Should Swiss investors worry about the US Estate Tax in 2025?
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Many think investing in the United States Exchanged Traded Funds (ETFs) is dangerous. They believe that because of the US Estate Tax, they will lose a lot of money. This tax will heavily tax the assets of a decedent.
The US estate tax means that your beneficiary will only get a portion of your estate when you decease. Because of that, many people recommend not investing in American ETFs (or even stocks).
But is that even true? Not really! Indeed, many people forget about the US-Switzerland double taxation estate tax treaty.
In this article, we detail the US Estate Tax and the US Estate Tax Treaty with Switzerland. And we see what this means for Swiss investors.
The US Estate Tax
In the United States, when an estate is transferred from a deceased person, the beneficiary has to pay a tax on this estate.
This estate tax is a United States federal tax. It means it will apply everywhere in the United States. In addition to that, some states have added extra inheritance taxes. And some states have removed the estate tax. However, we will focus on the US Federal Estate Tax since this is the one that matters in our case.
This US Estate Tax law taxes inheritance at 40% of the estate’s value. It is a very significant estate tax. It is among the top estate taxes in the world.
For American citizens, estates of up to 13.99 million dollars (as of 2025) are exempted from the US Estate Tax. This exemption is adjusted every year for inflation. It means that most American investors do not care about this law. Very few investors have estates worth that much money.
However, this law also applies to non-resident aliens. It means it applies to everybody who invests in US products. And unfortunately, the large exemption of 13.99 million dollars only applies to US citizens.
Non-resident aliens only have an exemption of only up to 60’000 dollars. It means that if you have US assets valued at more than 60’000 dollars, you must pay this estate tax. You will not be paying this tax, but it will be the beneficiary of your estate, likely your spouse.
So this means that if you invest in a US ETF, you will be subject to estate tax. In general, this means that if you have more than 60’000 USD in US ETF, your beneficiaries will lose 40% of this value. It is a very significant tax. This loss could be terrible if your beneficiaries rely on your portfolio.
Because of that, many people assume that they should not invest more than 60’000 in US ETF. But this is not true in Switzerland!
The US Estate Tax Treaties
The United States has many tax treaties with other countries in the world.
The United States has two kinds of tax treaties:
- Income Tax Treaties
- Estate Tax Treaties
For this current problem, we are only interested in estate tax treaties.
These treaties can change how citizens of other countries are taxed either on income or on the estate. In the case of estate tax treaties, these treaties generally provide better conditions for foreign citizens.
The United States has about 60 income tax treaties currently. But they only have 15 estate tax treaties. And fortunately for us, Switzerland is on the list. It means that this treaty must be considered if we want to consider the US Estate Tax.
If you are interested, you can find the list of US Estate Tax Treaties from the IRS. This list should be kept complete.
The US Switzerland Estate Tax Treaty
In 1951, the United States and the Swiss Confederation signed an estate tax treaty. To this day, this treaty is still valid. And this tax treaty is perfect for Swiss investors that have US assets.
The official name of the tax treaty is “Convention between the Swiss Confederation and the United States of America for the avoidance of double taxation concerning taxes on estates and inheritances”.
What does this mean for Swiss investors? First, this treaty works both ways. There are some exemptions for Swiss people regarding US taxes, and there are some exemptions for Americans regarding Swiss taxes. But here, we are only interested in exemptions for Swiss people.
The law article states that decedent citizens of Switzerland (or domiciled in Switzerland) have a right to a certain proportion of the same exemption that would apply to a United States citizen. We saw before that this exemption was 13.99 million dollars.
The critical part is the proportion. It is relatively easy to figure out. It is the proportion of US assets in your entire net worth. You divide the value of your assets in the US by your entire estate value, and you will get your proportion of US assets. We also run some examples to make that clearer.
If you want all the details, you can read the original 1951 US Swiss Estate Tax Treaty (in German). It is a relatively short read. And I would say that for an official document, it is a straightforward document.
Examples
We can give a few examples to make it simpler:
- The decedent’s estate is one million dollars, with 200’000 dollars in US assets and the rest in Swiss assets. The decedent has 20% of US assets. It means he can get an exemption of up to 20% of 13.99 million, 2.798 million dollars. So, his beneficiaries will not pay any US taxes.
- The decedent’s estate is 2 million dollars, with 1.8 million dollars in US assets. The decedent has 90% of US assets. So, he can get an exemption of up to 90% of 13.99 million, which is 12.591 million. Therefore, there will not be any US estate taxes.
- The decedent’s estate is 25 million dollars, with 2 million dollars in US assets. It means the decedent has 8% in US assets. So, he can get an exemption of 8% of 13.99 million. This is an 1.119 million USD exemption. His beneficiary must pay US estate taxes on 0.88 million dollars (2 million minus the exemption). His beneficiaries will pay about 352’000 USD.
As you can see, most investors will pay no US Estate. In fact, if your total net worth is below the exemption, you do not have to worry about this tax.
We can take a final example of my situation. Once I retire, my net worth should be about two million CHF. I expect to have a house for about 300’000 CHF, 100’000 CHF in cash, and the rest in my investment portfolio. And my portfolio is currently 80% in US assets. So I will have 80% of 1.6 million CHF in US assets. This is 1.28 million CHF in US assets. It is 64% of my entire estate.
