Death of a US RSU holder: succession, repatriation, the $60,000 estate tax trap, and the documentation playbook

A Mumbai-based engineer in their early 40s held approximately $850,000 of vested US shares — Microsoft RSUs accumulated over 7 years, plus a Schwab brokerage with personal investments in NVDA, AAPL, and a few ETFs. They held nothing in joint name; everything was in their sole-name accounts with their spouse as informal "beneficiary" they'd mentioned but never formally designated. Schedule FA had been filed each year correctly. Form 67 / Form 44 claims had been current. Their CA was happy.

Then they died suddenly in a road accident in March 2025.

Six months later, their grieving family discovered:

• The $850,000 of US-listed shares were subject to US estate tax for non-resident aliens at potentially 18-40% rates on amounts above $60,000.
• The first $60,000 of US-listed shares in the estate was sheltered by the non-resident alien exemption. The remaining ~$790,000 was potentially exposed to US estate tax.
• There was no joint owner with right of survivorship on the accounts. No Transfer-on-Death (TOD) beneficiary designation. The shares could not be transferred to the spouse outside of US probate.
• The spouse had to file Form 706-NA (the US estate tax return for nonresidents) within 9 months of the death.
• The US probate process for non-resident alien estates took 9-18 months. During that time, the US shares were frozen — the spouse couldn't sell, couldn't repatriate, couldn't access.

The eventual US estate tax bill: approximately $190,000-$280,000 depending on the deductions claimed. The legal and accounting fees to navigate the dual-jurisdiction succession: approximately $25,000-$50,000. Total cost to the heirs: somewhere between $215,000 and $330,000 of value lost to estate tax + administration that could have been almost entirely avoided with proper pre-death planning.

This is the most consequential and least-known tax trap for Indian residents holding US shares: the US estate tax for non-resident aliens has a $60,000 threshold (versus $13.99 million for US citizens in 2025). Most Indian families have no idea this exposure exists until it materializes at death.

This article is the death + US RSU guide for Indian families. The structural mechanics are bilateral: India has no estate tax (abolished in 1985), but the US estate tax mechanism for non-residents is brutal. Proper planning before death reduces or eliminates this exposure. Without planning, families discover the exposure at the worst possible moment.

The $60,000 US estate tax trap

Under US tax law, the estate of a deceased non-resident alien (NRA) is subject to US federal estate tax on US-situs assets. The relevant numbers:

Estate tax detail	Value
Exemption threshold for US citizens (2025)	$13.99 million
Exemption threshold for non-resident aliens	$60,000
US estate tax rate brackets	18% to 40% (progressive)
Effective top rate (for estates over $1 million)	~40% on the excess

What counts as "US-situs assets" for NRA estate tax:

• US-listed shares (NYSE, NASDAQ) — including RSU shares
• US real estate
• US bank deposits (with specific exceptions)
• US tangible personal property located in the US at death

What does NOT count as US-situs:

• US-listed ADRs of foreign companies (sometimes — depends on specific tax treaty)
• US Treasury securities (held in certain ways)
• US-source income receivables
• Insurance proceeds (specific structure)

For most Indian RSU holders, the US-situs assets include:

Asset	US-situs?
Microsoft RSU shares (Nasdaq)	Yes — fully exposed
Apple shares from ESPP (Nasdaq)	Yes
NVIDIA shares from RSUs (Nasdaq)	Yes
Google shares (Nasdaq)	Yes
Personal Schwab/Fidelity brokerage holdings of US ETFs (e.g., VTI, VOO)	Yes
US 401(k) balance	Yes
US Traditional IRA balance	Yes
US Roth IRA balance	Yes
US bank checking account	Special rules apply — generally not US-situs for NRAs
US savings account	Same — generally not US-situs

The math is harsh. An Indian resident with $500,000 of US-listed shares dying as NRA has a US estate of $500,000 − $60,000 exemption = $440,000 taxable estate. At progressive rates that reach 40% at the top, the US estate tax owed is approximately $135,000-$165,000.

