Introduction
If the Deceased is a U.S. Citizen who is not resident in the USA as at the date of death, then a different procedure is used to obtain a Federal Transfer Certificate (sometimes called an “Affidavit in lieu”) if the world wide assets were below the Unified Credit Amount (also called the Exclusion Equivalent Amount) allowed for the year in which the Deceased died. The Amount changes from time to time for 2024 it is US$13,610,000), and so this can affect which course of action is to be taken. If the Deceased was a U.S. Citizen, please see the Section on U.S. Citizens – Affidavit in Lieu below.
The initial problem that you face when the USA assets of the deceased (which includes any shares, but excludes any bank account) have a date of death value exceeding US$60,000 as this (provided the deceased died domiciled in the United Kingdom (for Tax Treaty purposes) – or rather dies domiciled outside the USA) requires the filing of Form 706-NA with the US IRS in order to be able to receive the Federal Transfer Certificate which the share registrars require in order to transfer the shares into the names of the Executors.
Form 706-NA has to be filed to obtain the Federal Transfer Certificate (Form 5173), and only after that Certificate has been obtained (it will take about a year (by the admission of the US IRS) from the time that the Form 706-NA and all its supporting documents are filed with the US IRS until we receive the Federal Transfer Certificate), will you then be able to transfer the shares into the names of the Executors. Although as a matter of practice the US IRS has been taking far, far, longer than one year. We have cases where we are waiting for the Federal Transfer Certificate 4 years after filing the Forms with US IRS. It seems complaints make no difference to speeding up the process.
The rules relating to Federal Transfer Certificates provide that a Transfer Certificate is not required when the property of the Deceased is administered by an Executor or Administrator appointed, qualified and acting within the United States. In other words if a Grant of Probate or Letters of Administration (called an Ancillary Grant) is obtained in the USA based upon a Grant which has been obtained in the United Kingdom (or other Foreign Country)(see the section on USA Grants of Probate – Ancillary Grants below) a Federal Transfer Certificate is not required.
First of all – are the shares are book entry (electronic) shares, or paper share certificates, or a mixture? If they are already in electronic (book entry) form you will not have to deal with a missing paper share certificate.
If any of the shares are in paper share certificate form, they will have to be converted into electronic form before the shares can be sold or transferred, but this conversion will take place after the Federal Transfer Certificate has been issued.
The Form 706-NA has to be filed within nine (9) months of the date of death (although there is an automatic 6 month extension possible), as otherwise there might be penalties payable, but as we are claiming the benefit of the UK / USA Tax Treaty with the result that no US Estate Taxes are due and payable on the USA assets, we have not so far had anyone charged with such penalties even though the US IRS have the power to do so.
Most of the time we find that that it is only after the time limit has passed do the Executors even know about the need to file Form 706-NA, as they will have been concentrating upon obtaining the English Grant first, gathering in the assets and selling the same or distributing the same to the various Beneficiaries; and it is only after most of this has been completed that the Executor’s attention is drawn to dealing with any foreign assets (including the USA assets).
You should note that no transfer or sale of the shares can take place until we have received the Federal Transfer Certificate (Form 5173) from the US IRS (at least one year away), and only after we have received the same, will we be able to undertake the Medallion Guarantee process, and then transfer the shares into the names of the Executors or into the names of the Beneficiaries entitled to receive the same.
If there is an intention to sell some or all of the shares, again this cannot be done until the shares have been transferred into the names of the Executors (which again cannot occur until the needed Federal Transfer Certificate has been obtained).
You should also note that a Federal Transfer Certificate is not required if a Grant of Probate is obtained in the USA; and is not required for companies which are not incorporated in the USA even if the company’s share registrars are based in the USA.
The Process
Cadburys / Kraft / Kraft-Heinz / Mondelez
First of all (as mentioned in the United States article) Cadburys were taken over by Kraft (a USA company), and later on Kraft divided into Kraft Foods Group and Mondelez (also a USA company).
Kraft Foods Group (which has now merged with Heinz to form Kraft Heinz) may result in the need to have a Letter of Transmittal signed and a Medallion Guarantee affixed to transfer those shares in due time to the Executors; and as Mondelez is a USA incorporated company we need to know how many shares the deceased owned in Mondelez as the value of these shares (even though they can be sold in the UK without a Federal Transfer Certificate) has to be taken into account and disclosed on Form 706-NA.
