Estate Tax, US PP for Europeans on US or European exchanges?

[hedgehog]

I have to quote LazyInvestor's post from the thread - http://gyroscopicinvesting.com/forum/va ... us-and-eu/ - which has been misplaced to the Variable Portfolio branch for better exposure here - and I am looking for the Permanent part.

For >10K accounts, I think IB is the best. The monthly fee is more than saved on free money transfer, excellent currency conversion rates, lowest trading fees in the market, and so on.

I agree with the IB (= Interactive Brokers) recommendation. At least, don't know any better. Start with 12,000 and IB's 120 a year fee will be 1% (+ ETF fees). Okay, that's what you can get. Plus you have to account for currency exchange between your European funds and IB's USD account. That's the crucial part for Europeans wanting to implement US PP!

Insist on opening the account with their US division to get the 500K SIPC protection. To protect yourself against heavy US estate taxes on foreigners, you buy government debt (50% of PP) directly as it is exempted from estate taxes, and you buy Vanguard or iShares S&P500 on a EU exchange (LSE maybe the best). If you are not buying physical, you can also buy Rowland's PP book-recommended ZGLD ETF on an EU exchange to avoid estate taxes. They are the only broker that let's you submit and update W8-BEN form online thus saving you the hassle of having to mail it in every 2 years.

So this is the part I am not quite sure I understand.

Let's say I want a PP with 4 easy ETF's for example these: http://joshkaufman.net/permanent-portfolio/ can be other ETFs, it is not the main point here.

What are US estate taxes for non-US residents? Do US residents pay it as well? Google just further confused me. Not did I had the slightest clue in the first place.

So you recommend investing US treasuries where exactly? And that I buy S&P 500 in London? How my costs all add up if I trade on different exchanges (if I understand you correctly) regarding funding and rebalancing, or estate taxes I have to pay, alternatively
- if I am a gazillionaire
- if I am not a gazillionaire?

Best approaches, exchanges, accounts for these two cases? Thanks.

[hedgehog]

No one in my shoes? I thought this question is in the interest for quite a few people. Really.

[Libertarian666]

I have no idea about estate taxes, but I'm pretty sure there are no US capital gains taxes for non-US persons.

Yes, the US is a tax haven... if you are not a resident or citizen of the US.

[LazyInvestor]

Estate taxes depend on the treaty. Simplified for practicality purposes: if there is no treaty, everything (except bank interest and government bond interest) above 60K is taxed at 60% or so rate. So if you have real estate, ETF, stocks and you die they'll tax it at 60% before giving the leftovers to your heirs. Note, if you own US government bonds directly there will not be estate tax on them, but if you own them through ETF such as TLT there will be estate tax on them. So if your country does not have a treaty with US, you can have as much in as you want in US banks and directly owned treasuries, and up to 60K in equity. Presuming you keep gold outside of US, you can have 320K balanced PP portfolio before starting to worry about US taxes. If your country has a treaty with US, then the exemption is probably even higher, such as a million or so. In summary, if no treaty:

- no capital gains tax
- no interest tax
- 30% dividend tax
 
Having said this, you cannot listen to anyone on the Internet forums about taxation but you must read in detail IRS NRA stuff and keep up-to-date with the changes:

http://www.irs.gov/Individuals/Internat ... ent-Aliens

[hedgehog]

Thanks for your insights LazyInvestor!

So how does the practical side work? When I want to put my funds on an investment account (preferably all of them on one account) for easy rebalancing and not hit by fees when moving funds between accounts and maybe even countries.

You said to buy the equities portion on an EU exchange (maybe LSE), I don't have problem buying a US-based gold ETF (as a non-US person), buy bonds from the treasury or not to worry about estate taxes under 60k (as half of the portfolio is in short+long term bonds, that adds up to a whole PP of 120k not 240k as you stated or am I missing something?)

All in all, how these all add up, where one should open the account for a portfolio?

My guess:
- If under 120k for the whole PP the Interactive Brokers, USA
- If your portfolio worth more than 120k overall, you may try a European offshoot of IB called Lynx Broker:
http://www.lynxbroker.de/pdf/LYNX_Tarife.pdf
http://www.lynx.nl/php/Tarieven_Lynx.pdf

To put it bluntly: estate taxes only hit you when you die correct? If you just want to withdraw or move your funds out you are tax free?

Maybe I am missing something.

Here's the list of Tax Treaty countries for reference: http://www.irs.gov/Businesses/Internati ... s---A-to-Z

[hedgehog]

Sorry for bump.