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Estate Taxes for Interactive Brokers HK stocks account

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Old 02-10-2016, 11:40 AM   #1
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Estate Taxes for Interactive Brokers HK stocks account

Hong Kong has zero estate tax. However, if a Singaporean buys Hong Kong stocks through Interactive Brokers, is the Hong Kong stock portfolio subjected to U.S estate tax given that Interactive Brokers is a U.S broker?

Last edited by klarklar; 02-10-2016 at 11:44 AM..
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Old 02-10-2016, 12:20 PM   #2
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The general consensus seems to be that U.S. equities, mutual funds, ETFs, bonds ... and any cash balance (in any currency) in your IB account are part of the calculation toward the U.S. estate tax exemption (US$60,000 for non-U.S. resident foreigners). Non-U.S. securities, such as Vanguard's Ireland domiciled ETFs, do not count.

Also, the general consensus is that the U.S. fair market value for estate tax purposes is based on the day you die, not on anything that happens to valuations and account balances thereafter. Even if your heir(s) liquidate your positions at IB then withdraw cash, that's fine -- unless one of your heirs dies after liquidation and before the cash is withdrawn!

If you need to hold a cash position at IB that's much larger than $60K, take a look at what IB might offer for a low cost, non-U.S. domiciled, "cash like" place to park your money if you need to do that. It has to be something like a non-U.S. domiciled ETF, stock (equity), or foreign bond. For example, I think VUTY (Vanguard's Ireland domiciled U.S. Treasury bond ETF) should qualify. There's a broker trading cost to get in/out of a fund, of course.

Some people suggest having a holding company or trust as the titled owner of your IB account, but that seems like more trouble than it's worth. In particular, if you ever become a U.S. person, that approach would get even more complicated, with some tax implications.

Anyway, net net, just keep your IB account's "U.S. balance" (including cash, in any currency) below $60K, and your heirs should avoid U.S. estate tax. (You won't care. You'll be dead.)
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Old 02-10-2016, 12:35 PM   #3
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Just give your password to your love ones and ask them to log on, hit the liquidate all button and remit money back
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Old 02-10-2016, 12:48 PM   #4
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I don't agree with that advice, Orange. At least not the way you've written it.

If your heir(s) need cash urgently, IB is certainly not the place to put any of it. Make other provisions for their emergency needs. Anything in IB should be handled rationally, calmly, and "by the book." For example, it could very well make sense simply to transfer title to the account to an heir through probate, with the executor handling that in due course. Or it might make sense to transfer the securities themselves to an heir's brokerage account (at IB or at another firm), without liquidating the securities -- and without incurring trading costs.

Also, depending on where they live and/or their immigration statuses, some heirs might have inheritance tax, some might have capital gains tax, and some might have both. Liquidation could mean they have an immediate capital gains tax burden. In some cases an heir might want to pass some or all of the inheritance to a qualified charity, for tax and other reasons. All of these considerations ought to be considered in the fullness of time.
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Old 02-10-2016, 02:20 PM   #5
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The general consensus seems to be that U.S. equities, mutual funds, ETFs, bonds ... and any cash balance (in any currency) in your IB account are part of the calculation toward the U.S. estate tax exemption (US$60,000 for non-U.S. resident foreigners). Non-U.S. securities, such as Vanguard's Ireland domiciled ETFs, do not count.

Also, the general consensus is that the U.S. fair market value for estate tax purposes is based on the day you die, not on anything that happens to valuations and account balances thereafter. Even if your heir(s) liquidate your positions at IB then withdraw cash, that's fine -- unless one of your heirs dies after liquidation and before the cash is withdrawn!
Umm, what does general consensus? mean? That you don't actually know the answer but you read somewhere? Then post the link to the place you read it?

This sort of legal issue, I will tell TS to get proper advice or at least ask for a link to some US government webpage with the correct answer. Don't rely on "general consensus."
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Old 02-10-2016, 04:35 PM   #6
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I don't agree with that advice, Orange. At least not the way you've written it.

If your heir(s) need cash urgently, IB is certainly not the place to put any of it. Make other provisions for their emergency needs. Anything in IB should be handled rationally, calmly, and "by the book." For example, it could very well make sense simply to transfer title to the account to an heir through probate, with the executor handling that in due course. Or it might make sense to transfer the securities themselves to an heir's brokerage account (at IB or at another firm), without liquidating the securities -- and without incurring trading costs.

Also, depending on where they live and/or their immigration statuses, some heirs might have inheritance tax, some might have capital gains tax, and some might have both. Liquidation could mean they have an immediate capital gains tax burden. In some cases an heir might want to pass some or all of the inheritance to a qualified charity, for tax and other reasons. All of these considerations ought to be considered in the fullness of time.
To a Singaporean with no capital tax liability, that is the most clear cut method to ensure my non sgd assets are safely back to sgd and to Singapore without any tax liability.
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Old 02-10-2016, 05:25 PM   #7
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Umm, what does general consensus? mean?
It means there's another forum where this issue was discussed, recently, and well and authoritatively answered. Using your favorite search engine will find it. It also means that you, the reader, are responsible for your own legal obligations, including tax obligations.

To a Singaporean with no capital tax liability, that is the most clear cut method to ensure my non sgd assets are safely back to sgd and to Singapore without any tax liability.
No, that's not correct. Tax is either legally owed or it is not. Transferring funds does not avoid tax liabilities. It might be a way to try to evade taxes illegally. Is that what you're recommending, tax evasion (an illegal act)?

But leave that aside. Liquidating assets, even if there are no tax consequences, might be a really dumb thing to do, financially speaking. There is a transaction cost to do so, and selling a whole portfolio at once at one random moment in time (shortly after the death of the owner) is likely to be perfectly awful timing.

