By Anthony Allsopp, Head of Business at Title Research
Recently, we have provided several articles that address the various nuances surrounding US assets held in UK estates:
This article summarises the main points from each of these to detail the associated risks and pitfalls that an Executor or Administrator should be aware of.
It can be tempting to push assets that you’re not familiar with to the bottom of the pile and, despite best intentions, every practitioner I have ever spoken with has one such file.
Start the process early on
Dealing with UK shareholdings is relatively pain-free and fast, with the only potential complication arising if it is a requirement to replace missing certificates and obtain indemnities. There are no tax treaties to be concerned with and dealing with UK share registrars can be fairly easy as the legal language is the same and is understood. When dealing with US shareholdings, even just reaching a position of understanding of their value can be challenging and this is of course, ideally, a requirement for making the initial Grant application. Unfortunately to prove legal authority, a US transfer agent will require a copy of the UK Grant, more specifically, a court sealed and certified Grant. If the asset values are unknown and the Grant application hasn’t been made as a result, this presents a catch-22 situation with the less-than-ideal resolution being to apply for the Grant and submit a corrective later.
When a Grant is available, corresponding with a transfer agent by post is time-consuming. Replies are usually received 5-6 weeks after submission as letters will be returned in the most economic way possible i.e. by sea and not by air. It can take a similar amount of time to obtain a new holding statement for an account and 3 months to arrange a transfer of ownership. If it is ascertained that Federal tax clearance is required, then it is likely that the shares will not be encashed for two to three years.
IRS timescales are not favourable currently, and this will likely not improve due to the impending election process in the US. Many Government institutions have shut down for this period, including the IRS, and so we anticipate backlogs and timescales will worsen as a result.
In summary on timescales, whilst it is theoretically possible to arrange transfer and sale of a US holding in 6-8 weeks (in this scenario, there must be no tax treaty application required and a current holding statement readily available from the outset, along with a Grant – plus a fair wind behind any third parties that need to be involved), it can often take many months or years to fully complete the process and this, from a client perspective, can be hard to reconcile.
Ensure that dividends are paid into bank account
In scenarios where timescales are not favourable, the risk of assets escheating to state ownership worsen. There are limited ways to prevent this process:
- Fully transfer ownership of the holding before escheatment occurs
- Place an escheatment block on the holding (a maximum period of 180 days is applicable for transfer agents, although some investment companies can put longer blocks in place)
- Register activity on a shareholding by cashing dividends
From the points above, the first may not always be possible and the second may not be sufficiently long enough should tax clearance be required. However, cashing dividends registers activity on a shareholding account and will mitigate the risk of escheatment almost fully.
Compliance
There are numerous different forms required by transfer agents that must be completed correctly or face rejection. Given that all transfer forms must carry a Medallion Signature Guarantee, which carries a direct and indirect cost to obtaining, it is important that all forms are completed accurately or as above, the transfer will be rejected, and the process must be started again.
It is also important to ensure that any relevant forms are supported by other required documents that are within an acceptable date range. For example, a US transfer agent will likely reject the legal authority of a Grant if it is not dated within 6 months. This too can lead to the transfer request in its entirety being rejected.
We hope you have enjoyed this series of articles on US assets and should you have any matters that you require assistance with, we can be contacted here…
If you’d like to find out more about how Title Research can help you retrieve escheated assets or administer North American shares and funds, call our Client Services Team on 0345 87 27 600 or email fill in the form below.
Topics: North America, Overseas Assets, US Shareholdings
