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  • Living in Cayman and investing in US stocks via Interactive Brokers

I live here in Cayman permanently as a full time resident. I use an Interactive Brokers account to invest in stocks, bonds and ETFs. I formed the account on the .co.uk IB website.

I’ve just been thinking about some estate planning stuff lately. I’m looking for some info from someone who might have some experience in this stuff. My worry is that because the assets I own are considered US situs assets that if I die my spouse might be required to pay estate tax on the assets we hold in the Interactive Brokers account. I know there are some simple work arounds like investing in non-US domiciled funds like Irish ETFs and that sort of thing but I don’t like those as there’s very little trading volume so the bid ask spread is rather wide.

If anyone here has any suggestions or advice it would be welcomed.

    caribinvest The fact that your IB account is with InteractiveBrokers.co.uk doesn't matter as far as situs assets are concerned. Technically if you're directly invested in anything thats deemed US domiciled your estate can get caught up in the tax net for estate taxes on your death. This is why often times people will invest in like you said non-US domiciled ETFs. I'm assuming you're not an American based on what you're saying here so there are some alternative things you can consider.

    The simplest way to own US situs assets to avoid any estate taxes on death is to own them though a Cayman company. You'd need first form a Cayman company (doesn't have to be a Cayman company any offshore jurisdiction would suffice). Then you'd need to establish an IB account in the name of the company that you'd use to purchase financial assets. Assets held in this company would be shielded from US estate tax. On your death in your will you would outline how you would like the ownership shares in the offshore company to be distributed among your beneficiaries.

    You could also look to layer in additional features like adding a trust so that the company shares are owned by the trust. This would allow you to avoid probate in Cayman on the shares in the company that holds your financial assets.

    I'm not a lawyer so don't take this and run with it. Be sure to discuss with a lawyer or accountant in advance as your circumstances could be unique and require some additional planning.

      8 days later

      Thank you appreciate the feedback. I've decided to establish a structure to hold my Cayman assets so that my beneficiaries can avoid any estate taxes on my passing. This seems to be the goto solution the more I looked into this.