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Foreign domiciled US Citizen decedent can probate US Will in any state ?

Discussion in 'Estate Administration & Probate Court' started by Oko Nomimono, Feb 12, 2021.

  1. Oko Nomimono

    Oko Nomimono Law Topic Starter New Member

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    US citizen passes away in Japan. Spouse, the sole beneficiary of a US-Minnesota executed will, is also a US citizen. Spouse goes through the Japanese legal process (very fast!) to succeed to the sitius assets (bank accounts, home, personal properties). The assets of the decedent in the USA (bank and brokerage accounts, no real properties) are also valued as part of the world-wide-estate and taxed in Japan inheritance tax return for the suriving spouse and sole beneficiary.

    Now the widowed spouse is ready to come back to USA. Which state is suitable (no state inheritance taxes -- the estate is much under the federal estate tax limit) for her to return and deal with the financial assets (bank and brokerages) in the USA ?
     
  2. army judge

    army judge Super Moderator

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    Here are some articles that CLAIM to offer a person useful information.

    Get a List of States Without an Estate Tax or an Inheritance Tax

    Does Your State Have an Estate or Inheritance Tax?

    States With No Estate Tax Or Inheritance Tax: Be Strategic Where You Reside

    State-By-State Estate And Inheritance Tax Rates

    https://www.kiplinger.com/slideshow...-estate-taxes-or-inheritance-taxes/index.html
     
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  3. Tax Counsel

    Tax Counsel Well-Known Member

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    Army Judge gave you a list of links that deal with state death taxes. The problem though is that you are not asking about a good place for spouse to move to keep the taxes low on her estate when she dies, which is where those links would be useful. Rather, as I understand it, you are asking how the woman will deal with the US assets her now deceased spouse left behind.

    The answer to that depends on the details of those financial accounts (and you indicated that only financial accounts are involved, no real estate, tangible personal property, intellectual property, etc). The most common way people pass their financial assets to others in the US is by making a pay on death (POD) beneficiary designation on the account. The POD beneficiary designation is made with the financial institution that holds the account and directs the financial institution whom to pay when the account owner dies. So if he made POD beneficiary designations on these accounts it will be very simple; she provides proof of death of the account owner and the institution then transfers those assets to the named beneficiaries.

    If that was not done, and the financial accounts were also not in a trust, then they may need to be probated. Since he was domiciled in Japan and died there that means there is no US state in which he was domiciled and thus no state for primary probate of his estate — that was done in Japan. So she may need to open ancillary probate proceedings in the state or states where the financial accounts are held in order to do what is necessary to transfer the accounts to the rightful beneficiaries or heirs to the estate.
     
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  4. Oko Nomimono

    Oko Nomimono Law Topic Starter New Member

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    This is the case. Japan-side legal process involves lawyers, but when there is no contest of the will and the Japan statutory provisions for the division of sitius (Japan located) real property, it is an out-of-court agreement among all the heirs.
    Thanks for your response. I shall look more into this Ancillary Probate process. I believe the USA situated Brokerage accounts are in Kentucky(ComputerShare) and Ohio(Fidelity). Would this mean two ancillary probates, one in each state ?
     
  5. Tax Counsel

    Tax Counsel Well-Known Member

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    Possibly. Even if it does, the ancillary probate should not be a big deal as it is not a full blown probate proceeding. But first see if there were POD designations on the accounts. If there were, no probate is needed at all for those POD asset.
     
  6. Oko Nomimono

    Oko Nomimono Law Topic Starter New Member

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    There are no POD or TOD designations on the accounts. Japan has already allocated these accounts to the beneficiary-spouse, and taxed the worldwide estate, including the balances of these accounts, already. When this is the case, would the IRS process of getting a Transfer Certificate (form 5173, I learned this from the internet) be sufficient ? Do estate-tax attorneys offer help with this transfer certificate process?
     
  7. Tax Counsel

    Tax Counsel Well-Known Member

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    Then the accounts would pass through her probate estate.

    As for federal estate tax, note that as a US citizen her estate is subject to federal estate on her worldwide assets whether they passed through her probate estate or not. However, because of the very high unified credit against federal gift and estate tax ($11,580,000 for decedents dying in 2020) unless the value of her taxable estate exceeded that amount there would have been no federal estate tax to pay. Along with that, there is no requirement for a federal transfer certificate (Form 5153) for a decedent who was a U.S. citizen unless that citizen was not living in the U.S. at the time of his/her death, the estate was not probated in the US, and the decedent's assets exceeded the unified credit amount, i.e. $11,580,000 for a decedent dying in 2020. See the IRS page on transfer certificates for estates of nonresident US citizens. The purpose of the certificate is that it provides assurance to transferees of the decedent's assets that no federal tax lien attaches to the assets and thus they need not worry about the IRS coming to them later on to claim those assets. It is not a substitute for ancillary probate under state law if the state requires that to transfer the assets. A tax attorney familiar with US taxation of US persons living abroad should be able to assist you in getting a transfer certificate if one is needed. Note that it can take up to a year to get it, so don't count on a quick turn around if you need one.
     
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