Singapore removed estate duty for deaths on and after 15 February 2008, so most Singaporeans assume the shares they leave behind will pass to their family untaxed. For US stocks and ETFs, that is not true.
The US levies its own estate tax on US assets owned by non-residents. US citizens and domiciled residents enjoy an exemption of $15 million, but for non-residents the exemption is effectively just $60,000.
Above that, the tax runs up to 40% of your total US-situs assets at death, and Singapore has no estate tax treaty with the US to soften it.
If you hold US shares or US-listed ETFs, you need to understand which assets count as US-situs, how the tax is calculated and collected, and who exactly is considered US "domiciled".
Table of contents
- What is the US estate tax?
- Who is considered a non-resident for US estate tax purposes?
- How is the value of US holdings calculated for estate tax?
- Which assets are considered US-situs?
- How is the estate tax liability calculated?
- What happens to my brokerage account when I die?
- How Singaporeans can protect their assets from the US estate tax
What is the US estate tax?
The US estate tax is a federal tax on the transfer of assets to heirs after a person's death. It covers tangible assets like property and cars, and intangible assets like stocks and ETFs. It is essentially a tax on the right to transfer property at death.
It is levied at progressive rates from 18% to 40% on the total market value of your US-situs assets. Non-residents then receive a fixed credit of $13,000 against the tax, which is what shelters the first $60,000 of estate value.
For US citizens and domiciled residents, this tax is rarely a concern because they enjoy an exemption of $15 million (as of 2026). For non-residents, the exemption is effectively just $60,000 of estate value.
Note: Singapore has no estate tax treaty with the US, and Singapore has no estate duty of its own. There is no treaty relief and nothing to offset the US tax against. Your heirs bear the full US bill.
Who is considered a non-resident for US estate tax purposes?
The term "resident" is defined differently for US income tax and US estate tax.
Income tax residency is determined by the Substantial Presence Test. Estate tax residency is determined by domicile.
Holding an H-1B or L-1 visa, or meeting the substantial presence test, does not automatically make you a resident for estate tax purposes. US domicile is determined by a two-prong test:
- Physical presence: You are physically present in the United States.
- Intent: You intend to remain in the United States indefinitely.
The first prong is objective and easy to prove. The second is a fact-specific inquiry.
Courts look at objective signs of your intent to decide whether you planned to stay in the US permanently or kept deep ties to your home country. No single factor decides it. Courts weigh the following factors:
- Immigration status: Do you hold a US Green Card?
- Time spent: How much time is spent at the claimed domicile vs. abroad?
- Residence duality: How your US home compares with your home elsewhere (size, owned or rented, level of furnishing).
- Asset location: Where your personal investments and main business assets are.
- Family ties: Where your spouse and children live.
- Community integration: Membership of local religious, social or political organisations.
- Statements of intent: What you have declared on legal documents about your permanent residence.
You can be a US tax resident for income tax (paying US tax on your global income) while still being non-domiciled for estate tax. In that case your estate still receives only the $13,000 unified credit, leaving most of your US assets exposed at rates up to 40%.
Example. Suppose you are a Singaporean posted to your employer's US office. You live there for 6 years and pay US income tax, but you keep your Singapore home, your CPF savings and most of your investments in Singapore, and your parents and extended family remain there.
If you pass away during the posting, the IRS looks at those ties to Singapore and concludes you never intended to stay in the US indefinitely.
You are classified as a non-resident for estate tax purposes, and your US assets are taxed at rates reaching 40%.
How is the value of US holdings calculated for estate tax?
Your US holdings are valued at their fair market value (FMV) on the date of death, not at the price you paid.
If you bought US stocks for $50,000 and they are worth $200,000 on the day you pass away, the estate tax is calculated on $200,000.
US-situs assets owned at death that are subject to US estate tax include:
- US real estate: Any land or property located in the US.
- Tangible personal property: Items physically in the US, such as cars, furnishings, art and jewellery. Cash and currency physically in the US (for example, in a safe deposit box) also count.