The India side: India abolished estate tax in 1985. There's no Indian estate or inheritance tax. The Indian heir receives the US assets after US estate tax has been paid.

The India-US estate tax treaty — what helps and what doesn't

The India-US tax treaty does NOT have a comprehensive estate tax provision. The general income tax DTAA (Article 4 residence tie-breakers, Article 11 dividends, Article 13 capital gains) does not extend to estate tax matters.

What this means practically:

• US estate tax applies based on US-situs rules, with no treaty relief for Indian residents
• The $60,000 NRA threshold is the structural limit
• The 40% top rate is the structural ceiling
• India provides no estate tax, but also no credit/relief for US estate tax paid (because there's nothing to credit against)

The only structural protection for Indian RSU holders is pre-death planning to reduce or eliminate US-situs exposure. The mechanisms exist; they require setup well before death.

Pre-death planning to reduce US estate tax exposure

The structural strategies to manage US estate tax exposure for Indian residents holding US shares:

Strategy 1: Joint Tenants with Right of Survivorship (JTWROS)

Mechanic: Hold US brokerage accounts jointly with spouse under JTWROS. On the death of one spouse, the surviving spouse automatically inherits the entire account outside of probate.

For US estate tax purposes:

• The entire JTWROS account is generally included in the deceased's estate unless the survivor can prove their contribution to the account (the "contribution rule")
• For most newly opened joint accounts funded entirely from one spouse's pre-marriage assets, this rule doesn't help much
• The benefit is operational (avoiding probate) rather than tax-reducing

Practical use: For estate planning + operational continuity. The shares pass to the surviving spouse without probate, but US estate tax may still apply.

Strategy 2: Transfer-on-Death (TOD) beneficiary designation

Mechanic: Add a TOD beneficiary to your existing sole-name US brokerage account. On death, the account transfers to the designated beneficiary automatically.

For US estate tax purposes:

• The TOD designation does not reduce the deceased's US-situs estate — the account is still in the deceased's name at death, so it's part of the NRA estate
• The benefit is purely operational — avoiding probate and transferring quickly to the beneficiary

Practical use: Operational simplicity. Most Indian RSU holders should have TOD designations on every US brokerage account regardless of other estate planning.

Strategy 3: Lifetime gifts to family members

Mechanic: Gift US shares to family members during your lifetime. The shares are then in the recipient's estate, not yours.

For US estate tax purposes:

• The shares are removed from your US estate
• The recipient's US estate exposure depends on their residency status

For Indian tax purposes:

• Gifts to "relatives" under Section 56(2)(x) are exempt from Indian gift tax
• For spouse gifts, Section 64 clubbing applies on future income (covered in Marriage + US RSUs)
• Gifts to children, parents, siblings — generally clean for Indian tax

For US tax purposes:

• US has gift tax for US-situs gifts; the NRA donor's gift tax annual exclusion is $18,000 per recipient per year (2024)
• Above the exclusion, US gift tax applies at 18-40% rates

Practical use: Gradual transfer of US assets to next generation over years, staying within annual gift exclusions.

Strategy 4: Convert US-situs assets to non-US-situs

Mechanic: Sell US-listed shares; reinvest in non-US-situs assets (Indian equity, gold, etc., or US-tax-exempt structures like certain Treasury securities held specific ways).

For US estate tax:

• Removes the assets from US-situs exposure
• Eliminates the $60,000 threshold concern

Drawbacks:

• Triggers Indian capital gains tax on the sale (Section 112: 12.5% LTCG if held >24 months)
• Loses the foreign-equity portfolio diversification

Practical use: For Indian residents with very large US holdings (>$1M) where US estate tax exposure is severe; the Indian capital gains tax on a strategic sale may be cheaper than the eventual US estate tax.

