U.S. Estate Tax for Expats: The Hidden Risk in Holding U.S. Investments


 Many internationally based professionals invest in U.S. stocks and ETFs as part of a sensible, long-term strategy. The U.S. markets offer depth, liquidity, and global exposure, so it’s not surprising these assets show up in portfolios worldwide. From a performance perspective, these portfolios often look well constructed. From an estate planning perspective, many are not.

If you are not a U.S. citizen or green card holder, U.S. estate tax rules apply very differently to you. For non-U.S. citizens and non-residents, the U.S. estate tax exemption is just $60,000. Any U.S.-situs assets held above this threshold at death can be taxed at rates of up to 40%. U.S.-situs assets can include U.S.-listed shares and U.S.-domiciled ETFs. The critical point is this: the determining factor is not where you live and not where your broker is based. It’s the domicile of the underlying asset.

This risk often goes unnoticed because it rarely appears in normal investment conversations. Many investors assume they’re protected because they live outside the U.S. or because their broker is offshore. Unfortunately, neither assumption is correct. Over time, U.S. exposure tends to build quietly. A handful of U.S. stocks, an S&P 500 or Nasdaq-linked ETF, and the $60,000 threshold is crossed without intention and often without awareness. What makes this more concerning is that these portfolios are rarely speculative. They’re usually diversified, long-term, and cost-conscious. On the surface, they look sensible. They simply weren’t structured with cross-border estate realities in mind.

There is also a second issue that is commonly missed: probate. Even when estate tax is not the headline problem, U.S.-situs assets may still be subject to U.S. probate, which can freeze accounts and delay access for heirs for extended periods, often 12 to 18 months, while legal processes run their course. This can introduce administrative complexity, legal costs, and delays at exactly the wrong time, even where a will exists.

One reason this persists is that U.S. estate tax for non-residents sits between disciplines. Investment advice focuses on growth and allocation. Tax advice often focuses on income. Estate planning is frequently treated as documents and wills. Structural risks linked to jurisdiction and ownership can fall into the gaps, particularly for internationally mobile individuals. That’s why many families only discover the issue after death, when it is no longer possible to fix.

The solution is not to avoid U.S. markets or unwind good investments. It is to recognise that how assets are held can be just as important as what assets are held. Good financial planning looks beyond performance and considers what happens when circumstances change. Death, relocation, and changes in residency all stress-test portfolios that were never designed for international lives. Most investors believe they’ve made a decision when they choose an investment. In reality, the most consequential decisions are often made silently, through default structures that were never designed for cross-border planning. That’s the difference between owning investments and owning a plan.

Max Gerstein
Financial Adviser
Helping professionals and business owners protect what they’ve built, grow it intelligently, and make long-term financial decisions with clarity and confidence.

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