Renee Tiun
Renee, a foreign-trained attorney at Basswood Counsel, specializes in taxation, corporate law, and estate matters, bringing over a decade of experience from Malaysia and a client-focused approach.
Settling an estate of a loved one is a daunting task, as navigating the estate tax rules in the US can be unfamiliar and challenging to anyone, especially when an estate’s assets span multiple countries. This can be further complicated when the decedent is a nonresident person or a nonresident US citizen who owned US situated assets.
An important step in this process to transfer US situated assets to heirs and beneficiaries of a decedent’s estate is obtaining an IRS Transfer Certificate. US corporations, transfer agents, banks, trust companies, or other custodians will require this certificate before the decedent’s asset will be released; thus not obtaining a Transfer Certificate can cause significant delays in settling the estate. This article explains what a transfer certificate is, when it’s required, and how to obtain one.
What is a Transfer Certificate?
A Transfer Certificate or Form 5173, is issued by the IRS to certify that a US estate tax obligations of a deceased non-resident alien have been fully discharged. This certificate allows US financial institutions to legally transfer the assets of a nonresident decedent who is not a US citizen, preventing unauthorized or premature asset transfers.
The process of requesting a Transfer Certificate for a nonresident is dependent on a number of factors. Firstly, there are different forms to be filed for nonresident US citizens, and nonresident non-citizen decedents.
Nonresident US citizen decedent
Form 706 must be filed by the executor of the US citizen decedent whose gross estate plus adjusted taxable gifts and specific exemption is more than the unified credit of the year of the decedent’s death. The unified credit for year 2024 is $13,610,000 and $13,990,000 for year 2025. Therefore, if the decedent’s gross estate is valued more than the credit of the year of death, a Form 706 must be filed.
If the decedent’s gross estate plus adjusted taxable gifts and specific exemption is valued at less than the unified credit of the year of death, Form 706 is not required. Filing a Form 706 when it is unnecessary will only delay the issuance of a Transfer Certificate. Certain documents must be submitted to the IRS when a Form 706 is not required, such as the State Department Form DS-2060, Report of the Death of an American Citizen or the death certificate and a copy of the photo page of the decedent’s current U.S. passport or other proof of U.S. citizenship, an affidavit made under oath signed by the executor, administrator, or a personal representative of the estate, inheritance or death tax return, and other documents which may be required by the IRS. If any of the documents required are not available, a statement must be included to explain why.
Nonresident Not citizen decedent
The procedure to obtain a Transfer Certificate for a nonresident noncitizen is dependent on the value of the US situated assets. For US situated assets that exceed $60,000, Form 706-NA is required to be filed. For estates with US situated assets that are below the $60,000 threshold, the IRS will require certain documents to be filed, such as the decedent’s last will and testament, death or inheritance tax return; and an affidavit signed by the executor, administrator, or a personal representative of the estate. Similarly, if any of the documents required are not available, a statement must be included to explain why.
While the process can be paperwork-intensive and time-consuming, understanding the requirements and planning accordingly can help minimize delays. Executors and families are encouraged to consult with an experienced U.S. tax advisor or estate planning attorney to navigate the process efficiently and ensure full compliance with IRS regulations and avoid unnecessary delays.