USA / UK TREATY BASED ESTATE TAX RETURNS

Certain deceased nonresidents who were not citizens of the United States are subject to U.S. estate taxation with respect to their U.S.-situated assets. For estate tax purposes, a citizen of a U.S. possession is not a U.S. citizen.

U.S.-situated assets that are subject to estate tax include, for example:

  • Real estate located in the U.S.,

  • Tangible personal property (excluding some art), and

  • Stock of corporations organized in or under U.S. law, even if the nonresident held the certificates abroad or registered the certificates in the name of a nominee.

Examples of property treated as situated outside the U.S., and therefore not subject to the U.S. estate tax, include certain deposits and debt obligations described in Section 871(g)-(i), bank accounts deposited with a foreign branch of a domestic commercial banking business, and proceeds of life insurance on the life of a nonresident who is not a U.S. citizen.

Estate tax treaties between the U.S. and other countries often provide more favorable tax treatment to nonresidents by limiting the type of asset considered situated in the U.S. and subject to U.S. estate taxation. Executors for nonresident estates should consult such treaties where applicable. Treaties and tax information exchange agreements are viewable at the Department of the Treasury's Resource Center for Treaties and TIEAs.

An executor for a nonresident, not a citizen of the U.S. must file an estate tax return, Form 706-NA, United States Estate (and Generation-Skipping) Tax Return, Estate of a nonresident not a citizen of the United States PDF, if the fair market value at death of the decedent's U.S.-situated assets exceeds $60,000. See the Form 706-NA Instructions for more information.

U.S. citizens are subject to U.S. estate taxation with respect to their worldwide assets, even if they are not residents of the U.S. An estate tax return, Form 706, United States Estate (and Generation-Skipping) Tax Return, Estate of a citizen or resident of the United States PDF, is required for a deceased U.S. citizen if the fair market value at death of the decedent's worldwide assets plus the value of the decedent's adjusted taxable gifts exceeds the basic exclusion amount in effect on the date of death. For additional information, refer to the Instructions to Form 706 or to Publication 559, Survivors, Executors, and Administrators PDF.

The Internal Revenue Service may collect any unpaid estate tax from any person receiving a distribution of the decedent’s property under transferee liability provisions of the tax code.

 

Do you own property or assets in Florida such as vacation homes, US bank accounts, shares of stock, etc.?

Are you aware that the USA Internal Revenue Service (the "IRS"), can charge USA estate and/or USA gift tax on the estate of a deceased foreign national (including the estates of UK citizens who owns $60,000 or more in US situated assets?  

Have you lost a loved one who on the date of his or her date of death owned assets in the United States?  Most British and other foreign nationals who own US situated assets are not aware that on their deaths that their estates may, if the value of their US situated assets exceed $60,000,

 

 

 be required to make payment of US estate and /or gift taxes.  

The estates of Non-US residents who own U.S. situated assets must file estate tax returns!

Are you looking for assistance in dealing with the US estate tax return on the US situated assets of a deceased British citizen and possibly eliminating any US estate tax due?

If so, and if you are an executor, surviving spouse, trustee, or a beneficiary of such a person, it may be important for you (and especially so for those dealing with the person's US estate) to take legal advice from a US qualified lawyer experienced in dealing with these matters. Such a lawyer needs to be experienced in both the preparation of US estate tax returns and in relation to determining available treaty-based relief, and to be aware of the following described matters:

If a spouse or other family member of yours has died owning US situated assets the value of which exceeds $60,000, whether such includes shares of stock, rental homes, bank accounts, etc. or other assets, it may be very important to take care in seeking experienced legal counsel in order to determine all options possible in relation to any estate tax liability claimed against the estate and any gift tax on lifetime gifts, and to address any possible fines and penalties further to late submission of estate tax and/or gift tax returns.

Normally, when a foreign national owned US-situated assets, the estate shall owe US estate tax wherever the value of the deceased's US-situated assets exceeds a $60,000 "unified credit" available to the US estates of foreign nationals.  This can mean a charge against the foreign national's estate for USA estate tax.  A table can be found below providing how USA estate and gift tax is calculated depending on the nationality of the deceased and the value of the USA estate.  

Additionally, there is a treaty between the USA and UK which may provide a basis for reducing and, in many cases, totally avoiding any payment of US estate & gift tax on the foreign national's estate's US situated assets.  

Please contact us to address this with you in detail.


1.  The threshold amount at which a person's estate may be required to file a US estate tax return, and possibly a gift tax return.

 
Note:  The threshold amount of assets which triggers the requirement to file a US estate tax return and potentially a US gift tax return is dependent upon the law for the calendar year in which the person died and on whether the deceased was a (a) a US citizen or a US permanent resident, or was instead (b), a foreign national on the date of his or her death.


(1A).  If the deceased was either a US citizen or a US permanent resident, he or she is thereby entitled to a large "unified credit" for both estate tax and gift tax which is determined by the US government each year. The unified credit for calendar year 2019, such being $11.4 million per individual, was increased from $11.18 million in 2018.  It is important to note that the worldwide assets, and not just the USA situated assets  of a US citizen must be reported on a Form 706.  A deceased US citizen will not need to file or pay a US estate tax if the value of the estate is below $11.4 million dollars. 


(1B).  If the deceased was neither a US citizen nor a US permanent resident, he or she is subject to US estate          tax only on their USA situated assets.  However the estate would only be entitled normally to a $60,000 credit against US estate tax which will be charged against only the deceased's US situated assets.  Please note that a foreign national is only entitled to a $60,000 unified credit which results in only a $13,000 deduction from any applicable tax. 


(1C).  With regards to any annual lifetime gifts made by a foreign national, there is no unified credit available on death.  Like a US citizen, a foreign national can make gifts in any given year to an unlimited number of persons of no more than $15,000 for each individual person.