US tax trap inheritance when investing in US ETFs

[void-function]

Hey!

I read the following:
https://thepoorswiss.com/swiss-investors-lose-access-us-domiciled-etfs/

But I also found the following information which I think is very important for people to know about before investing in any ETFs with domicile in the US:

https://www.reddit.com/r/MalaysianPF/comments/16u4eyp/voo_vs_vuaa

The very small difference that you observe is because both ETFs are ~99% correlated. That is, you are buying the same haystack of stocks, just through different funds. Think about this - why would VUAA be useful if it's just another VOO? US tax traps, of course! See Non-US investor's guide to navigating US tax traps for detailed explanation.

Are you sure that the return % includes capital gain only, or both capital gain and dividend? My guess is that you are missing out the dividends. The impact of the 15% difference in with-holding tax for dividend is quite significant, see some excellent answers in my post Why Irish-based ETFs and what are the Irish equivalence of VTI + VXUS?

In addition, don't forget another tax trap, i.e. the US estate tax. You don't want to overlook this because if you invest in ETFs, you most likely will invest for a long-term. What if you die? Good luck then, Uncle Sam will take away 40% of your sons/ daughters' money that exceed 60k USD limit. For context, 60k USD limit is not much given that you are investing long-term!

Is this true with the 40% when it exceeds 60k? Or is this BS. That would be bad news for holding any US ETF.
I think I have not found any information about inheritance when holding US ETFs on PoorSwiss, thats why I am asking.

What do you guys think about it?

Thanks!

 

[Baptiste Wicht]

That's a good question!

There is some truth to it, but it's lacking a major information: We have an estate tax treaty with the US. As a result, we have an exemption of more than 10 million USD. So, we don't really have to worry about that.

Should Swiss Investors Worry About The U.S. Estate Tax In 2024? - The Poor Swiss

Many think investing in the United States Exchanged Traded Funds (ETFs) is dangerous. They believe that because of the U.S. Estate Tax, they will lose a lot

thepoorswiss.com

 

[void-function]

Ah! Thank you very much, I did not see this article you wrote.

 

[newiron8]

What matters is the domicile of the ETF, not where you buy it. Many are domiciled in Ireland and they AFAIK don’t have any estate tax for foreigners.

Kodi​