Everything you need to know about obtaining Federal Transfer Certificates

In the USA, a Federal Transfer Certificate is required to deal with assets that are:

owned by non-US citizens/residents and
worth over $60,000 at the date of death.

This includes selling or transferring shareholdings and closing bank accounts.

This blog covers the key facts about the process of obtaining a Federal Transfer Certificate, including when it’s required, how to obtain a certificate, and the essential documentation for a successful submission.

What is a Federal Transfer Certificate?

A Federal Transfer Certificate is a document issued by the USA tax authority – the Internal Revenue Service (IRS). Federal Transfer Certificates, also sometimes referred to as Form 5173, prove that Inheritance Tax clearance has already been obtained in the UK and therefore the assets held in the estate are exempt from Inheritance Tax in the USA.

What is the requirement for a Federal Transfer Certificate?

A Federal Transfer Certificate is required on estates where the Deceased owned assets in the USA worth over $60,000 at their date of death – this is a requirement if the Deceased was neither a resident nor citizen of the USA and died after 31 December 1976.

There is currently a double taxation treaty in place between the UK and the USA, meaning assets that have been included in the Inheritance Tax return in the UK do not also need to be declared in the USA; a Federal Transfer Certificate is not required if a Grant of Probate has been obtained within the USA.

Alongside a Federal Transfer Certificate, you may also need to obtain a Medallion Signature Guarantee to verify the transfer or sale of shares. Learn more about our service for obtaining a Medallion Signature Guarantee stamp.

How do I obtain a Federal Transfer Certificate?

To obtain a Federal Transfer Certificate, an application must be submitted (Form 706-NA) to the IRS along with the required supporting documentation – this includes the full UK Inheritance Tax return paperwork. The IRS will issue a certificate once investigations have been completed and they are satisfied that the tax imposed on the estate has been fully discharged or provided for.

If the Deceased was domiciled in the UK at the time of death with assets held in the USA, Title Research can assist with preparing and submitting the application documents. We can also assist with any queries that may be raised by the IRS whilst the application is being processed. To enquire about how we can help with Federal Transfer Certificates, click the button below:

What documentation is required to obtain a Federal Transfer Certificate?

In addition to a completed Form 706-NA, the following documentation is required for a successful Federal Transfer Certificate application:

A copy of the UK Grant of Probate or Letters of Administration
A copy of the death certificate
A copy of the Deceased’s passport or evidence of UK domicile at the time of death
A copy of a completed Form IHT205/400 and supporting schedules
Evidence of the US assets at the time of death
Copies of the invoices from expenses incurred during the estate administration (this includes invoices from Accountants, etc.)

How long does a Federal Transfer Certificate application take?

The processing of the Federal Transfer Certificate application is subject to Federal Government opening times and other delays, such as requests for further supporting documents. Professional Executors should expect that the process may take months, if not over a year.

How does this impact the UK Inheritance Tax return?

As a Federal Transfer Certificate is evidence of tax clearance in the UK, it is essential that the US assets have been included in the UK Inheritance Tax return at the time of filing. The US assets must be identifiable on the relevant form, depending on the return that was made for the estate. One Executor will need to be nominated as the lead Executor for the estate and it is to their name and address, as declared on the initial application, that the resulting Federal Transfer Certificate will be issued.

If the US assets are not declared in the UK Inheritance Tax return, a corrective account must be submitted to HMRC to include the assets. Then, the application for the Federal Transfer Certificate can be made – this may delay the estate administration process considerably.

Title Research can navigate the often-complex process of selling and transferring US shareholdings. If a Federal Transfer Certificate is required to obtain tax clearance from the IRS, we can take on this tedious task for you. We can complete this work as part of the share sale process or if you’re currently administering foreign shareholdings, we can offer it as a standalone service.

To find out more, call our Client Services Team on 0345 87 27 600 or fill in the form below and a member of our team will be in touch.

Topics: North America, Federal Transfer Certificate, Overseas Assets, US Shareholdings