Non-Americans investing in the United States often use U.S. brokerage accounts. While it may seem counter-intuitive for a non-American to open an American brokerage account from overseas, here are two reasons why this is a good move.
- Efficiency– U.S. securities markets may be the most efficient and individual-investor friendly in the world. American regulations place customer protection and transparency at the top of their concerns. You can have a diversified basket of global assets within a “regular” U.S. brokerage account, and do it cost effectively.
- Diversification– A U.S. brokerage account can host a variety of investment vehicles, such as stocks, bonds, mutual funds, and bank deposits (CDs). American brokerage portfolios can hold investments in both American and global companies.
Do non-American heirs need to pay U.S. Inheritance Tax?
One of the issues that non-Americans face by opening an American brokerage account is the possibility of their estate having to pay an inheritance tax to the United States when they die. There are a few solutions to this problem, the most common of which is to buy “offshore” mutual funds in an American brokerage account. Those mutual funds are not considered “U.S. assets” when determining U.S. estate tax, even if the funds themselves invest in U.S. stocks. So if a non-American buys an offshore mutual fund with a name like, “ABC Offshore U.S. Equity Fund,” or the “XYZ Offshore European Bond Fund,” and then passes away, that fund will not be subject to U.S. estate tax. (This is just an illustration, not advice; be sure to speak with a qualified cross-border financial specialist before investing.)
In order to prevent tax bills, the account needs to be set up and managed properly. There are many details related to opening a U.S. brokerage account, so make sure you work with a company that is experienced in handling cross-border investments for both American and non-American citizens. To learn more, watch the ten-minute video that over 25,000 people have viewed, “U.S. Brokerage Accounts for Non U.S. Residents” at Profile-Financial.com/non-us. If you have other questions, call 02-624-2788.
Douglas Goldstein, CFP®️ is the director of Profile Investment Services, Ltd. www.Profile-Financial.com He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation on how to set up your American assets to meet your financial goals. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.
Published March 21, 2016. Updated May 2021