Estimate what your US-situs assets are worth now and in ten years, and compare both with the current exemption.
If you hold US shares or US-listed funds, you probably know that the US gives non-resident aliens an estate tax exemption. Knowing the rule still leaves two questions about your own portfolio: how close you are to the line today, and in which year you would cross it if you keep investing as planned. An exposure worksheet answers both, using your latest statements, a spreadsheet and the current figure from the IRS website.
Before you start, gather four things: your sorted holdings list (likely US-situs, likely not, unsure), your latest statements, the current exemption figure from the IRS website, and a spreadsheet. The finished worksheet has four entries. The first is today's US-situs total, with unsure items on a separate line. The second is a ten-year projection with the growth rate and contributions written next to it. The third is the current IRS exemption and the date you checked it. The fourth is the first year the projection passes the exemption, or a note that it never does. Below those, you list the options you would look into and the questions you would ask.
Rachel sorted her holdings into likely US-situs, likely not and unsure in lesson 4.2, "Which of your holdings count as US assets". In lesson 4.1 she looked up the current non-resident alien exemption on the IRS website. Then her father asked whether they are anywhere near the line and when they would cross it, and she had no answer for him. All of her figures below are made up, including the threshold, so that nobody copies a number from her example into their own plans.
List every holding you marked likely US-situs. Next to each one, write its current market value in US dollars from your latest statement, then add them up. Rachel has two US company shares worth US$12,000 and US$8,000 and a US-listed ETF worth US$25,000, so her likely US-situs total today is US$45,000.
Put unsure items on their own line rather than leaving them out. Rachel's unsure line is US$3,000 of US dollar cash, which she keeps separate from the US$45,000. If your unsure items are large, run the whole exercise twice, once with them and once without, so you can see the range.
If you keep adding to your portfolio, it won't stay at today's value, so you need to project it forward. In your spreadsheet, make a table with one row for each of the next ten years. Each row takes last year's total, grows it at a modest rate, and adds that year's planned US-situs contribution. Label the growth rate as an assumption, since the aim is only a rough idea of when you might cross the line and a modest rate is enough for that. If you're unsure what rate to use, add a second column at a lower rate.
Rachel plans to add US$6,000 a year to her US-listed ETF. She assumes 4% growth a year, labels it as a made-up assumption, and assumes each contribution goes in at the end of the year. Each row is last year's total x 1.04, plus 6,000. After year 1 she has about US$52,800. After year 2 it is US$60,912, after year 3 US$69,348, after year 4 US$78,122 and after year 5 US$87,247. By year 10 it reaches US$138,648.
To check year 10, use the formula: today's total x 1.04^10 + yearly contribution x (1.04^10 - 1) / 0.04. For Rachel this gives US$138,648, which matches her table. You can also use the future value worksheet from How money works, lesson 6.4, "Build your time value of money worksheet".
Put the current exemption in a single cell. Compare today's total and every projected year against it, and note the first year the projection passes it.
Rachel's example uses a made-up threshold of US$80,000, which is not the real exemption. Her US$45,000 today is well below it. Her projection passes it during year 5, at about US$87,247, which is about five years from now if today is the start of year 1. By year 10 she is about US$58,648 over the line (138,648 - 80,000), and all of that excess would be taxable at the graduated rates covered in lesson 4.1.
On your own worksheet, replace the made-up threshold with the real current exemption from the IRS website, and write the date you checked it next to the figure. If your projection never passes the exemption, record that along with the growth rate and contributions you used. Rerun the projection every year, because your contributions, the growth and the exemption itself can all change.
Under your result, write down the options you would look into. People in this position usually consider these four:
holding funds domiciled outside the US, such as Irish-domiciled UCITS ETFs, for new money keeping US-situs holdings below the exemption making sure the family has the cash or cover to pay the tax and wait out the process described in lesson 4.3 getting professional advice on more complex structures
The course does not tell you which one to use. Each has its own costs and trade-offs, and Module 5 covers the fund domicile option in detail. For now, your worksheet should hold options and questions only. Next to each option, write the questions you would want answered before choosing it, and leave the decision for later.
Rachel finished her worksheet in forty minutes, and most of that time went on hunting for one fund's prospectus.
Now fill in your own worksheet with your holdings and the real exemption figure, and write down the year your projected US-situs assets would pass it, if they do.
Fill in the exposure worksheet. If your projected US-situs assets would go over the current exemption, write down the year that happens.
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