U.S. Estate Tax on Equity Awards and Shares Held by Non-U.S. Citizens: Key Issues and Planning Considerations

Description

Non-U.S. employees or service providers receiving equity awards from U.S.-based companies or that hold shares in such companies may be subject to U.S. estate taxes. Estate planners and tax counsel must understand the nuances of the application of U.S. estate taxation to such individuals in order to properly assess their potential impact on estate and tax planning.

Non-U.S. citizens may be subject to U.S. estate tax rules unless an exemption or other tax relief applies under current U.S. tax law or an applicable tax treaty. A non-U.S. employee or service provider who dies holding equity or rights to profits of a U.S. company may subject their heirs to U.S. estate taxes and filings unless appropriate planning methods to avoid unintended tax consequences are implemented.

The application of U.S. estate tax laws to a non-U.S. citizen depends on domicile, situs of assets, and the application of a treaty. Non-U.S. citizens domiciled in the U.S. are provided the same exemption amount as U.S. citizens and may be subject to estate tax on their estate. Therefore, determining the domicile of a non-U.S. citizen is critical.

For those determined to be not domiciled in the U.S., the situs of their assets may be subject to U.S. estate taxes with limited exemption amounts. However, under such circumstances, an applicable estate tax treaty may mitigate any adverse tax consequences.

Trusts and estates counsel advising non-U.S. clients with or who plan on having equity awards or shares in U.S.-based companies must be aware of the rules that might impact their clients' U.S. estate tax liability attributable to such assets.

Listen as our panel discusses potential estate tax implications for non-U.S. citizens with equity awards or shares in U.S.-based companies, relevant tax rules and potential estate planning pitfalls, situs of assets, and the application of tax treaties