Wealthy Indian families are looking for ways to shield their growing U.S. stock portfolios from the threat of a 40% inheritance tax imposed by the American government, which has the potential to affect any assets over $60,000. Some are seeking permission to form offshore trusts or buy insurance wrappers to cover the tax.
According to the Economic Times, some are treading legal grey areas in their attempts to keep their assets. Resident Indians cannot gift U.S. stocks bought under the liberalized remittance scheme (LRS) to their children in the U.S. Under the LRS, Indian residents can currently remit up to $250,000 per financial year for permitted overseas investments, including equities.
Also, opinions differ whether they can gift the cash from stock sale and encashment of stock options and restricted stock units (RSUs) to their relatives in the U.S. Also, after a person’s death, their successors can own stocks only after paying an inheritance tax.
“There are no easy solutions. Some may violate the Foreign Exchange Management Act (FEMA). Gifts are allowed only to resident relatives as defined under the Companies Act.
READ: ‘Watching my parents through FaceTime’: US citizen considers returning to India with $3M savings (May 26, 2026)
It may mean divesting 90% of the owner’s net worth in many cases — only to shift the inheritance tax burden,” said Rutvik Sanghvi, partner at Rashmin Sanghvi & Associates, which specializes in international tax and FEMA.
Solutions like ring fencing through foreign “insurance,” or settlement in a trust would require prior permission under FEMA.
Sanghvi also told ET the severity is missed as transfers may escape scrutiny now, but on exit, the sale proceeds have to be remitted back to India, and the bank can block the funds then due to the initial FEMA violation.
One possible solution to this is a person giving U.S. stocks during their lifetime to children before the latter leave to study or settle in the U.S. However, this rarely happens.
READ: Indian American entrepreneurs launch AI-powered tool for investment advisors (January 2, 2026)
Moin Ladha, partner at law firm Khaitan & Co, said the rich are considering approaching RBI for restructurings to migrate holdings into institutional or trust-like structures rather than leaving assets in individual ownership, as well as for substantial overseas life insurance products to offset potential inheritance tax liabilities.
“The challenge is that cross-border wealth, immigration planning and exchange control compliance cannot be addressed in silos. Any such structure, particularly where funds are being moved for immigration-linked investments, must be FEMA compliant. The real risk lies in reactive, last-minute structuring,” said Ladha.
Some families are also rearranging their wealth specifically to back children applying for the American EB-5 investor visa. However, aggressive wealth-transfer strategies could face regulatory scrutiny later.