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Hidden US Tax Risks for Hong Kong Families – What Happens If Your Child Is a US Green Card Holder/ US Citizen?

Many Hong Kong families today have children who were born in the United States or educated there and have become US citizens. At the same time, it is increasingly common for Hong Kong individuals to invest in US listed stocks given the depth and liquidity of the US market. What is often overlooked is that these two factors—US‑citizen family members and US investments—can create significant and unexpected US tax exposure.

A common misconception is that “US tax does not apply because I do not live in the US.” In reality, the combination of US‑citizen beneficiaries and US‑situs investments can bring Hong Kong families within the US tax net in ways that are not immediately obvious.

To start with, the United States operates a fundamentally different tax system than that of Hong Kong, in the sense that a US citizen is subject to tax on worldwide income regardless of where they live. As a result, a child who is a US citizen will have ongoing US tax and reporting obligations even if he or she has no intention of living in the US long term.

Separately, many Hong Kong individuals assume that because they are not US residents, US tax is not relevant to their succession planning while in fact US estate tax may kick in because such individual may have assets which are treated as “US‑situated assets”. A typical example would be US shares (including US‑listed ETFs). This gives rise to a common but frequently misunderstood risk: even if the parent is not a US person, holding US stocks directly can expose their estate to US estate tax.

This is particularly significant because the estate tax regime for non‑US individuals is extremely strict. The exemption is only USD 60,000, and any excess may be taxed at rates of up to 40%. Many Hong Kong investors holding US shares through brokerage accounts (even if such account sits in Hong Kong) may therefore have an unintended US estate tax exposure.

The risk becomes more acute in a typical family scenario—where parents hold US investments, and upon their passing, those assets are intended to pass to a US‑citizen child. Without proper structuring, US estate tax may be imposed at the estate level before any distribution is made, and the child may also face ongoing US tax and reporting obligations thereafter.

To understand more, please discuss with our professional team:

Anna Chan, Partner, Head of Tax & Private Client
Email: anna.chan@oln-law.com

Joshua Maxwell, US Tax Attorney
Email: Joshua.maxwell@oln-law.com

Disclaimer: This article is for reference only. Nothing herein shall be construed as Hong Kong legal advice or any legal advice for that matter to any person. Oldham, Li & Nie shall not be held liable for any loss and/or damage incurred by any person acting as a result of the materials contained in this article.