The US Estate Tax Trap: Why Non-Resident Indians need UCITS ETFs

For Indian residents investing in US stocks, one of the least discussed but most severe risks is the US Estate Tax. Let's break down exactly what it is, who it applies to, and how smart money avoids it.

The $60,000 Threshold Trap

If you are a Non-Resident Alien (NRA) — which applies to most Indian residents trading directly via LRS on platforms like INDmoney, Vested, or directly via Interactive Brokers — the US assumes you are subject to estate taxes upon your demise.

The shocker? While US citizens have a massive multi-million dollar exemption, NRAs are only exempt up to $60,000. Any US-situated assets (like shares of Apple, Tesla, or a US-domiciled Vanguard ETF) above this $60,000 mark are subject to a staggered US Estate Tax ranging from 18% to a staggering 40%.

The Irish UCITS Solution

Sophisticated investors do not buy US ETFs directly from US exchanges to avoid this. Instead, they buy UCITS ETFs domiciled in Ireland, usually traded on the London Stock Exchange (LSE).

Because Ireland does not levy estate/inheritance taxes on non-residents, and the US estate tax only looks at the domicile of the asset (which is now Irish, not American), the estate tax risk drops to effectively zero.

• Example of US Domiciled: Vanguard S&P 500 ETF (VOO) — Subject to 40% Estate Tax above $60k.
• Example of Irish UCITS: iShares Core S&P 500 UCITS ETF (CSPX) — Exempt from US Estate Tax.