The US Estate Tax Trap Most NRIs Never Hear About

Many NRIs, quite sensibly, want exposure to global markets.

The most common way they do it is by buying US stocks, or US listed ETFs, through an international brokerage.

It feels simple and low cost. But it carries a risk that very few are told about, and it has nothing to do with how the market performs.

It is US estate tax, and for a non-American investor it can reach 40%.

This is an awareness piece. The point is not to frighten you away from global investing, but to make sure you hold it in a way that does not expose your family to a tax most people never see coming.

What the Trap Actually Is

The United States taxes the estate of a non-resident who dies holding US situated assets.

For a US citizen, a large exemption applies -- around 15 million dollars in 2026.

For a non-American, that exemption is only 60,000 dollars.

Above that small threshold, the value of your US situated assets can be taxed at rates rising to 40% on death.

And here is the part that surprises people. US stocks, and ETFs domiciled in the United States -- the kind registered and listed there -- are treated as US situated assets, regardless of where you live or where your brokerage is.

Why Indian Investors Have No Treaty Shield

Some countries have an estate tax treaty with the United States that softens this.

India does not.

So an Indian passport holder building a global portfolio through US listed shares and ETFs has, in most cases, no treaty relief from this exposure at all.

A family could face a 40% claim on the US holdings -- on top of the grief of losing someone -- simply because of how those assets were held.

If you are building a global ETF portfolio, this is worth reading alongside our guide to building a global portfolio using ETFs.

It Is About How You Hold It, Not Whether You Invest Globally

The important thing to understand is that this is about how you hold the assets, not whether you should own them at all.

Global diversification is sensible. We have written about why home bias is a risk for NRIs choosing between India and global portfolios.

The exposure comes specifically from holding US situated assets directly. The same global exposure can often be obtained through funds domiciled outside the United States -- for example Ireland-based versions of the same index funds -- which are not treated as US situated assets. That changes the estate tax picture entirely.

In other words, you do not necessarily have to give up global investing. You have to be deliberate about the vehicle you use to access it.

What This Means for You

Know your exposure. If you hold US stocks or US listed ETFs directly, you are likely exposed above the $60,000 threshold.

Do not solve it with guesswork. Estate tax interacts with your residency, your structure, and your succession plan. It is genuinely specialist territory.

Treat the vehicle as a decision, not a default. How you access global markets deserves as much thought as which markets you choose.

This is precisely the kind of cross-border risk that a considered structure is designed to manage -- and it is an area we are building carefully for our clients.

The Takeaway

The headline risk in global investing is usually assumed to be the market. For an Indian investor holding US assets directly, a quieter and larger risk can sit in the estate tax rules.

The good news is that it is manageable, when it is planned for in advance rather than discovered too late.

If you hold global assets, or plan to, it is worth a conversation about how they are structured. A RuDo advisor can help you think it through.

Frequently Asked Questions