US estate tax for non-resident aliens

6 min · For educational purposes only

A non-US-resident Indian who dies holding US stocks faces US estate tax at up to 40% on the value above USD 60,000. Most investors are blindsided by this.

The exposure

If you, a non-resident alien from a US tax perspective, die owning US-situs assets — directly held US stocks, US-domiciled ETFs, US real estate — your estate is liable for US federal estate tax. The exemption is USD 60,000. Above that, rates progress to 40%.

A USD 1M direct US equity portfolio could face a US estate tax bill north of USD 300,000 before anything passes to your heirs. The India-US treaty does not have an estate-tax article covering this — there is no relief on the way out.

What is US-situs

Directly held US stocks and ADRs
US-domiciled ETFs and mutual funds (regardless of underlying)
US real estate
US-issued bonds (with some exceptions for portfolio debt)

What is not US-situs

Irish-domiciled UCITS funds that hold US stocks (Irish situs, not US)
IFSC AIF units that hold US stocks (Indian situs)
Cash in US bank accounts (specific exemption for non-resident aliens)

Key takeaways

USD 60,000 exemption is the cliff; above it, rates progress to 40%.
Structure choice — direct US, UCITS, IFSC — determines situs, not the underlying.
There is no treaty relief on estate tax for Indians.