As the saying goes, there’s nothing more certain than death and taxes. That phase comes to life, pardon the expression, when a person dies owning property. If the property is located in the United States or is consider “U.S. property” at the time of the owner’s death, even if the deceased was a non-resident foreigner, the property is subject to U.S. Estate Tax and an estate tax filing must be made.
One tidbit: shares in a company that is incorporated in the United States, even if traded on a non-U.S. stock exchange, are U.S. property; shares in a non-U.S. company, even if traded on a U.S. stock exchange, are not U.S. property.
Let me say up front that even the U.S. Internal Revenue Service acknowledges that U.S. estate tax is a particularly complex area of an already complicated U.S. tax system. To make matters worse, U.S. estate tax is also constantly changing.
US estate tax law assumes that all inheritance and transfer-on-death regimes operate as in the United States. Of course, that is not true. Many countries do not have “estates” as we understand them here. Regardless of how those who are responsible for handling the property of a deceased person are legally required to operate in their own countries, if they learn that the deceased owned “U.S. property” at death, they need to address U.S. estate tax compliance.
When U.S. property is involved, foreign “estates” must address a number of questions. Is the “estate” required to file a U.S. estate tax return? If the “estate” is required to file a return, when is it due? How is that done? What assets should be included or excluded in the “U.S. estate”? Who has to file a return on behalf of the “estate”? How are the assets valued? Does the deceased’s country have a gift and estate tax treaty with the U.S.? Is it advantageous? Is the estate or any of its beneficiaries now subject to other taxes within the U.S.?
Tax professionals can help navigate the US estate tax system. Going it alone on U.S. estate tax compliance is not wise. That is what we do: help people understand U.S. estate taxes, take advantage of the U.S. gift and estate tax treaty regimes where relevant, and reduce the stress of tax compliance. For foreign persons handling U.S. estate taxes, expert assistance can save time, money and hassles with the U.S. tax authority, the Internal Revenue Service.
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