Strategy 5: Irrevocable Trust structures

Mechanic: Place US-situs assets in an irrevocable foreign trust before death.

For US estate tax:

• If structured correctly, removes assets from the NRA's estate
• Requires specific legal structure

Drawbacks:

• Legal and accounting setup costs $10,000-$50,000+
• Complex to administer
• Requires permanent loss of direct control over the assets

Practical use: For very high-net-worth Indian families ($5M+ in US assets) where the structural protection justifies the complexity.

Strategy 6: Diversify out of US-situs concentration

Mechanic: Reduce the absolute size of US-listed share holdings by diversifying into other geographies/asset classes.

For most Indian residents whose RSU concentration is the primary cause of large US-situs exposure, this is the most accessible solution. By reducing concentration in US-listed shares over time, the estate exposure shrinks proportionally.

The succession process when death occurs

If a US RSU holder dies without pre-death planning, the succession process is:

Phase 1: Death certificate and notification (Weeks 1-4)

• Obtain Indian death certificate
• Notify Indian employer
• Notify US brokerage (Morgan Stanley, Schwab, Fidelity, E*Trade)
• Begin gathering documentation

Phase 2: US estate administration (Months 1-9)

• Determine US-situs assets and valuations
• File Form 706-NA (US Estate Tax Return for nonresidents) within 9 months of death
• Pay US estate tax owed
• Obtain US estate tax closing letter

Phase 3: Asset transfer (Months 6-18)

• For accounts with TOD beneficiary: transfer to beneficiary
• For accounts without TOD: US probate process for non-resident estates
• Update share registration to heir's name (or sell and remit)
• Update Schedule FA disclosure for the heir going forward

Phase 4: Repatriation (Months 9-24)

• Once shares are in the heir's name, the heir decides hold/sell/transfer
• Repatriation to India through standard NRE/NRO mechanisms
• Indian tax on the heir's subsequent capital gains based on the heir's cost basis (typically step-up basis to FMV at death)

Form 706-NA — the US estate tax filing

Form 706-NA is the US estate tax return for non-resident aliens. Must be filed within 9 months of the date of death (extensions available up to 6 additional months for cause).

Key sections:

• Schedule A: Real estate located in US
• Schedule B: Stocks and bonds (US-listed shares — this is where most Indian RSU holders' exposure sits)
• Schedule C: Mortgages, notes, cash (US bank accounts)
• Schedule D: Insurance on decedent's life
• Schedule E: Jointly owned property
• Schedule F: Other miscellaneous property
• Schedule G: Transfers during decedent's life (gifts during the 3 years before death may be brought back into estate)

Valuation methodology: Assets valued at fair market value on the date of death OR on the alternate valuation date (6 months after death) — the executor chooses.

For RSU shares specifically:

• Vested shares: valued at the closing price on date of death × shares held
• Unvested RSUs: these typically forfeit on death; no estate inclusion

For 401(k) and IRA:

• These are US-situs assets and are included in the estate
• Step-up basis at death applies (for capital gains purposes if inherited and later sold)

What the heir inherits — step-up basis and Indian implications

For US tax purposes, the heir typically receives a step-up in basis equal to the FMV of the asset at the date of death. This means future capital gains for the heir are measured from the FMV at death, not the original cost basis.

For Indian tax purposes, the heir receives the asset with a cost basis equal to the decedent's original cost basis converted to INR (or in some interpretations, the FMV at death converted to INR).

The Indian tax position is contested for inherited US shares:

Position	Implication for heir
Heir's cost basis = decedent's original cost basis (INR-converted at original acquisition)	When heir eventually sells, capital gain includes the entire appreciation from the original purchase to current sale
Heir's cost basis = FMV at death (INR-converted at date of death)	When heir eventually sells, capital gain only includes appreciation from death to sale

The favorable position (FMV at death) is supported by some ITAT rulings but isn't definitively settled. Most CAs adopt the conservative position (decedent's original cost basis) for safety.