I would also add that your suggestion is highly likely to cause family disputes between surviving heirs and has some security risks. It's also possible that the financial institutions involved will ask additional questions. That sort of liquidation and fund transfer would not be a typical pattern, to say the least. "I used my brother's password" (the truth) is not a great way to start a conversation with somebody from the fraud department.

Bad idea, really. This stuff ought to be done "by the book" if you care about your heirs.
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Old 02-10-2016, 05:43 PM   #8
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It means there's another forum where this issue was discussed, recently, and well and authoritatively answered. Using your favorite search engine will find it. It also means that you, the reader, are responsible for your own legal obligations, including tax obligations.


No, that's not correct. Tax is either legally owed or it is not. Transferring funds does not avoid tax liabilities. It might be a way to try to evade taxes illegally. Is that what you're recommending, tax evasion (an illegal act)?

But leave that aside. Liquidating assets, even if there are no tax consequences, might be a really dumb thing to do, financially speaking. There is a transaction cost to do so, and selling a whole portfolio at once at one random moment in time (shortly after the death of the owner) is likely to be perfectly awful timing.

I would also add that your suggestion is highly likely to cause family disputes between surviving heirs and has some security risks. It's also possible that the financial institutions involved will ask additional questions. That sort of liquidation and fund transfer would not be a typical pattern, to say the least. "I used my brother's password" (the truth) is not a great way to start a conversation with somebody from the fraud department.

Bad idea, really. This stuff ought to be done "by the book" if you care about your heirs.
I disagree. Firstly the transfer of assets should ideally be done by myself before my demise. If I can't do it, it should be done by my spouse before my demise. There will not be any estate tax as I haven't passed away yet.

Second liquidation of assets is the right choice for me as it's easier to divide the assets. Ideally I shouldn't have much in IB in my later years but if I do, it would probably mostly in bonds so timing wise it would matter little
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Old 07-10-2016, 12:35 PM   #9
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Firstly the transfer of assets should ideally be done by myself before my demise. If I can't do it, it should be done by my spouse before my demise.
That's hard to do if you're hit (hard) by a bus, for example. We're talking about how the U.S. estate tax works for non-U.S. persons.

If you know that you're going to die at precisely 8:31 p.m. on November 21, 2045, and you set a calendar reminder on your Apple iPhone 21 (with Siri, the holographic assistant) to log into your IB account on November 15, 2045, to reduce your taxable holdings below the $60K estate tax exemption, then your forecasting powers are much better than mine.

Important point: this is current tax law. Will the $60K exemption be different in 2045? Will Singapore have an estate or inheritance tax in 2045? Will the Chicago Cubs win the World Series by 2045? We don't know yet. (Maybe 2016 for the Cubs.)

Second liquidation of assets is the right choice for me as it's easier to divide the assets.
Sure, that's fine. And you can leave those instructions behind in your will for your executor to carry out, legally and properly, without risk of fraud investigations, asset freezes, or other "inconveniences" to your heirs.
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Old 07-10-2016, 12:50 PM   #10
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I was browsing through IBKR on whether i could transfer some of my IBKR holdings to another family member's IBKR account but strangely the situation is not covered by their internal transfer which is only to another account bearing the same name.

Anyone can point me to the correct page in IBKR that deals with transfer of holdings to other IBKR accounts not in your own name?
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Old 07-10-2016, 01:23 PM   #11
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IB's information on position transfers is located here. You'll just have to try to see if you can transfer a position to another individual.

Note that IB offers "Friends and Family" accounts which can be advantageous. More information is available here.
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Old 07-10-2016, 01:39 PM   #12
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As a follow-up, IB does not allow position transfers between different individuals. "Transfer on Death" is a one-time exception to that general restriction.

These are probably exchange and/or depository rules now that I think about it. The whole purpose the exchanges serve is to facilitate securities trading between parties. If individuals could transfer positions to each other directly then they'd bypass the exchanges in side deals, and the exchanges wouldn't get paid.
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Old 07-10-2016, 04:38 PM   #13
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then just get your relatives or some will and instruct them to wire money back in the event u die lor.

Provide user name n pass. WHats so difficult ?
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Old 07-10-2016, 05:05 PM   #14
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WHats so difficult ?
You're not understanding the point. Obviously it's very easy for somebody familiar with Web browsers and financial transactions to use a Web interface to execute a financial transaction. It may be easy for you, it may be easy for an heir, and it may be easy...for an unauthorized hacker. All easy.

But that's not the important point. The point is that you are dead. You presumably care for your heirs, and you want them to have clear, uncontested, problem-free title to your bequest(s) -- in the lowest cost/highest reward fashion. And with minimum family fights, resentments, or suspicions. That's what wills, probate, and executors are for.

Handing your Interactive Brokers user ID, password, and code card to your niece is NOT an estate plan. It's amateur at least, at best. And if you're an IB customer, you shouldn't be an amateur. You shouldn't be risking (for your heirs) unexpected tax complications, financial institution fraud department investigations, account freezes, and other potential complications. You should bequeath "by the book." That's what makes it easy for your heirs, to leave behind a real, legal plan (well executed) and not something amateur and risk prone.

This isn't your Facebook account.
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Old 07-10-2016, 08:04 PM   #15
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Hong Kong has zero estate tax. However, if a Singaporean buys Hong Kong stocks through Interactive Brokers, is the Hong Kong stock portfolio subjected to U.S estate tax given that Interactive Brokers is a U.S broker?
go and buy a term insurance plan, consider AVIVA SAF
and pegged that to 30% of your stock holdings...
case closed.

that's all, after all, IB is US-based.
we would be slapped w US laws.

for more useful info, join the Shiny Things thread on money mind.
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