US Estate Tax: How UAE Investors Can Reduce the Risk

By Sreekanth Pillai

If you hold US shares or US-domiciled ETFs, have you considered what happens to those investments after your death?

For your family, the challenge could include a tax liability, paperwork and delays in accessing investments. Planning ahead can help reduce that burden.

This article concerns investors who are neither US citizens nor US-domiciled for estate-tax purposes.

Understanding the exposure

An estate generally must file a US estate-tax return when US-situated assets, together with certain previous taxable gifts, exceed USD 60,000. This applies across accounts—not separately to each platform.

US company shares and US-domiciled ETFs generally fall within this exposure, even when held through an overseas broker. IRS guidance

Here are some planning options to discuss with qualified advisers.

1. Use non-US-domiciled ETFs tracking US indices

Investors can access US markets through ETFs domiciled outside the United States, including suitable UCITS ETFs.

With an appropriately structured foreign corporate fund, the investor owns non-US fund shares, rather than directly owning its underlying US securities. This can reduce US estate-tax exposure.

Check the fund’s legal domicile and structure. A USD trading currency or UCITS label alone does not establish its estate-tax treatment. IRS asset-location rules

2. Consider an appropriately structured insurance wrapper

Some investment-linked life insurance policies hold investments through an insurer, while the investor owns the policy.

An appropriate arrangement may mitigate US estate-tax exposure, but an insurance label does not guarantee protection. Obtain confirmation of the specific policy’s US tax treatment, ownership arrangements and death-benefit terms.

Also compare charges, surrender restrictions and insurer risk before committing.

3. Check treaty eligibility

An applicable US estate-tax treaty may provide relief. Neither the UAE nor India appears on the IRS estate and gift-tax treaty list, but some UAE residents may qualify through connections with another country.

Eligibility depends on the particular treaty and personal circumstances. IRS treaty list

4. Explore genuine lifetime gifts

For qualifying nonresident noncitizens, gifts of US corporate shares are generally outside US gift tax. However, gifting means genuinely giving up ownership, and other countries’ taxes or reporting requirements may apply.

US real estate follows different rules. Obtain advice before transferring assets. IRS gift-tax guidance

Make the process easier for your family

Joint accounts, wills and adviser support can help with succession arrangements, but a joint account does not itself remove US estate tax. IRS joint-property rules

Ask your platform what happens after an account holder dies: which documents are required, whether access is restricted and who will help the surviving family.

Keep investment records and adviser contacts accessible, and arrange emergency funds your family can access independently. Separate life insurance may help fund a tax liability without eliminating it.

For substantial US property or business holdings, obtain specialist advice before considering company or trust structures.

A good investment plan should prepare your family to access and manage the wealth you leave behind.

For general educational purposes only. This article is not tax, legal or investment advice. Suitability and tax treatment depend on individual circumstances. Obtain qualified advice before making changes.