Understanding US Federal Estate Tax (FET) exposure for executives holding US stock

US Federal Estate Tax (FET) may apply to the estate of an Irish-resident individual who was not a US citizen but held US-situated assets at the time of death. These assets include US real estate, cash held with US brokers, shares in US corporations, and US-domiciled Exchange Traded Funds (ETFs).

Executives employed by US multinational technology companies are increasingly compensated through substantial stock-based remuneration. For Irish tax residents, this can create a significant – and often unrecognised – exposure to US FET.

There will be a charge on the value of the US estate above the exempt amount of US$60,000. Where US FET applies, the tax rate starts at 18%, rising to 40% for estates with taxable US assets exceeding US$1 million. Unlike the position in Ireland, a spousal exemption does not automatically apply unless the recipient spouse is a US citizen.

Where the US FET spousal exemption is not available, the transfer of US assets on death between spouses will be subject to US FET. As there is no Capital Acquisition Tax (CAT) on gifts or inheritances between spouses in Ireland, this US FET exposure results in tax leakage.

For US citizens or individuals domiciled in the US, the position is very different. Their entire estate, not just US-situated assets, is subject to US FET. However, a substantial exemption of approximately US$15 million (2026) applies for US individuals. In addition, there is an unlimited marital deduction for transfers to a surviving spouse who is a US citizen. As a result, most estates belonging to US individuals do not incur US FET.

At Davy, we frequently meet clients who have accumulated substantial company stock and now face two key challenges:

• An overconcentration in employer stock, presenting long-term financial planning and diversification issues; and
• A potential US FET liability, which may be significant and is often overlooked.

With enhanced information-sharing under the Foreign Account Tax Compliance Act (FATCA) and tighter W-8 reporting requirements, the IRS is now significantly more effective at identifying non-US individuals who hold US-situated assets.

What can be done to mitigate the position?

While it is important to recognise and manage potential exposure to US FET, this should be balanced against ensuring the most suitable investment strategy for your overall financial objectives and personal circumstances. In some cases, there can be minor housekeeping adjustments made around how and where the US assets are held which can help to mitigate the administration risks.

Next steps

Through our financial-planning-led approach, we work with clients to identify potential exposure to US FET and determine the most appropriate course of action, in collaboration with legal and tax advisers.

If you currently hold US equities through your current or former employer, or if you are considering investing in them, please contact your Davy adviser.

If you are not a Davy client, a conversation costs nothing, why not book a consultation?