US Estate Tax for Non-US Investors: The $60,000 Trap

Any non-US person (not a US citizen and not a US tax resident) who dies holding US-situs assets is potentially subject to US estate tax. US-situs assets include: US-listed stocks and ETFs (SPY, QQQ, AAPL, etc.), US real estate, and US-domiciled mutual funds. They do NOT include: Irish-domiciled ETFs (UCITS), non-US stocks listed on US exchanges through ADRs, or US bonds held by non-US persons.

A UK investor with $200,000 in a US brokerage account (all in US ETFs like SPY) who dies unexpectedly faces US estate tax on $140,000 (the amount above the $60,000 exemption). At the marginal rate of 40%, that's $56,000 in US estate tax — in addition to any UK inheritance tax. The estate would need to hire a US tax attorney and file a US estate tax return (Form 706-NA) to claim the tax due.

The simplest fix: don't hold US-domiciled ETFs. Replace SPY with CSPX (iShares Core S&P 500 UCITS ETF, Ireland-domiciled). Replace VTI with IWDA or VWRA. Replace QQQ with EQQQ. These funds track identical indices but are domiciled in Ireland and are not US-situs assets. Your estate will have zero US estate tax exposure regardless of portfolio size.