- US stocks: Shares of corporations organised under US law (e.g. Apple, Microsoft), even if the certificates or brokerage account are held outside the US.
- Non-portfolio US debt: US debt whose interest does not qualify for the portfolio interest exemption. Most publicly traded US bonds fall outside this category, as explained in the next section.
- Retirement plans: Qualified US retirement plans such as 401(k)s.
- Business assets: Assets connected to a US trade or business, including bank accounts used for that business.
To arrive at the taxable estate, the IRS lets you deduct certain liabilities from your US assets. With proper documentation, these can include funeral and administration expenses, legitimate debts owed by the deceased, mortgages and liens on US property, and certain theft or casualty losses during the settlement of the estate.
Note: For non-residents, the US estate tax applies only to US-situs assets. Your worldwide estate is not part of the calculation.
Warning for joint accounts: If you hold a joint account with your spouse, the IRS assumes 100% of it belonged to the first spouse to die and taxes the full amount. The surviving spouse must prove their own contribution to protect their share. For more, see how joint global brokerage accounts are taxed.
Warning for spouses: there is no marital deduction
The unlimited marital deduction that lets a US citizen leave an entire estate to a spouse tax free is not available when the surviving spouse is not a US citizen.
For most Singaporean couples, assets passing to your spouse are treated like any other transfer. Your estate is taxed on the full US-situs value, with only the $13,000 unified credit, before your spouse receives anything.
The standard workaround is a Qualified Domestic Trust (QDOT). Assets left to a QDOT qualify for the marital deduction, but under Section 2056A the tax is only deferred. It becomes payable when the surviving spouse dies or withdraws principal, and the trust must have at least one US trustee.
Note: A QDOT postpones the liability and adds administrative cost. It does not remove the estate tax the way holding non-US-situs assets does.
Which assets are considered US-situs?
For non-residents, the US estate tax applies only to assets legally situated in the United States, known as US-situs assets. If an asset is not situated in the US, the IRS has no claim over it.
Taxable assets (US-situs)
If the total value of these assets exceeds $60,000, your estate owes tax and your executor must file a US estate tax return:
- US real estate: Any land, homes or commercial property in the United States.
- Tangible personal property: Items physically in the US, such as cars, jewellery or art.
- US stocks and US-listed ETFs: Shares of US corporations (e.g. Apple, Microsoft, Tesla) and US-domiciled ETFs (e.g. VOO, QQQ), wherever the brokerage account is held. Buying them through a Singapore broker does not change this.
- Non-portfolio US debt: US debt whose interest does not qualify as portfolio interest. Under Section 871(g)-(h), this covers Treasury bills maturing within 183 days, contingent-interest debt, and debt issued on or before 18 July 1984.
- Cash in brokerage accounts: Cash balances held in brokerage accounts are classified as US-situs property and can be taxed.
Non-taxable assets (non-US-situs)
Assets situated outside the US are completely exempt from US estate tax. These include:
- Non-US stocks: Shares of companies not incorporated in the US, such as DBS or Singtel, or European companies like Nestle.
- UCITS ETFs: ETFs domiciled in Europe, typically Ireland. Even if a UCITS ETF tracks the S&P 500 or holds only US stocks, the fund itself is Irish, so it is not a US-situs asset.
- Portfolio debt obligations: Under Section 2105(b)(3), US debt is excluded if its interest would qualify for the portfolio interest exemption. This covers most publicly traded US corporate bonds issued after 18 July 1984 and longer-dated US Treasuries.
- Bank deposits: Cash in a standard US bank savings or checking account not connected to a US business is exempt.
- Life insurance proceeds: Payouts from a US life insurance policy on the life of a non-resident are generally exempt.
Note: The portfolio debt exemption applies to the bond itself, not to a fund holding bonds. A US-domiciled bond ETF is still a share in a US corporation and remains fully US-situs.
