Ancillary Probate and Administering a Nonresident’s US-Situs Assets

The issue

A succession administered in Munich, Lyon or Zurich often includes US property: a condominium, a brokerage account, shares of US corporations, a share in a Delaware company. US custodians, title insurers and recorders act only on an authority they can verify, and custodians release nothing until they are protected against the federal estate tax, whose lien attaches to the gross estate at death and lasts ten years (I.R.C. § 6324). The two requirements run on separate clocks, and the IRS publishes no processing period for the certificate where a return has been filed.

Who the guide is for

The guide addresses executors under a foreign grant, a German Testamentsvollstrecker, heirs whose title rests on an Erbschein or an acte de notoriété, and the notaries and attorneys at the domicile, as well as the US counsel and custodians who deal with them.

Which assets need a US proceeding

Real property is conveyed under the law of the state in which it is situated, and title insurers will not insure through a foreign will that no court there has admitted, so real property almost always needs a proceeding; Florida, the District of Columbia and Maryland offer routes short of full ancillary administration in defined cases. Financial assets are released by institutions, which differ in what they accept whatever state law permits. The guide therefore places a written canvass of every custodian before any petition.

Who may be appointed in six states

Ancillary administration rests on the domiciliary record, apostilled and translated. Florida, New York, California, the District of Columbia, Maryland and Virginia differ on who may serve, what a foreign will must satisfy and where the ancillary estate goes. Florida admits a nonresident only within a defined circle of relatives and gives no effect to a nonresident’s holographic will; New York requires a resident co-fiduciary for a non-domiciliary noncitizen; California accepts a person living outside the United States only as the executor the will names; the District of Columbia and Maryland bar non-citizens who lack permanent residence; Virginia requires consent to service and bond with surety.

The statutory executor, Form 706-NA and the transfer certificate

The duty to file and pay exists from the date of death whether or not anyone petitions a US court, and a representative who pays other debts before the federal tax is personally liable to that extent (31 U.S.C. § 3713(b)). The guide covers the automatic extension of time to file on Form 4768, which does not extend the time to pay, the pro rata deductions and treaty disclosure on Form 8833. Custodians avoid liability only by obtaining the transfer certificate (Treas. Reg. § 20.6325-1); for estates below the filing threshold the IRS states twelve to eighteen months. Property administered by an executor acting in the United States needs no certificate, so ancillary letters also serve as a tax release.

The estate tax treaties

For a treaty-country domiciliary, the treaty decides what tax the administration secures; the Code governs only where no treaty applies. The domicile-type treaties leave the United States real property and permanent establishment property, with tangible movables added for France. The German and French treaties and the estate tax article of the income tax treaty with Canada also allow a pro rata share of the unified credit and relief for a surviving spouse. The situs-type treaties with Switzerland, Italy, Japan, Finland and Australia keep US shares in the tax base subject to a proportionate exemption, which the treaties with Ireland and South Africa do not provide. The guide maps all fifteen treaty partners, then covers income tax, FIRPTA and sequencing.

The questions the guide answers

• Which US assets can be collected without a court proceeding where they are located, and which cannot?
• Who may be appointed in each of the six states, and on what agent and bond requirements?
• Who must file Form 706-NA and pay the tax if no US executor has been appointed?
• How is the transfer certificate requested, and when is it not needed?
• Which assets may the United States still tax under each estate tax treaty, and how is the home-country credit coordinated?
• How are the estate’s income tax and a sale of US real property handled during the administration?

The firm acts for foreign executors, heirs and fiduciaries on the US side: it obtains the custodians’ requirements, conducts ancillary proceedings in the six states with local counsel where needed, prepares Form 706-NA including treaty claims and the pro rata credit, requests the transfer certificate and handles the estate’s income tax and FIRPTA filings. The work is coordinated with the court, notary or executor at the domicile, which receives the US figures for its credit.