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Internal Revenue Service requirements for US shares administration

Internal Revenue Service requirements for US shares administration

Internal Revenue Service requirements for US shares administration

Do overseas executors need to be concerned about reporting US assets to the Internal Revenue Service?

For most estates, there will be a requirement to comply with the Internal Revenue Service (IRS) reporting procedures when dealing with the administration of US shares. Executors will also be required to complete the forms requested by the transfer agents for the death registration. If these forms are not completed correctly, the asset may become subject to 28% withholding tax.

For estates where the value of the US assets at the date of death exceeded $60,000, the executors or administrators of an estate will have to apply for federal tax clearance from the IRS.

This is unfortunately a long process, usually taking between 6 – 9 months – sometimes much longer. It is also something which is not often listed as a requirement by the transfer agents when you initially contact them for assistance. When it is mentioned, they usually refer to a, “Form 5173 Transfer Certificate”. Many people find that they are only told about this requirement once they lodge all the completed forms. As it takes such a long time to be arranged, reporting the US assets to the IRS should be attended to as soon as possible.

Will US estate tax be payable?

If the deceased was domiciled within the UK and not a US citizen, generally, no US estate tax will be payable on the US shares due to the Double Taxation Agreement between the US and the UK. However, there is still the obligation to apply for the clearance certificate by lodging the US estate tax return (usually form 706-NA and supporting forms and documents).

If the deceased was domiciled in the Republic of Ireland, US estate tax may be payable, as the Double Taxation Agreement between the Republic of Ireland and the US works differently to that with the UK. If the US estate tax is not paid within the IRS time limits, interest and penalties will start to accrue.

How can Lester Aldridge assist with this kind of administration?

With our contacts at the IRS and experience of their procedures, our International Probate Services team would be pleased to assist you in arranging to obtain Federal Tax Clearance.

Please contact us at +44 (0)1202 786194 or 786118 for an initial discussion about your matter, or email us by clicking below:

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