A Singaporean who is a non-resident non-US Citizen and invests in US assets like ETFs are subjected to US government estate duty. This is often overlooked. I have talk to many individuals and they were not aware of it. Sometime they just ask their broker to buy XYZ stocks or ETFs listed on the US stock exchange but they are not advised that they should use a tax shelter instrument to do that.
According to US government tax website: http://www.irs.gov the Form 706NA is meant for the deceased's Executor to fill up. It is assumed that the deceased was a non-US citizen and non-resident. It is clearly written that assets above the filing limit of US$60,000 (under the "Who Must File" page 1 of the Form 706NA instructions) need to file this form. The actual Form 706NA is so complex that it is obvious that an US certified accountant cum lawyer need to be engage to assist. After legal fees for the accountant and lawyer, I really wonder how much assets are left for the estate!
If a person is a US-citizen US-resident, how much is the exemption limit? According to Form 706 Instruction, the exemption limit is US$2,000,000 ! This is confirmed by this US government IRS website here:http://www.irs.gov/publications/p950/ar02.html#d0e126
How much is the estate duty rates in US? The "Economic Growth and Tax Relief
Reconciliation Act of 2001" states that the rates are as follows:
2011 55% <--- Note!
Estate Duty is automatically reinstated in 2011 unless Congress acts before then. Seehttp://en.wikipedia.org/wiki/Economic_Growth_and_Tax_Relief_Reconciliation_Act_of_2001
While effort have been made to ensure the above information is as accurate as possible, readers are advised to consult their tax and legal advisers.
My opinions are subjected to change although at the present they are in agreement with other financial planners such as these:
Besides Estate Duty, there is also a relatively unknown problem which is the Probate process. Regardless of whether the foreign jurisdiction has estate duty or not, a Probate is required to be done in those countries. This can be a long and costly process too. After considering time and money, investing offshore can be an expensive thing to do. Some of my clients who have families continue to act irresponsibility in the way they invest offshore as they just seem not to care about the hardship they will be imposing on their families when they have passed on. Of course we have a solution to help people invests offshore without the problems of estate duty and probate (probate still need to be done in Singapore - only) but the key point is this - if people do not treat financial planning seriously, the solutions are of no use. The losers at the end of the day will be their family who will turn from rich to rag.
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