Broker Liability , U.S. Estate Tax on Investments

NotSureIf2024

I’m dealing with an estate that had significant investments in equities, mostly in U.S. shares. The broker handling these investments never informed the deceased of the potential U.S. estate tax liability, which we now know to be a staggering 40% of the U.S. share portfolio’s value.

Given the severe tax implications, I’m questioning whether this could ever have been considered a prudent investment choice. Can the broker be held liable for negligence, misappropriation of funds, or a lack of duty of care?

I’ve already consulted two tax accountants who believe it’s not the broker’s responsibility, arguing that an estate planner should have been involved. However, is there any law or regulation that explicitly states brokers are absolved from a duty of care regarding future tax liabilities, particularly in cases where they are aware of the investor’s potential estate planning needs?

I’m looking for insights or any relevant legal precedents that might clarify whether brokers have any fiduciary responsibility to inform clients about significant tax risks like this?

Peregrinus

Is this broker in Ireland or in the US?

Also, much would depend on what service the broker was providing (and was paid to provide). What this an execution-only service, in which you tell the broker what stocks and bonds you want, and they buy them, and are remunerated by commission? Or did they also provide investment advice, for a fee? Or was this a comprehensive wealth management service, in which they assisted the client in financial planning, devised and investment strategy to acheive the client's objectives, and then managed a portfolio of assets in accordance with that strategy (for a fat fee)?

Obviously, the amount of tax advice you could reasonably expect in these three different relationships would vary wildly.

Might be worth trying to get your hands on the client services agreement or similar between the deceased and the broker. It will likely detail the services and service levels the broker was to provide.

Tow

This issue with US Federal Estate Tax on shares is only going to grow with CRH moving their listing to the states. Many people have small holdings in them and are none the wiser. My understanding is that 40% tax is even due on the death of a spouse, as there are no exemptions or allowances for Non US Citizens, and no Irish CAT to offset against.

Peregrinus

SFAIK small holdings aren't a problem. A non-domiciled non-US citizen can leave a US estate of up to US$60,000 free of estate tax.

Nermal

This tax is routinely ignored. What makes you think you should pay it?

Marcusm

https://www.boards.ie/discussion/comment/122560990#Comment_122560990

CRH shares are Irish situate assets for US federal estate tax purposes so the position should not have changed ex ante.