The United States imposes estate taxes on assets deemed to be located in the country (“U.S. situs assets”). For non‑resident alien investors the exemption is only about $60 000, meaning that the vast majority of a $10 million U.S. stock portfolio would be subject to a progressive estate‑tax rate that can reach 40 %.
Switzerland offers a unique treaty‑based solution. As a tax resident of Switzerland you can claim the same estate‑tax exemption that a U.S. citizen enjoys—approximately $13.6 million (the figure in force at the time of this analysis). This raises the exemption from $60 000 to $13.6 million simply by establishing Swiss tax residency.
US estate‑tax basics
- U.S. situs assets: stocks, real estate, and other property considered located in the United States for estate‑tax purposes.
- Non‑resident alien exemption: roughly $60 000 (subject to change).
- Tax rate: progressive, up to 40 % on the value above the exemption.
The Swiss‑US estate‑tax treaty
- Switzerland is one of the few jurisdictions with an estate‑tax treaty that provides a full‑citizen‑level exemption to Swiss residents.
- The treaty is clear‑cut: a Swiss tax resident can apply the $13.6 million exemption without ambiguity, unlike some other treaty partners (e.g., Ireland) where domicile status can affect applicability.
- The exemption is calculated using a proportionality rule that also considers the holder’s Swiss assets; if a person holds no Swiss assets, the full exemption may apply.
Additional Swiss tax advantages
- No federal inheritance tax. Inheritance tax, where it exists, is levied only at the cantonal level; selecting a canton without cantonal inheritance tax eliminates this burden.
- Capital‑gains tax: Generally not levied on movable assets (shares, bonds, crypto) for non‑professional traders. This allows tax‑free growth of a diversified portfolio while residing in Switzerland.
- Lump‑sum tax regime (optional): Provides a predictable, low‑tax residency option, but the estate‑tax benefits apply to regular Swiss tax residents as well.
Practical considerations
- Treaty expiration risk: The $13.6 million exemption stems from the 2017 Tax Cuts and Jobs Act, which is set to expire in 2025 unless renewed by Congress. Even if reduced, the exemption would remain substantially higher than the $60 000 non‑resident level.
- Professional advice required: Implementing the treaty benefits correctly involves complex calculations (proportionality rule) and proper structuring of assets (e.g., blocker corporations, trusts). Consultation with an attorney experienced in international estate planning is essential.
- Choice of canton: To avoid cantonal inheritance tax, select a canton that does not impose such a tax. Federal inheritance tax does not exist in Switzerland.
- Asset type limitation: The capital‑gains exemption applies only to movable assets. Real estate and other immovable property remain subject to Swiss taxation rules.
Comparison with other treaty partners
| Country | Estate‑tax treaty with US | Swiss‑type exemption | Notable limitation |
|---|---|---|---|
| Switzerland | Yes | $13.6 M (citizen‑level) | Requires Swiss tax residency |
| France | Yes | Lower exemption; French taxes may offset US benefits | French residence taxes can erode gains |
| Ireland | Yes (non‑dom regime) | Treaty applicability uncertain for non‑doms | Interpretation issues; lower exemption |
Decision criteria for high‑net‑worth individuals
- Exposure to U.S. situs assets: Significant holdings in U.S. equities or real estate increase estate‑tax risk.
- Desire for tax‑efficient wealth transfer: Swiss residency offers a high exemption and eliminates federal inheritance tax.
- Willingness to relocate: Permanent tax residency in Switzerland (or a suitable canton) is required to activate treaty benefits.
- Tolerance for complexity: While the treaty simplifies estate planning, professional structuring (trusts, corporations) may still be advisable for asset protection.
In summary, establishing tax residency in Switzerland can dramatically increase the U.S. estate‑tax exemption from $60 000 to over $13 million, eliminate federal inheritance tax, and provide capital‑gains tax relief on movable assets. Prospective residents should evaluate the longevity of the exemption, select a canton without cantonal inheritance tax, and engage qualified legal counsel to ensure optimal structuring.