Example. Suppose you are a Singaporean with 700,000investedoverseas,splitbetweenUSstocksandUS-listedETFs(400,000) and Ireland-domiciled UCITS ETFs ($300,000). If you pass away, the estate tax applies like this:
| Holding | Market value | Situs status | Taxable estate | Estate tax liability |
|---|---|---|---|---|
| US stocks and ETFs | $400,000 | US-situs | $400,000 | $108,800 |
| UCITS ETFs | $300,000 | Not US-situs | $0 | $0 |
| Total | $700,000 | $400,000 | $108,800 |
The result: the $400,000 in US structures costs your heirs $108,800, while the $300,000 in UCITS ETFs passes untouched
That is about 27% of the US portfolio lost purely because of where the funds were domiciled.
How is the estate tax liability calculated?
The US estate tax is progressive, with rates from 18% to 40%. For non-residents, it is calculated in two steps:
- Tentative tax: The rate schedule under Section 2001(c) is applied to your entire taxable estate, from the first dollar.
- Unified credit: A flat credit of $13,000 is subtracted from the tentative tax, under Section 2102(b)(1). The credit can reduce the bill to zero but never below it.
The $60,000 figure is not a deduction from your assets. It is simply the estate size at which the $13,000 credit exactly cancels the tax. Below $60,000 you owe nothing. Above it, the credit stays fixed at $13,000 while the tax keeps climbing.
| Value of taxable estate | Tax rate |
|---|---|
| $0 to $10,000 | 18% |
| $10,001 to $20,000 | 20% |
| $20,001 to $40,000 | 22% |
| $40,001 to $60,000 | 24% |
| $60,001 to $80,000 | 26% |
| $80,001 to $100,000 | 28% |
| $100,001 to $150,000 | 30% |
| $150,001 to $250,000 | 32% |
| $250,001 to $500,000 | 34% |
| $500,001 to $750,000 | 37% |
| $750,001 to $1 million | 39% |
| Over $1 million | 40% |
Example. Suppose you are a Singapore resident with $700,000 in US stocks and US-listed ETFs, and no UCITS or other non-US holdings. The rate schedule is applied to the full $700,000:
| Slice of estate | Tax rate | Tax due |
|---|---|---|
| First $10,000 | 18% | $1,800 |
| Next $10,000 | 20% | $2,000 |
| Next $20,000 | 22% | $4,400 |
| Next $20,000 | 24% | $4,800 |
| Next $20,000 | 26% | $5,200 |
| Next $20,000 | 28% | $5,600 |
| Next $50,000 | 30% | $15,000 |
| Next $100,000 | 32% | $32,000 |
| Next $250,000 | 34% | $85,000 |
| Remaining $200,000 | 37% | $74,000 |
| Tentative tax | $229,800 | |
| Less unified credit (Section 2102(b)(1)) | -$13,000 | |
| Total estate tax liability | $216,800 |
The result: the IRS takes $216,800, about 31% of your $700,000, before your family receives anything
You can work out your own exposure with the US estate tax calculator.
What happens to my brokerage account when I die?
When a non-resident dies with US assets above $60,000, the custodian (e.g. Interactive Brokers) freezes the account once it is notified of the death.
Transfer to the executor
The broker may transfer the assets to the estate's legal representative (executor, administrator or fiduciary) before the IRS estate tax requirements are resolved.
- Management only: The executor gains control to manage the estate's liabilities.
- No distribution: The executor cannot distribute anything to the heirs at this stage. The assets stay locked in the estate until the IRS confirms all taxes are paid.
Paying the tax
Before distributing anything, the executor must obtain a transfer certificate (Form 5173) from the IRS. To get it, they must file Form 706-NA and pay the estimated tax. Since the account is frozen, the question is where that cash comes from.
- Paying from outside cash: The estate has enough cash outside the US brokerage account (for example, in a Singapore bank account) to settle the bill upfront. Even then, the transfer certificate takes 18 to 24 months after the return is filed.
- Liquidating within the account: If the heirs have no cash outside the account, they can instruct the broker to sell specific US holdings to raise the payment. At Interactive Brokers, this is available once the broker has confirmed who can give instructions for the estate. The broker does not send the cheque to the IRS directly. It sends it to a tax adviser or trusted contact in the US, who forwards it to the IRS.
