime.
That is the phrase meaning that the survivor is co-owner of an asset before death of spouse and automatically sole owner after death of spouse without probate or process.
Depending on the jurisdiction, JTWROS might conceivably be another way for folks to avoid US estate tax, but that's just a wild guess of something worth investigating.
Presumably a prerequisite would be that both your broker and your jurisdiction of domicile sufficiently recognize the concept of JTWROS.
Or at least are willing to let it slide. Frequently inter-spouse inheritance tax is zero anyway, so many organizations simply don't care.
Jim
No. of Recommendations: 0
<<I don't want all our money in the US>>
Btw if being a nonresident one should only have all money in the US if being fully aware of the US 40% inheritance tax for US stocks, real estate and tangible personal property (applies even to the spouse).
That was an interesting discussion, learned some things. I have been in that situation, not anymore. Though I 'aint frum 'round here, I am a US resident now.
What I mean is I don't want all my investments centered on the USA. "Don't bet against the USA", says Buffett. Yes, well, I think it's prudent to have some of my families' assets spread around a bit. Hasn't worked very well so far, of course.
Regarding inheritance tax, I figure that foreign stock ETFs and such held in a US brokerage are just part of the US estate. Foreign property is a different matter. I need to look into that.
No. of Recommendations: 11
>> So as a UK resident investing in individual US shares as a named individual through say interactive brokers and having filled out the W8BEN
https://www.optimiseaccountants.co.uk/americans-us...
>> I'm liable for this 40% estate tax or not?
> You are liable.
Hello. I don't agree. I believe he is not liable (to US estate tax) except in rather extreme circumstances.
I'm not a lawyer or a tax consultant, and OP, THIS IS NOT TAX ADVICE OR LEGAL ADVICE.
But I've looked into this before for myself, and these are my findings:
1) Firstly, and as a very minor technicality, it's an estate tax, so liability is for the estate, not 'him'.
2) Residence is not the key issue. Citizenship and domicile are the key issues in US & UK estate taxes.
For example, a US citizen who is UK resident and has domicile somewhere else, may have a different set of concerns to a UK domicile UK resident UK citizen.
3)
https://uniset.ca/misc/us-uk1980.html#:~:text=The%....
This treaty determines estate taxation of UK domiciled individuals holding US domiciled assets.
4) Generally, for an ordinary UK citizen, this page written by a US CPA who leads an international tax department, summarises how things are:
"Individuals domiciled in the U.K. have significant advantages over residents of other countries due to the favorable provisions contained in the estate tax treaty between the U.S. and the U.K., which has been in effect since November 11, 1979. Article 8, Paragraph 5 of the treaty provides that the estate tax imposed in the U.S. on a domiciliary of the U.K. shall be limited to the estate tax that would have been imposed if the decedent had been domiciled in the U.S. immediately before his death. For decedents dying in 2022, this means that if the worldwide estate of the U.K. resident was valued at $12,060,000 or less at date of death, the U.S. estate tax would be zero, regardless of the value of the U.S. assets in relation to the value of the assets outside of the U.S. Even if no tax is due, the filing of a U.S. estate tax return is required if the value of the U.S. assets exceed $60,000 at date of death."
That paragraph corresponds with everything I have ever read on this topic re: UK domiciled individuals holding US domiciled assets.
In conclusion, and as I personally understand it (and again, this is NOT tax advice, this is NOT legal advice):
1. The estate of a UK domicile individual with under $60000 in US domicile assets (directly held!), has nothing to worry.
2. The estate of a UK domicile individual holding US domicile assets indirectly (e.g. via an Irish ETF), has nothing to worry about.
3. The estate of a UK domicile individual holding US domicile assets directly, worth over $60000, will have to file a US estate tax return, but can claim rights under the treaty reducing tax to zero.
4. The estate of a UK domicile individual holding US domicile assets directly, worth $12,060,000 or more, will have to pay US estate taxes as well as filing a US estate tax return.
I encourage the original poster, if they have very substantial savings directly held and which are domiciled in the USA, to seek professional advice from an international UK/US tax specialist to confirm their situation.
Hope this is useful / of interest to someone
lux
No. of Recommendations: 3
Additionally, see:
https://uk.andersen.com/us-estate-taxes-for-non-am...Quote,
"For example, a UK domiciled individual with shares in a US 'C' corporation would typically be exempt from US estate tax because of the treaty. The treaty does not provide an exemption for all US assets, so a UK domiciled individual with an interest in US real estate, a US 'S' corporation, partnership, or Limited Liability Company, may still be exposed to US estate taxes."
lux
No. of Recommendations: 0
I'm liable for this 40% estate tax or not?
