E275 US Professional Executor for Federal Transfer Certificates

<p>Many non-US heirs need a professional executor to get federal transfer certificates.</p> <h2>What is a federal transfer certificate?</h2> <p>It is an IRS document, specifically, <em>Form 5173</em>. It is used to confirm through the IRS that there is no estate tax due, or it’s already been paid. The certificate allows the financial institution off the hook for taxes.</p> <p>In absence of this, they can be liable! For example, lets’ say E*Trade has a brokerage account for a decedent who was a non-resident, non-citizen. If any tax was owed, but E*Trade releases the funds prior to the tax being paid, then E*Trade owes the IRS those taxes. This transfer certificate is the IRS’s way of letting E*Trade know that it is safe to release the funds to the executor or heirs. Because of this liability, banks and brokerages will not release the money without this certificate.</p> <h2>When is a federal transfer certificate required?</h2> <p>First, the decedent should be a non-resident alien (NRA). Second, the decedent’s assets must be US assets: stocks, real estate (but not bonds, cash, checking account, etc.).</p> <p>The executor must send the certificate to the financial institution, or else the bank cannot and will not release funds.</p> <p>If estate is large enough that it requires a federal estate tax return (706NA), just file the return instead using the federal transfer certificate. After filing the federal estate tax return, you will receive a closing letter from the IRS stating that they agree with your return and that the matter is closed. You can take the closing letter to the bank, and they will release the funds without the federal transfer certificate. You do not need to do both.</p> <p>Recently, we’ve found that some institutions interpret to mean that if there there is a US professional executor (as opposed to a foreign executor), then no federal transfer certificate is needed. Hurray! Right? Unfortunately, this is usually not the case. Even if the law has changed, most financial institutions have not caught u