Distribution to heirs
Once the tax is paid, the IRS processes the return, which currently takes 18 to 24 months.
- The IRS issues the transfer certificate (Form 5173).
- The executor submits it to the broker.
- Only then does the broker release the assets to your heirs.
Selling within the account solves the immediate cash problem, but the heirs still need someone authorised to act for the estate and a US contact to route the payment. The rest of the assets stay locked until the certificate is issued.
Add an 18 to 24-month processing delay, and your family faces a long cross-border process at an already difficult time. Your financial and succession plans should make sure they get timely access to the wealth you built for them.
How Singaporeans can protect their assets from the US estate tax
Most investors focus on annual returns and miss that the US estate tax can take up to 40% of their US portfolio at death.
If you build a portfolio of US-situs assets worth $5 million for your children, the estate tax will claim $1,932,800 (38.7%) of it.
The tax depends on where an asset is situated, not on which companies you invest in. US stocks and US-domiciled ETFs are situated in the US. UCITS ETFs give you the same companies without the same situs.
UCITS ETFs are funds regulated under EU rules and typically domiciled in Ireland. Because the fund is not domiciled in the US, it is a non-US asset.
Switching from a US-domiciled ETF (like VOO) to an Ireland-domiciled UCITS ETF (like VUSA) gives you the same exposure to US companies while removing the US estate tax liability for your heirs. Singapore investors get a second benefit too: US withholding on dividends falls from 30% to 15% inside the fund.
Use our UCITS Screener to discover and compare UCITS ETFs.
Will I have to pay tax when I switch?
Generally no. This is where Singapore investors have a clear advantage.
- Singapore: Singapore does not tax capital gains, unless IRAS treats you as trading shares as a business (IRAS).
- US: The US generally does not tax non-residents on gains from selling US stocks or ETFs (IRS Publication 515).
So selling your US holdings and buying UCITS ETFs with the proceeds usually costs only brokerage and currency conversion. Keeping old US holdings and redirecting only new money into UCITS leaves the existing exposure in place for no tax benefit.
Example. Suppose you are a Singapore resident with $500,000 in US stocks and US-listed ETFs, planning to hold for 25 years at an assumed 10% a year growth. You either switch to UCITS ETFs today or stay in US assets.
| Item | Switch to UCITS today | Stay in US assets |
|---|---|---|
| Starting capital | $500,000 | $500,000 |
| Tax on switching | $0 | Not applicable |
| Value after 25 years (10% a year) | $5,417,353 | $5,417,353 |
| US estate tax | $0 (UCITS are exempt) | $2,099,741 (38.8%) |
| Final inheritance | $5,417,353 | $3,317,612 |
The result: switching leaves your family $2.1 million more, at no tax cost today
This also understates the gap, because it ignores the lower dividend withholding inside the UCITS fund over those 25 years.
Can I gift US shares to my heirs instead?
Yes. US gift tax rules for non-domiciliaries are much narrower than the estate tax rules. Under Section 2501(a)(2), a non-resident who is not a US citizen pays US gift tax only on transfers of US real estate and tangible property physically in the US.
Shares of US companies and US-domiciled ETFs are intangible property. Gifting them during your lifetime does not attract US gift tax, however large the transfer.
Note: Gifting removes your control over the assets permanently, and the recipient now holds US-situs assets exposed to the same estate tax in their own hands. For most investors, switching to UCITS ETFs is the cleaner long-term solution.
About Paasa
Paasa is a global investing platform giving investors access to markets across the US, UK, Europe and Asia.
- Estate tax-free US exposure: Buy Ireland- and Luxembourg-domiciled UCITS ETFs that track the S&P 500, Nasdaq 100 and other US indices without holding US-situs assets.
- An account in your own name: Your holdings are held with Interactive Brokers as custodian, and you get read-only access to IBKR alongside the Paasa dashboard.
- Any trading currency: Buy UCITS lines in USD, GBP or EUR, whichever suits your portfolio.