The impression I have is that since the UK haxes the estate after death as well, the UK/US dual taxation treaty protects you from US inheritance taxa liabilities provided the size of the estate is under $12.5m ( which I believe is the level at which US estates start being liable).
No. of Recommendations: 1
In conclusion, and as I personally understand it (and again, this is NOT tax advice, this is NOT legal advice):
1. The estate of a UK domicile individual with under $60000 in US domicile assets (directly held!), has nothing to worry.
2. The estate of a UK domicile individual holding US domicile assets indirectly (e.g. via an Irish ETF), has nothing to worry about.
3. The estate of a UK domicile individual holding US domicile assets directly, worth over $60000, will have to file a US estate tax return, but can claim rights under the treaty reducing tax to zero.
4. The estate of a UK domicile individual holding US domicile assets directly, worth $12,060,000 or more, will have to pay US estate taxes as well as filing a US estate tax return.
Good info.
I will point out that the estate of a UK domicile individual will generally have to pay UK estate taxes at 40% for estates over the threshold (#325k individual, #650k couple). Got to pay for that great NHS somehow.
No. of Recommendations: 1
Here's a good synopsis.
1. The bottom line is the estate tax is paid by the estate, not the inheritor.
2. As of now, 2023, 12.92 million is exempt from estate taxes per individual. Once the deceased leaves an estate above that figure, the estate tax kicks in taking anywhere from 18% to 40%, depending on the excess amount over 12.92 mil. To keep this very simple, once the decedent's estate reaches approximately the 14th million, every dollar thereafter is paid at the 40% rate. Again, there is no obligation by an inheritor to pay a decedent's estate (death) tax. That is done before the disbursement of the inheritance.
3. You can leave anything under 12.92 mil to an heir without any estate tax levied. After that, you can structure a plan to leave the rest to charity. That is one of my options I'm considering with my BRK shares, with embedded gains, going forward.
https://www.usbank.com/wealth-management/financial...
No. of Recommendations: 0
Aha, so ok upto $12m. Thanks.
No. of Recommendations: 1
(their UK division handles non-US accounts for the majority of countries that don't have a local IB division)
Actually they moved all European accounts to Ireland after Brexit.
No. of Recommendations: 2
their UK division handles non-US accounts for the majority of countries that don't have a local IB division
...
Actually they moved all European accounts to Ireland after Brexit.
Not so.
My account contract remains with Interactive Brokers (U.K.) Ltd., Level 20 Heron Tower, 110 Bishopsgate, London.
IB Luxembourg wound down and spread the clients among different entities:
IB Ireland serves a subset of western European EU countries.
IB Central Europe Zrt (zártkörűen működő részvénytársaság, Hungary) handles most people in central Europe.
IB UK handles residents of various countries outside EU/EEA. UK and Switzerland are probably the biggest, but wee Monaco is another.
I can't find the data, but I think (?) IB UK still handles several non-European countries as well.
Of course, for practical purposes those are all just corporate "fronts" to the same back end.
Jim
No. of Recommendations: 0
Not so.
My account contract remains with Interactive Brokers (U.K.) Ltd., Level 20 Heron Tower, 110 Bishopsgate, London.
IB Luxembourg wound down and spread the clients among different entities:
IB Ireland serves a subset of western European EU countries.
IB Central Europe Zrt (zártkörűen működő részvénytársaság, Hungary) handles most people in central Europe.
IB UK handles residents of various countries outside EU/EEA. UK and Switzerland are probably the biggest, but wee Monaco is another.
I can't find the data, but I think (?) IB UK still handles several non-European countries as well.
Of course, for practical purposes those are all just corporate "fronts" to the same back end.
Thanks, I stand corrected.
No. of Recommendations: 24
...the estate tax is paid by the estate, not the inheritor.
Though true, it's one of the all time best examples of a distinction without a difference.
Your buddy tries to leave you 100.
Option 1: The government gets 40 from the estate, and you get the 60 leftovers.
Option 2: You get 100 and then the government immediately takes 40 from you, leaving you 60.
They both quack in a remarkably similar manner, so we can consider both of them ducks for practical (quacktical) purposes.
The main reason the distinction is emphasized is that heirs can't complain about estate taxes...technically (and only technically) they aren't the ones paying it.
Plus, option 1 seems less painful, so it's easier to keep the laws on the books.
As an aside, I think estate taxes are a fine idea, properly constructed, as I think dynastic wealth is not something to encourage.
Offhand, I can't think of any reason the great-great-great-grandchildren of some 19th century robber baron should be among the idle rich as a result.