The value of the Mondelez shareholding also has to be taken into account in the preparation and notarisation of the Affidavit of Domicile and as to US Assets (see our article on United States).
Information needed to prepare Form 706-NA
When the estimated value of the Deceased’s shareholdings exceeds US$60,000 as at date of death, then as mentioned, Form 706-NA will have to be prepared with its supporting documents, and filed with the US Internal Revenue Service (the “US IRS”) in order to obtain the needed Federal Transfer Certificate (also known as Form 5173) as the company registrars will not permit the transfer or sale of the shares to occur until the needed Federal Transfer Certificate has been obtained. As also mentioned, it will take a year to receive the Federal Transfer Certificate from the US IRS (by its own admission) from the time that all of the needed documents are filed and are accepted as being complete.
Once we have established the correct shareholdings of the deceased – we need evidence of the various shareholdings and mutual funds, and the date of death values (which are not calculated in the same way for UK probate purposes, but instead have to be calculated in accordance with US IRS requirements, which can be very complex), and we have received the needed total costs of the deductible items (see below), we will then be able to start preparing Form 706-NA and related documents for the US IRS, as we will then know accurately the extent of the deceased’s shareholdings in the USA company(ies). Please note that the valuation level of US$60,000 includes not just stocks and shares and investments, but also includes ALL assets in the USA as at the date of death such as real estate, cars, antiques and other personal items, but excludes bank accounts.
We will also need some more details in order to be able to finalise the numbers, namely:
(1) The legal fees incurred in the administration of the estate to date, and an estimate (if possible) of any additional fees that might be payable; and
(2) Any accountancy or other fees incurred in the course of the administration of the estate; and
(3) A copy of the account of the undertakers (we need to include this in the return to the USA IRS).
Can you please make sure that we have all the details as to debts etc, as we are entitled to deduct in the US Estate Tax calculation the following debts:
(a) Funeral expenses;
(b) Administration expenses, such as legal fees, disbursements, accountant’s fees;
(c) Claims against the Estate;
(d) Unpaid mortgages and liens (mainly against the US assets, but please give all details);
(e) Uncompensated losses such as losses from theft, fires, storms, and shipwrecks incurred during the administration of the Estate.
When in due time we file Form 706-NA and its related documents with the US IRS we will also need a complete copy of the following documents:
(i) Form IHT 421 (Probate Summary; and
(ii) The HMRC letter confirming (in effect) that all the inheritance taxes have been paid; and
(iii) Form IHT 301 (The Inheritance Tax calculation);
(iv) Form IHT 400 (The Inheritance Tax Account – at least pages 1 – 16); and
(v) Form IHT 411 (Listed Stocks and Shares) and attached schedules; or/and IHT 417 (Foreign shareholdings), and IHT 421; or
(vi) Form IHT 205 (2006) and its Schedules.
If you can send us photocopies of these documents (just simple photocopies will be sufficient), we can then start preparing some of the initial calculations for Form 706-NA while we wait to receive confirmation as to the shareholdings from the company registrars, unless you already have this confirmation – such as a recent dividend statement.
We will draft all of the needed documents that accompany the Form 706-NA filing (which includes an Affidavit of Domicile), and will submit them to you for approval, and then for signature and Notarisation, in due time.
When we file Form 706-NA we will at the same time claim the benefit of the UK/USA Tax Treaty, which should ensure that no US Estate Taxes are charged upon the shares; and even if for some reason the US IRS does wish to charge US Estate Tax, we try to ensure that whatever English Inheritance Tax has been paid on the shares is used to offset any claim for US Estate Taxes. Usually no claim for US Estate Taxes is made.
