US Estate Tax and Non-resident aliens

Discussion in 'Taxes and Accounting' started by BenZarski, Mar 30, 2019.

  1. BenZarski



    I reside in Mexico. I have a US stock brokerage account. As a non-resident alien I pay tax on US dividends and interest (no capital gains tax) at the reduced US-Mexico tax treaty rate of 15% and 10%.

    Mexico does not have an Estate or Inheritance Tax. However, the US applies an Estate Tax of up to 40% on non resident aliens who hold US situs assets over $60,000 unless there is an Estate Tax Treaty. Mexico does not have an Estate Tax Treaty with the US.

    This limits my investment options to non US situs assets. Holding only non US situs assets eliminates the Estate Tax but my beneficiaries would still need an IRS tax clearance certification which would be an added expanse and delay disbursements. I want to avoid the issue completely.

    From my investigations I see my options as;

    1) Open a brokerage account with a non US broker and hold only non US situs assets. This would avoid the US Estate Tax issue but would significantly increase my trading costs and most jurisdictions will not deal with non residents. Also the correct US-Mexico Tax Treaty rates may not be applied.

    2) Form a US LLC and transfer my assets to the LLC. Now I can own US situs assets but I would need to file annual tax returns with the IRS. I would make an IRS election to have the LLC treated as a flow through entity. As a flow through entity the correct tax treaty rates would be applied.

    3) Form an offshore entity (company or foundation) and transfer my assets to this entity. I would avoid both the Estate Tax and tax filing issues but lose all benefits of the US- Mexico Tax Treaty.

    Does anyone have further insight or suggestions? Thanks.
  2. if the person who will inherit after you must live in US then will your assets will be subject of US estate tax. And if you are still afraid of estate tax give your family instruction how accessing and closing your brokerage account if something happend to you.
  3. BenZarski


    Hello Obelixtrader

    None of my beneficiaries are US person ie: not US citizens or US residents or US green card holders. I and all my beneficiaries have absolutely no connection to the US.

    As far as giving my family / beneficiaries info on how to access and/or close the account after my demise, I question the legality of this. My understanding is the broker is to be advised of my passing and the account is then frozen until IRS clearance is received. I do not want to do anything that can be in a grey area.

    Thanks for your reply
  4. Amazing how much taxation changes people's decisions isn't it...taxation is theft
  5. Taxation woudlnt be theft if politicians wouldnt steal taxpayers money and im my country this is true twice. And if I died my family know procedure how to close my broker account the money would reach the same bank account from which money come to broker and that means that this bank account will be subject to inheritance proceedings in my country