Most discussions about investing in US stocks focus on returns, diversification, or taxes on dividends and capital gains.

Those are the taxes investors see every year.

But there is another rule that almost never comes up in discussion among Indian investors. It only becomes relevant at the time of death.

But when it applies, it can have a meaningful impact on how assets are passed on to the next generation.

Estate tax and the limit of $60,000

The United States levies estate tax on assets located within the country when the owner passes away.

For US citizens and residents, the exemption is very large – over $15 million as of 2026.

For non-US investors, including Indian residents, the exemption is just $60,000.

This means if an Indian investor passes away while holding more than $60,000 worth of US-situated assets, the estate may become subject to US estate tax.

US-situated assets include:

• Shares of US-listed companies
• US-listed ETFs
• ADRs traded on US exchanges

Even if the brokerage account is opened from India, these securities are still considered US assets for estate tax purposes.

Example

Suppose an investor has built a $500,000 portfolio of US stocks.

At the time of death:

• The first $60,000 is exempt
• The remaining $440,000 may be subject to estate tax

The tax is paid by the estate before the assets can be transferred to heirs. In practice, this usually means filing a US estate tax return and settling any liability before the brokerage releases the assets.

The estate tax rates

The tax itself is tiered as per IRS, meaning the rate increases as the taxable amount grows.

For larger estates, the effective rate can approach 40%.

Since this rule mainly affects investors who directly hold US stocks or ETFs.

In earlier chapters, we discussed structures such as UCITS-domiciled funds, which are typically based in jurisdictions like Ireland or Luxembourg.

In those cases, the investor does not directly own US securities. Instead, they own units of a fund domiciled outside the United States.

Because the legal asset is the UCITS fund unit rather than the US stock itself, these structures are commonly used by international investors to avoid exposure to US estate tax.

This is one example of why, in cross-border investing, the structure through which you invest can sometimes matter as much as the investment itself.