If you need our help, then once we have an idea of what will be involved, we will give you a fixed quote for the cost of doing the work – this fee will include our fees for transferring the shares as set out in our article relating to the transfer of USA shares. We operate on a fixed fee basis, although if extra unanticipated work is involved, we may ask for a review. The disbursements are likely to be the Medallion Guarantee fees which cost about £295 per company (as mentioned in our articles relating to Medallion Guarantees and to the USA), and other minor miscellaneous charges, such as £65 to cover postages including overseas postages; and the fixed charge of £30 for printing; the costs of the sealed and probate court certified copy of the Grant – HMCTS for £10; Notarial fees and the cost of the Apostille also have to be taken into account, but these will be paid by the Executors direct to the Notary. As you may be aware the Royal Mail’s registered mail/ recorded delivery supervision ends at the US border as the US postal service does not recognise foreign mail sent to a US address by
In addition to the above documents we also need photocopies of the Grant of Probate; the Will; and the Death Certificate and of any evidence of the shareholding in the name of the deceased such as a dividend statement and copy share certificates (if any), to enable us to get started in preparing the documents, and as we need to establish that the deceased was domiciled in England – we need this information for the Affidavit of Domicile (details of which are set out in our article about USA shares).
In order to prepare the Affidavit of Domicile we need details of the passport of the deceased. If you do not have those details we will have to write to the passport office and then use the reply as an Exhibit to the Affidavit of Domicile.
Bank Deposits
As mentioned above, bank deposits are not included in the Form 706-NA, and so these can usually be closed without the need for a Federal Transfer Certificate.
However, if the bank deposit is more than US$60,000, then the bank may well ask for either a Federal Transfer Certificate to be obtained (which is a different process for bank accounts from that set out above for stocks and shares), or the bank may require the UK Grant to be resealed (the banks sometimes call it “reprobated”) in the USA. Again we can help in this regard to obtain either the Federal Transfer Certificate or to reseal the UK Grant in the USA.
We have found that if the UK Grant is resealed in the USA, then once the Court Order appointing our lawyers as the local fiduciary for the deceased’s estate in the USA has been produced to the bank, the banks will close the deceased’s account fairly quickly and pay the monies to our local lawyers who have been involved in the resealing process.
U.S. Citizens – Affidavit in Lieu to obtain a Federal Transfer Certificate
If the Deceased was a U.S. Citizen and was not resident in the USA as at the date of death, then if the Worldwide assets of the Deceased exceed the Unified Credit Amount (also called the Exclusion Equivalent Amount) – which in 2024 is US$13,610,000 – then the usual Form 706-NA and its supporting documents must be filed with the US IRS in the usual way.
If the Worldwide assets of the Deceased are below the Unified Credit Amount (also called the Exclusion Equivalent Amount) then instead of filing Form 706-NA an Affidavit in Lieu has to be filed. The Affidavit has to be signed by the Executor, Administrator or personal representative and notarised.
The Affidavit is very detailed and must include:
(1) A list of all of the Worldwide Assets of the Deceased together with their date of death values;
(2) All taxable gifts (if any) made by the Deceased after 1976;
(3) For any USA bank or investment account, details of the account and its account number.
When filing the Affidavit with the US IRS all of the documents that accompany the Form 706-NA when it is filed with the US IRS must at the same time also be filed with the Affidavit.
USA Grants of Probate – Ancillary Grants
If it is possible to obtain a Grant of Probate or of Letters of Administration in a State in the USA (called an Ancillary Grant), then the need for a Federal Transfer Certificate is avoided.
The process to obtain the Ancillary Grant can be long and complex depending upon which State is used to issue the Ancillary Grant as some states can be very difficult. We have a State that we use, and it has proven to be very successful as by obtaining an Ancillary Grant it is possible for the whole matter to be completed in about 10 months or so, with the UK Executors at completion receiving the USA assets under their control in the United Kingdom. The Ancillary Grant process is more expensive than filing Form 706-NA but it does mean that matters move forward to a conclusion much quicker than waiting for the US IRS to process the Form 706-NA.
The problem that arises is making sure that the State Probate Court concerned is satisfied that it has jurisdiction over the assets of the Deceased in the State concerned. Generally speaking, we find that these issues can be overcome, but sometimes this is not possible such as dealing with a State Pension Plan or real estate, when you are forced to obtain a Grant in the State concerned which means in the case of Texas or California court appearances by our local agent, and court hearing delays. If such State proceedings are necessary the whole process can easily take a year to be concluded.
Many States also have a scale of charges with minimum amounts being payable to the local agent lawyer (generally about 5%) and while we are usually able to negotiate a reduction in such charges, this is not guaranteed and in some States (such as in Florida) there is a general refusal by the local lawyer agents to negotiate a reduction on the basis that the fees are set by law. We usually obtain a quote for the work by our local lawyer agents before the starting the work so that clients know what fee charges to expect in due time.