Yes, the IRA generally holds U.S. situs assets, but hypothetically it could be structured (or restructured) as U.S. estate tax immune. The typical way would be for the assets within the account to be repositioned into direct holding of individual bonds. Obviously those wouldn’t be municipal bonds (since tax free bonds within a tax advantaged account don’t make sense), but corporate and government bonds are fine for these purposes. I don’t think the IRA “wrapper” matters for these purposes. This kind of defeats the idea of longer tax free/tax deferred growth, though.Thank you once again BBC. My spouse has a SSN and could keep the U.S. address on the account. Good thought on her letting the account grow until passing along to our kids... however if she is still a NRA at that time, wouldn’t the 40% estate tax apply between her and our USC kids for amounts above $60k? I’m assuming an IRA is considered U.S. situs.
Could an IRA that survives you be repositioned into offshore funds like VWRA? I don’t know, but that seems contrived. Maybe Interactive Brokers could pull it off. They’d then presumably need to be re-repositioned into onshore funds when your children inherit the IRA. (Or would they?) Mitt Romney evidently had/has all sorts of crazy things inside his IRA, so maybe offshore funds are possible right now. Something to check I guess.
Can your spouse benefit from an estate tax treaty? There are something like 16 countries that have estate tax treaties with the U.S.
The SECURE Act (passed in December, 2019) threw a wrench into some inherited Roth plans, so I suppose you cannot be too clever for too long. The rules can change, and in this case they did.This Roth is about 10% of our net investable assets, and there are no other tax advantaged accounts in the mix. If estate tax will be an issue for our USC children, maybe having them inherit from me is the way to go. They would definitely want to spread the RMDs over 10 years for maximum tax free growth in the account.
To some extent you might be able to make your estate plan “IRS proof.” For example, you include instructions in your will that your spouse will inherit up to (cite part of the tax code) or (fixed figure), whichever is lower, of assets that are subject to (cite other part of the tax code). This gets a little complicated of course, but I did a little bit of this in some instructions I left in another obscure area of tax considerations. Also, I believe you can split the Roth IRA between heirs if you wish to do so.