US Estate Tax Risk for Non-US Holders of US Stocks: The US$60,000 Threshold and Rate Schedule
Many Hong Kong investors keep a close eye on dividend withholding but overlook a much bigger risk: US estate tax. If you hold US stocks or US-domiciled ETFs directly, they may be subject to US federal estate tax when you die, at a top marginal rate of 40%.
Who is affected?
When someone the IRS calls a "nonresident not a citizen" (NRNC) dies, US estate tax is calculated on their US-situated assets. The IRS states plainly that stock of a corporation organised under US law is a US asset no matter where the share certificates are kept. So Apple, Tesla or VOO bought through a Hong Kong broker still count as US assets.
The US$60,000 threshold
Under the instructions for Form 706-NA, if the value of the decedent's US-situated assets at the date of death (plus adjusted taxable gifts) exceeds US$60,000, the executor must file Form 706-NA within 9 months of death. Note that US$60,000 is a filing threshold. When the tax is actually calculated, a nonresident gets a maximum unified credit of US$13,000, which happens to equal the tax on a US$60,000 taxable estate under the rate schedule.
Unified rate schedule (IRS Form 706, Table A)
| Taxable estate over | But not over | Tax on lower amount | Rate on excess |
|---|---|---|---|
| $0 | $10,000 | $0 | 18% |
| $10,000 | $20,000 | $1,800 | 20% |
| $20,000 | $40,000 | $3,800 | 22% |
| $40,000 | $60,000 | $8,200 | 24% |
| $60,000 | $80,000 | $13,000 | 26% |
| $80,000 | $100,000 | $18,200 | 28% |
| $100,000 | $150,000 | $23,800 | 30% |
| $150,000 | $250,000 | $38,800 | 32% |
| $250,000 | $500,000 | $70,800 | 34% |
| $500,000 | $750,000 | $155,800 | 37% |
| $750,000 | $1,000,000 | $248,300 | 39% |
| $1,000,000 | — | $345,800 | 40% |
Worked example
Mr Chan dies holding US$300,000 of US stocks with no deductions. Tentative tax = $70,800 + ($300,000 − $250,000) × 34% = $87,800. After the $13,000 unified credit, the estimated US estate tax is about US$74,800, roughly a quarter of the holding.
Does a treaty protect Hong Kong residents?
The estate tax treaty countries listed by the IRS include Australia, Canada, the United Kingdom, Japan and Germany, among others. Hong Kong is not on the list, so Hong Kong residents are generally taxed under the nonresident rules above.
Hong Kong itself abolished estate duty under the Revenue (Abolition of Estate Duty) Ordinance 2005 for deaths on or after 11 February 2006, but US estate tax can still apply to US-situated assets such as US stocks.
Common ways to manage the risk
- Consider replacing some US-domiciled ETFs with UCITS ETFs domiciled in places such as Ireland. The IRS states that stock of non-US corporations is generally not a US asset.
- Note that US bank deposits not connected with a US trade or business are generally treated as located outside the US (see the 706-NA instructions).
- Keep your estate paperwork in order and make sure your family knows the accounts exist. Releasing US assets often requires an IRS transfer certificate, which can take a long time.
This is a simplified explanation. It leaves out details such as deductions apportioned by worldwide assets. If significant sums are involved, please consult a cross-border tax professional.
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- IRS：Instructions for Form 706-NA (Rev. 09/2025)
- IRS: Instructions for Form 706 (Table A, Unified Rate Schedule)
- IRS：Estate tax FAQ for nonresidents not citizens
- Inland Revenue Department: Estate Duty (Revenue (Abolition of Estate Duty) Ordinance 2005)
Facts checked on 16 October 2026. This article is general information only and is not tax, legal or investment advice.