I can see that almost everybody likes leaving money to their kids, meaning very high inheritance/gift/estate taxes are so hard to get consensus on. It's almost a genetic imperative.
So I'd support rules to tax first-generation bequests lightly but old[er] money bequests heavily.
e.g., Your low tax inheritance threshold would be limited to what you inherit, less what those benefactors inherited, adjusted for inflation.
Low tax on bequests by the nouveaux riches, and high tax on old money bequests. And, by extension, family trusts.
Jim
No. of Recommendations: 2
Quacktical!!!
💕
No. of Recommendations: 3
Apologies, I forgot to include the source/reference for the quote below - it is:
https://www.kbgrp.com/international-tax/united-sta...----
"Individuals domiciled in the U.K. have significant advantages over residents of other countries due to the favorable provisions contained in the estate tax treaty between the U.S. and the U.K., which has been in effect since November 11, 1979. Article 8, Paragraph 5 of the treaty provides that the estate tax imposed in the U.S. on a domiciliary of the U.K. shall be limited to the estate tax that would have been imposed if the decedent had been domiciled in the U.S. immediately before his death. For decedents dying in 2022, this means that if the worldwide estate of the U.K. resident was valued at $12,060,000 or less at date of death, the U.S. estate tax would be zero, regardless of the value of the U.S. assets in relation to the value of the assets outside of the U.S. Even if no tax is due, the filing of a U.S. estate tax return is required if the value of the U.S. assets exceed $60,000 at date of death."
No. of Recommendations: 7
3. The estate of a UK domicile individual holding US domicile assets directly, worth over $60000, will have to file a US estate tax return, but can claim rights under the treaty reducing tax to zero.
Though I don't argue with anything in your summary for UK individuals, it's worth noting that the treaty doesn't reduce the tax to zero, it mainly just changes which government gets the tax money : )
Such a person does appear exempt from US estate tax up to the high US-resident threshold, but the same assets still trigger the UK inheritance tax which is almost the same.
Basic rule 40% tax on everything over GBP 325k.
I am idly curious about what happens with UK non-dom owning US assets. e.g., does that treaty provision apply to them?
I suspect not, as the phrasing in that summary says "UK domiciliary".
By way of background, a UK non-dom is someone who is resident in the UK but not (in the specific UK legal meaning of the term) domiciled in the UK.
Few countries make that distinction, but it's a big one.
In effect, a non-dom may be living in the UK all year every year, but generally pays tax only in income brought into the UK, not on worldwide income, roughly till they have lived in the UK for 15+ individual years.
After 7-12 years a five-figure flat annual tax is also paid, but for the typical rich non-dom that's not a big deal.
A UK non-dom resident generally pays inheritance tax only on UK assets, which I guess (?) would not include shares of US stocks (especially if held at a non-UK broker).
But if the treaty doesn't apply because they are not technically UK domiciled, they'd be in the same boat as other non-US persons around the world, meaning the US would want full US estate tax on US assets.
i.e, generally 40% tax on all US assets above $60k.
Jim
No. of Recommendations: 1
> Basic rule 40% tax on everything over GBP 325k.
I believe excluding a house, up to 500k, passed to a partner.
So for many people, the IHT limit is closer to 500-800k, before they pay a penny of tax.
It's also worth noting that the issue of whether recipient or estate is taxed could be a big deal.
For example, if you live in the country X which taxes estates, and you have children who inherit but live in say Spain or France.
The estate and the recipient can be separately taxed without necessarily being able to offset the tax paid, since they're different people(/estates) being taxed.
No. of Recommendations: 1
The general rule is that US inheritance tax is definitely due for any deceased natural person globally who owned US assets at the time of death.
...
However, perhaps more to the point, almost nobody outside the US actually pays the US estate tax even when it is due.
Look up how much is collected each year under this tax...the total is about the size of one really rich person's portfolio.
In essence, the US does not know when a non-US person dies. Therefore the US doesn't ask for the tax, and the individual doesn't take the initiative to offer it.
A typical situation: a married non-US couple has a joint brokerage account. One dies. The other simply withdraws the money without telling the broker that one holder died. Done.
Many non-US brokers don't care even if they did know.
This approach does not meet US law, but it's what people do.
Wow, that's amazing. Just. Amazing. (And the conclusion is reassuringly practical, although I do know people who like to stick to "the letter of the law", even when it's not in their interests).
Thanks again, for all you do here. Sometimes they're real gems that I would never have imagined myself, and your explanation is so clear and "to the point". It has always amazed me that the US claims the right to tax peoples' incomes even when they've been away from the US for years, but now I know that they also claim to tax me / my heirs just because I was kind enough to invest in their country. Wow.
SA
