Gyroscopic Investing

MangoMan wrote: To Frugal, and any other non-US persons considering opening a US brokerage account, or even using a non-US fiduciary to trade US-based mutual fund or ETFs: Read this carefully, and caveat emptor. I don't know how the IRS could enforce collection, but it is worth noting anyway.

Americans have enjoyed increasing relief from U.S. estate taxes as their qualifying limits have risen.  But this isn’t the case for expats [sic] abroad. Those with stock and bond investments that trade on a U.S. exchange could be on the hook if their  investments exceed just $60,000 USD.  Decades ago, this was considered a lot of money.  But not today.  The exclusion rate hasn’t budged.  And the tax could be hefty, starting at 18 percent and rising to 40 percent for accounts exceeding $1 million.

Here’s how it could work. Assume an Australian lives in Malaysia.  She opens a brokerage account in Kuala Lumpur.  She buys an iShares MSCI Malaysia stock market ETF. She may never have stepped on U.S. soil.  She isn’t using a U.S. brokerage. But this ETF trades on the New York Stock Exchange.  So if she accumulates more than $60,000 USD before falling out of a Petronas Towers window, her family might receive an unusual condolence letter from the IRS.  “You owe us money,”? it might say. 

How U.S. Estate Taxes Could Hammer Non-American Expats