So, I will get an exemption of 8.953 million dollars. It is much more than the value of my US assets. Therefore, I do not expect to pay any US Estate Tax.
The exemption may change in 2026
The current large exemption is partly due to a change in 2017, the Tax Cuts and Jobs Act (TCJA). This almost doubled the exemption at that time.
Unless there is a change by the US Congress, the exemption will go back to normal in 2026. This means we will go from about 14 million to about 7 million USD.
While this is a significant difference, this remains a huge exemption. So, I am not worried about this change. It is also entirely possible that there will be new tax changes until then. We still a net worth of more than 7 million to get taxed if the act is reversed in 2026.
What happens on death with US stocks?
Some people are also worried about what would happen in case of death with US stocks, especially on a foreign broker. I have discussed that matter with Interactive Brokers to be clear on exactly what needs to be done.
On death, no US assets can be distributed by Interactive Brokers until they receive some information about the estate tax. And there are three cases for that:
- If you have less than 60’000 USD in US assets at the time of death, then a simple letter, signed by the heirs, stating that the US assets are below the limit is enough.
- If you have more than the limit of the US-Swiss estate tax treaty (13.99 million USD currently), you must fill a 706-NA form and send it to the IRS. Once this is received and processed, the IRS will send you a transfer certificate. Sending this certificate to IB will let you disburse the assets. It is important to know that it may take more than a year to get the transfer certificate.
- If you have more than 60’000 USD but less than the exemption of the tax treaty, the situation will be faster. You must fill both 706-NA and 8833 forms and send them to the IRS. Then, you need to send a copy of these two forms to IB, with a letter signed from the heir (or executor) stating that these two forms have been properly filed with the IRS. This will be faster because you do not have to wait until the IRS comes back to you.
Unless you fall in category 2, it should be fast and relatively straightforward to get back your assets. In category 3, you will have to fill some IRS forms, but they are both only two-pagers.
Conclusion
For Swiss investors, the US Estate Tax is of little concern! Switzerland and the United States have an excellent estate tax treaty.
This treaty says that Swiss investors can be treated like US citizens. It means that Swiss investors can get an extensive exemption. This exemption is still prorated based on the percentage of US assets in your net worth at your death.
There are only very few cases where you would even pay this tax. It is only when you have a substantial net worth (more than 10M).
So, Swiss investors do not have to worry about investing in US assets. United States ETFs are still the best ETFs available to Swiss investors.
Residents of another European country can see if their country has an estate tax treaty with the United States. If they have, you can try to find details about how this will impact you. If they do not, you will only be exempted up to 60’000 US dollars. And you should probably avoid having more than that in US assets.
Talking about US ETFs, you may want to learn about why Swiss investors may lose access to them.
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Thank you for the awesome article!
I am an Indian Citizen living and working in Switzerland on B-permit for last 4 years. Will the treaty apply to non-swiss citizens like me? Your article mentions “domiciled in Switzerland” – is there a technicality to it? Or living situation like me satisfies the domiciliary aspect of the treaty.
Hi Vivek
I am not aware of any technicality. This should apply to all Swiss residents that pay taxes in Switzerland.
There could be other treaties between India and Switzerland or US, but I have not heard about such cases.
Dear Baptiste,
Thank you for explaining in such of a understandable way! I found out some interesting info regarding the IRS certificate from Charles Schwab. They told me that you have to to a transfer certificate for sure with a joint account if you are a non-resident US or non-US citizen, and as well for the remaining spouse when they die. This is regardless of the amount of the account. the reason is the expat status so the IRS is sure they will receive their estate tax. I read in an article that the IRS puts a lien on U.S. stocks and blocks them until the case is cleared.
I just thought I would pass this along to you.
Hi Barbara,
You are welcome, I am glad my articles are well understandable :)
Thanks for sharing the details from Charles Schwab! It can be inconvenient indeed, but it does make sense from a tax point of view. IBKR would do the same and prevent distribution of assets before they have enough information.
Dear Baptiste,
Thank You Very Much for your article “Should Swiss investors worry about the U.S. Estate Tax in 2025?” as I found it useful on interpreting the application of The U.S. Switzerland Estate Tax Treaty.
I do have one specific question I am seeking your clarification on. I am a US Citizen domiciled in CH, married to a Swiss citizen, and the majority of our Investment Portfolio is in US Assets. With this if I were to pass away first and our US Assets would transfer to my spouse upon my death, would the same examples you have given for Descendent Estates apply to my spouse, and then when he/she passes away, also apply to our Trust Beneficiaries?
Thank You in advance for your feedback on this and any other relevant information you can share on the above situation. Very Much Appreciated, MQ
Hi MQ
I am glad you liked it.
I don’t know what would happen when you pass away since you are a US citizen. But when you first pass away second, I think everything will apply the same way since she is a Swiss citizen. The fact that you are a US citizen should not matter in this case.
Thank You Very Much for your quick feedback on my question Baptiste, it is much appreciated.