Most tax efficient way of investing in Berkshire

[CharlieMac]

Owning US stocks can expose you to US estate tax liability.

What's the most tax efficient way of investing in Berkshire?

This was posted in another thread by @ClubMan.

"presume that such companies also trade in the form of instruments (ADR/ADSs or something similar?) that are not held in the US so that the US Estate Tax issue becomes moot?"

Where can you buy these?

Berkshire Hathaway can be bought in euro or dollars. But neither way would shield you from us estate taxes would they?

Is the (40%) tax on the entire holding or just investment gains?

Does the liability only fall on a spouse or anyone who inherits the stocks? I've read conflicting information on this site and others.

To avoid this tax... Irish domiciled ETFs or using an EU based broker?

 

[ClubMan]

To avoid this tax... Irish domiciled ETFs or using an EU based broker?

Some (many it seems) people use another way to avoid it...

Pretty interesting article on the avoidance of US estate tax by non-US citizens -
http://www.cnbc.com/2015/11/03/why-foreigners-ignoring-this-tax-could-be-costing-us-billions.html

In reality, US Estate tax would only arise if the Executors went out of their way to pay it.

 

[rob oyle]

Berkshire shares are listed in Frankfurt (in Euro) too, so buying there doesn't expose you to US-related taxes.

 

[jpd]

No, it doesn't - you are still exposed if the company has its HQ in the USA

 

[Corola]

Is the (40%) tax on the entire holding or just investment gains?

The entire US holdings, with the first 60k exempted.

 

[Corola]

Presume that such companies also trade in the form of instruments (ADR/ADSs or something similar?) that are not held in the US so that the US Estate Tax issue becomes moot?

There are no ADRs for Berkshire. ADRs (American Depositary Receipts) are for foreign stocks trading in the US.

If you were highly motivated to avoid tax then an unleveraged CFD is not subject to US estate tax, but you wouldn't own the shares anymore.

 

[Steven Barrett]

Owning US stocks can expose you to US estate tax liability.

What's the most tax efficient way of investing in Berkshire?

This was posted in another thread by @ClubMan.
Where can you buy these?

Berkshire Hathaway can be bought in euro or dollars. But neither way would shield you from us estate taxes would they?

Buying stocks and the overriding concern is death?!! How about the investment?

There is a $60,000 limit. Do a quick google research and see how much the IRS loses out in taxes due to foreign nationals not paying estate tax on death.

Put the account in a joint name and if you die, the other person just takes out the money.

 

[Brendan Burgess]

Buying stocks and the overriding concern is death?!! How about the investment?

It is a very serious concern. Many people who buy and hold for the long-term will own these stocks when they die.

If you directly own shares in companies, your CGT liability will disappear on death.
If you own an investment fund, it will be subject to 40%(?) exit tax.
If you own Berkshire Hathaway shares you will be subject to US Estate Taxes.

One solution is to sell the shares before you die, but in that event, you will face Capital Gains Tax, which, otherwise, would disappear on death.

 

[Steven Barrett]

It certainly wouldn't be my overriding concern Brendan. It would be a consideration alright, especially if the intention is to hold them for the rest of your life* but I would be more interested in the quality of the company.





*Unless extremely wealthy, what is the point in buying shares with no intention of selling them and enjoying the money from them.

 

[Brendan Burgess]

*Unless extremely wealthy, what is the point in buying shares with no intention of selling them and enjoying the money from them.

Not sure what counts as extremely wealthy.
But many people will be leaving their home and substantial assets to their estate.

The fact that someone has €500k in investable assets at age 90 doesn't count as a mistake in my part. Just because you have money, doesn't mean you have to spend it.

 

[CharlieMac]

I appreciate both perspectives.

On the one hand it makes sense to live your own life, this tax doesn't arise until you die.

But I personally would like to build enough wealth so I could pass some on to others.

Put the account in a joint name and if you die, the other person just takes out the money.

I suppose the best scenario for this is if you have a spouse otherwise awkward taxation issues might arise?

For instance if you chose to sell any of the investment while you're alive to fund your own lifestyle, but the other name on the account was someone other than a spouse who you do not have joint finances with for income tax and tax credit purposes?

 

[AAAContributor]

I suppose the best scenario for this is if you have a spouse otherwise awkward taxation issues might arise?

Be very careful with joint accounts.

If there is joint property ownership where the surviving joint owner is a non-US Citizen, the general rule is that the Estate of the deceased joint owner must include the entire value of the property in the gross estate, unless the executor can establish proof of their contribution to purchase/maintain the property.

If US FET is a genuine concern and something that needs to be planned for, planning really needs to be looked at based on the assets and personal circumstances of each case. There is no one-size-fits-all approach.

Leaving shares to children directly in the Will (from a sole account) would be one workaround (with the Group A threshold used up with lifetime gifts), so that children can get the benefit of the credit for US tax (or one could look at skipping a generation).

More info re joint accounts and US FET:

The impact of US Federal Estate Tax (US FET) for Irish Investors | Davy

This insight discusses how US investments held directly in a portfolio can lead to a US FET exposure and what steps can be taken to mitigate the position.

www.davy.ie

Federal Estate Tax in Ireland; A Lurking Menace?? Blog256

www.informeddecisions.ie

 

[AJAM]

Most tax efficient way of investing in Berkshire​

Owning Berkshire directly is already incredibly tax efficient.

• Berkshire does not pay a dividend so there are no dividend taxes.
• It's not a UCTIS fund so no 41% exit tax.
• You only pay 33% CGT on gains when you sell
• You can offset this gain against any other losses you have
• You personally will never have to pay estate taxes

So just buy it directly. If estate taxes are the main thing you are worried about then really you should be asking a different question i.e. what's the best way to leave money to my.....