Practical implication: the heir's eventual sale may have significant Indian capital gains tax owed. Document the heir's adopted position and supporting reasoning.

Schedule FA for inherited assets

Once the heir takes ownership of inherited US shares:

• Disclose on the heir's Schedule FA from the date of inheritance forward
• Use the FMV at death (in INR per TTBR on date of death) as the "Initial Value" field
• Continue annual Schedule FA filing as long as the heir is an Indian resident

For the decedent's final ITR-2 (filed by the heir as legal representative):

• Schedule FA covers the deceased's foreign assets up to date of death
• Filed in the heir's capacity as legal representative
• The deceased's PAN is used; the legal representative signs

Documentation the heirs will need

If the deceased did proper pre-death planning, the documentation passed to heirs includes:

• Complete list of US brokerage accounts with account numbers
• W-8BEN forms on file for each account
• TOD beneficiary designations on file
• Last 3 years of US 1099-B, 1099-DIV, 1042-S
• Indian Form 16 from US employer for last 3 years
• All Schedule FA filings for last 8 years
• Brokerage cost basis statements for all holdings
• Indian PAN, Aadhaar of decedent
• Indian bank account details
• List of recurring obligations (mortgage, etc.)

If the deceased did NOT plan ahead, the heirs face the difficult task of reconstructing all of this from external sources during a grieving period. This is often the most expensive cost of the entire succession.

Five common errors in succession planning

1. Not knowing the $60,000 NRA estate tax threshold exists. The single most consequential gap. Indian RSU holders with $500K+ of US shares are massively exposed without realizing it.

2. No TOD beneficiary designations. Forces probate; delays transfer; increases legal costs by Rs 5-15 lakh.

3. Sole-name US accounts only. No joint ownership option; no immediate access for surviving spouse; weeks-to-months delay for basic operational needs.

4. Assuming Schedule FA shields succession. Schedule FA is disclosure, not protection. The US estate tax applies regardless.

5. Not documenting cost basis. Future heirs must calculate Indian capital gains using historical cost basis. Without documentation, they fall back to conservative positions that increase tax.

Diversification as succession planning

For Indian RSU holders concerned about succession exposure, diversification of US-listed concentrated positions reduces both the lifetime concentration risk AND the eventual estate tax exposure. The two problems share a single solution.

Rovia lets you transfer concentrated US employer shares from Morgan Stanley, Schwab, E*Trade, or Fidelity into a diversified portfolio without triggering a sale event. For Indian families thinking about succession risk specifically — where the goal is to reduce single-name US-situs concentration over time — this is structurally the cleanest approach. In-kind transfer preserves the foreign-equity asset bucket and original cost basis while diversifying away from the single-employer-stock concentration that drives the largest US-situs exposure.

Next in the series

Related life-event content:

• Getting married with US RSUs — joint ownership and gifting — pre-death planning starts here
• Divorce + US RSUs — division and tax treatment — court-ordered transfers and tax mechanics
• Sending kids to US college — LRS for education + tuition planning — LRS mechanics
• Buying a flat in India + US RSUs — how to save taxes — Section 54F exemption

Foundational references:

• Schedule FA disclosure guide — disclosure mechanics
• The Returning NRI playbook — for families dealing with US-Indian transitions

This article reflects US estate tax law and India tax succession framework through 2026. The $60,000 NRA threshold is set by federal law and unchanged in over a decade — not subject to standard annual inflation adjustments. The 18-40% rate brackets and overall structure have been stable. Pre-death planning is the only durable protection; we update this guide for any treaty or rule changes.

Critical disclaimer: estate planning involves complex legal and tax decisions specific to your circumstances. This article describes the framework but does not substitute for personalized advice from a US estate planning attorney and an Indian CA familiar with cross-border succession. For estates over $1M of US-situs assets, professional advice is essential.