Estate Planning for Non-US Residents with US Assets: Reducing the Risk of Unexpected Tax Exposure

After 30-year international career, a 56-year-old British expat working for a US-incorporated oil and gas company was preparing for retirement with USD 900,000 in company stock, held across several jurisdictions. During our review of his estate plan, we discovered something alarming: his family could face an estimated USD 336,000 in potential US estate taxes on his US-situs assets, alongside probate

How would his family even know where to start?

It’s a situation far more common than most expats realise.

In a recent webinar we hosted, Certified Financial Planner, Luke White from Melbourne Capital Group and Neil Chadwick, Chief Sales Officer from IFGL, broke down how the US Estate tax works, who is affected, and the practical steps you can take to protect your wealth.  

Table of Contents

1. Mitigating Unexpected Tax Bills

2. Why US Estate Tax Matters for Non-Residents  

3. How to Mitigate US Estate Tax  

4. Common Us Estate Tax Questions Answered

Why US Estate Tax Matters for Non-US Residents

For many expats, investing in US stocks feels straightforward. After all, US equities offer scale, stability, and global blue-chip brands like Apple, Microsoft, and Tesla. However, what most people don't realise is that holding US assets as a non-US citizen exposes you to unique and often overlooked risks, one of the most significant is the US Estate Tax.

Unlike most countries, the United States imposes estate tax not only on its citizens, but also on non-US persons who hold US-situs assets. This includes:

• Tangible property located in the US

• US-domiciled financial assets (stocks, bonds, and ETFs)

• Business interests in US companies

• Certain forms of US debt.

US Estate Tax Implications

A key issue is the dramatic difference in estate tax exemptions.

• US citizens (2025 exemption): USD 13,900,000

• Non-US persons: USD 60,000

Anything above USD 60,000 may be taxed at rates from 18% to 40%.

This can expose families to:

• Significant tax liabilities

• Lengthy US probate processes that can take years to resolve

• Complex cross-border paperwork and filing requirements

• Significant delays in beneficiaries receiving their inheritance  

• Limited treaty protection. Many Asian countries do not have estate tax treaties with the US

IMPORTANT: The Location of Your Brokerage Does Not Determine Tax Status

US estate tax applies based on the domicile of the asset, NOT the location of your brokerage account. This applies regardless of whether your shares are held through DBS Singapore, HSBC Hong Kong, Interactive Brokers UK, or any other international custodian.  

Important distinction: A company listed on the NYSE is not automatically US-situs.

The key question is: Is the company incorporated under US law?

Are ETFs and Funds Affected by the US Estate Tax?

Domicile is the determining factor:

• US-domiciled ETFs: Subject to US estate tax

• Irish-domiciled ETFs (ISIN starting with IE): Generally, NOT subject to US estate tax

• Luxembourg-domiciled ETFs (ISIN starting with LU): Generally, NOT subject to US estate tax

• UK funds holding US stocks: Depends on the fund's domicile, not the currency

Always consult with your financial advisor to confirm where the fund itself is domiciled.

How to Mitigate US Estate Tax: Insurance-Based Investment Wrappers

One commonly used method for reducing exposure to the US estate tax is by shifting ownership of the assets into an investment-linked insurance wrapper.  

As Neil Chadwick highlights in the webinar,

      "The insurance company would legally own the assets that are held within it. The insurance company won't die. Therefore, the individual's own mortality wouldn't trigger a US estate duty liability, because those assets are held by the company and not by the individual."

How The Insurance Wrapper Works in Practice

This structure eliminates the US estate tax liability from arising because, upon your death, the assets are not held directly in the client’s estate. Instead:

• The insurance company becomes the legal owner of the US assets

• The client’s estate no longer owns US-situs assets directly

• Beneficiaries inherit the insurance policy, rather than. the underlying US shares

Additional benefits may include:

• Maintaining full access and control of your investments

• Retaining the existing portfolio

• Reducing US estate tax exposure

• Consolidating scattered accounts

• Adding beneficiary provisions to bypass probate

• Improve cross-border succession planning

• Providing flexibility for future estate planning needs

For non-US residents, transfers into these structures typically do not create US capital gains tax, although local tax implications should always be reviewed with a qualified adviser.

Common US Estate Tax Questions Answered

1. If I am a non-US citizen and gift money to my daughter (also a non-US citizen) who is working and living in the US, are there tax issues now or in the future?

Generally, if both parties are non-US persons, the US gift tax does not apply. However, future changes to her tax residency could alter the position.

However, you must consider:

• Your own ties to the US at the time of the gift

• Her ties to the US when she receives the gift
  (If she later becomes a US citizen, her future tax situation may change.)

2. Are US-dollar or GBP-denominated ETFs that hold US stocks subject to the US estate tax?

The key factor is where the ETF is domiciled, not the currency in which it trades.
Example:

• Irish-domiciled (IE) or Luxembourg-domiciled (LU) ETFs are not subject to US estate tax

• US-domiciled ETFs or funds are subject to US estate tax

3. Does holding US shares through a non-US brokerage avoid US estate tax?

No. Exposure is determined by asset domicile, not brokerage location. If the structure holding the shares is US-domiciled, the estate tax issue still applies.

4. Does the insurance wrapper work for all non-US nationalities?

In most cases, yes. Since the insurance company becomes the legal owner of the US assets, the client’s death does not trigger US estate tax. This solution is used across multiple nationalities.

5. If I hold US shares from a bank in Singapore, will my beneficiaries still face US estate tax?

Yes. The custodian’s location does not change the asset’s US-situs classification.

6. Can the bank simply “swap” the US shares for another asset to avoid tax?

No. Executors must still comply with US estate tax and probate rules. Banks cannot bypass US estate tax regulations.

7. Is there any US exit tax when transferring US assets into an insurance wrapper?

Typically, no US capital gains tax is imposed on non-US residents. However:

• It depends on the type of asset

• You must consider local tax in your country of tax residence at the time of transfer

8. Are US bonds subject to US estate taxes?

It depends on the type and structure of the bonds. A more detailed review is required based on the specific bond.

9. Could my US assets be subject to double taxation (US and my home country)?

Possibly. This depends on:

• Whether your home country has a double taxation treaty (DTA) with the US

• Some countries offer tax credits for foreign estate taxes, but the availability varies on a case-by-case basis.

Your family shouldn’t inherit a tax burden. They should inherit your legacy.

Watch the full webinar led by industry experts Luke White, Certified Financial Planner from Melbourne Capital Group, and Neil Chadwick, Chief Sales Officer from IFGL, to learn how to eliminate US estate tax exposure and secure a clean succession pathway for your family.

Request now via this link.

If your portfolio includes US assets, it is important no the leave estate planning to chance. A structured review can help you understand your exposure and explore options for reducing unnecessary risk.

Arrange a complimentary session with our Private Wealth Managers to review your exposure and discuss potential options. Email us at info@melbournecapitalgroup.com

Important Disclaimers:

This information is for educational purposes only and does not constitute tax, legal, or financial advice. US estate tax rules are complex and subject to change. Individual circumstances vary significantly based on nationality, residence, asset types, and applicable tax treaties. We strongly recommend consulting with qualified tax and legal advisors regarding your specific situation or tax planning challenges before making any decisions.

Melbourne Capital Group is an award-winning independent financial planning firm and international professional partner firm of the Chartered Insurance Institute (CII). We specialise in helping international clients navigate cross-border financial planning challenges.