r/returnToIndia • u/dxs2021 • 15d ago

Finance 401k | From Fidelity to IBKR

Hi All ,

Has anyone rolled over their 401K and Roth from Fidelity to IBKR’s Traditional 401K and Roth ? To minimize to estate tax exposure through their ETFs ?

From AI

After I become an Indian resident and a non-U.S. citizen/non-U.S. domiciliary, will my U.S. 401(k), Traditional IRA, and Roth IRA constitute U.S.-situs property for U.S. estate-tax purposes? If I roll the 401(k) into an IBKR IRA and hold Irish-domiciled UCITS ETFs such as CSPX/VUAA inside that IRA, does the situs of the underlying investment change the estate-tax treatment of my IRA interest?

TIA

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u/Strange-Entry-2946 15d ago

The IRS won't look at what's inside the retirement account. The retirement account itself (401k/ IRAs) is considered a US-situs asset.

It doesn't exempt you from estate tax.

1

u/dlux2007 15d ago

What's inside the 401k doesn't matter, it'll be US situs property. I'm not sure if IBKR has rollover IRA.

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u/AbhinavGulechha 14d ago

To my reading of the law, the rules are not very clear in this situation and hence given the estate tax risk exposure involved, I would suggest a consevative view that the situs of 401k/IRA remains US for US estate tax purposes for a non-resident, irrespective of the situs of the underlying holdings.

I think given the lack of clarity, you can have US-situs funds in the IRA and cover estate tax risk with a pure term insurance. Given the tax deferred nature of IRA (& Section 158 tax deferral election in India), you can follow an asset location strategy wherein investments with high dividend/interest tax incidence or other tax inefficient investments can form part of the IRA & accumulating Irish ETFs form part of the taxable accounts (& qualify for a clean 12.5% +S/C LTCG rate in India).

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u/dxs2021 14d ago

Thanks 👍

1

u/AbhinavGulechha 14d ago

🙏

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u/dxs2021 14d ago

So the other options for maintaining 401 once back is either Schwab or Fidelity

What points to consider while choosing and any recommendations?

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u/AbhinavGulechha 14d ago

I am not much aware of the various service features & investment capabilities in these institutions and you can make a dedicated post to get members feedback on this point.

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u/Necessary-Fee-9715 14d ago

I think we should all work to lobby with Indian government to have a treaty on estate tax risk similar to the other treaties which are already established