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US Shares in Certificated Form in Estate

including wills and probate
sg31
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US Shares in Certificated Form in Estate

#452983

Postby sg31 » October 25th, 2021, 5:56 pm

My neighbour is executor for his mothers estate, most of the work is being done by his solicitors but he has a problem with some shares the old girl had.

She holds shares in certificated form in

Keurig Dr Pepper, 728 shares

Kraft Heinz Company, 251shares

Mondelez International, 755 shares.

His solicitors have told him it might cost more to sell the shares and repatriate the money than the shares are worth. They will need to speak to an expert as it isn't their field and it may get expensive. I've just totted up current prices and there is around $80,000 worth of shares.

Can anyone tell me the easiest and cheapest way for the executor to sell the shares and repatriate the money? My fist thought was to approach a uk broker to do this, someone like Halifax share dealing or Intelligent Investor but I'm not sure if the shares being part of the estate would cause them problems.

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Re: US Shares in Certificated Form in Estate

#452990

Postby scrumpyjack » October 25th, 2021, 6:09 pm

My first thought is that if she also had a UK broker for UK shares, contact them and see if you can lodge them in her account. Then there is no problem.
A firm like Hargreaves Lansdown ought to be able to handle this.

Also if he is the executor he should call up brokers himself. There is no point paying solicitors' chargeable hour rates for this.

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Re: US Shares in Certificated Form in Estate

#452995

Postby SalvorHardin » October 25th, 2021, 6:26 pm

A major problem with American share certificates is that when transferring them, registrars generally require a medallion signature guarantee to verify the signature (and cover them against fraud)

This can be the proverbial PITA to get in the UK because only a few British firms are authorised to give this guarantee. Cost is several hundred pounds per transfer, it takes several weeks and there's a fair bit of paperwork.

Most brokers run a mile when you ask them to get involved. It's not as simple as transferring UK shares.

He may also have to deal with an American inheritance tax liability on assets over $60,000. See below:

https://www.ey.com/en_uk/ey-frank-hirth/how-to-navigate-us-estate-tax

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Re: US Shares in Certificated Form in Estate

#453121

Postby yorkshirelad1 » October 26th, 2021, 10:07 am

SalvorHardin wrote:He may also have to deal with an American inheritance tax liability on assets over $60,000. See below:

https://www.ey.com/en_uk/ey-frank-hirth/how-to-navigate-us-estate-tax


Thanks for posting that information and related article: very useful, and a major alert for me. I wouldn't want to leave my exors with that sort of admin headache. I'm not keen on holding US equities directly (FATCA, W8BEN etc) and now there's another reason to think very hard about it.

sg31
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Re: US Shares in Certificated Form in Estate

#453127

Postby sg31 » October 26th, 2021, 10:27 am

SalvorHardin wrote:A major problem with American share certificates is that when transferring them, registrars generally require a medallion signature guarantee to verify the signature (and cover them against fraud)

This can be the proverbial PITA to get in the UK because only a few British firms are authorised to give this guarantee. Cost is several hundred pounds per transfer, it takes several weeks and there's a fair bit of paperwork.

Most brokers run a mile when you ask them to get involved. It's not as simple as transferring UK shares.

He may also have to deal with an American inheritance tax liability on assets over $60,000. See below:

https://www.ey.com/en_uk/ey-frank-hirth/how-to-navigate-us-estate-tax


Thank you for such a detailed reply. I will go through it with him.

Dod101
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Re: US Shares in Certificated Form in Estate

#453128

Postby Dod101 » October 26th, 2021, 10:29 am

SalvorHardin wrote:A major problem with American share certificates is that when transferring them, registrars generally require a medallion signature guarantee to verify the signature (and cover them against fraud)

This can be the proverbial PITA to get in the UK because only a few British firms are authorised to give this guarantee. Cost is several hundred pounds per transfer, it takes several weeks and there's a fair bit of paperwork.

Most brokers run a mile when you ask them to get involved. It's not as simple as transferring UK shares.

He may also have to deal with an American inheritance tax liability on assets over $60,000. See below:

https://www.ey.com/en_uk/ey-frank-hirth/how-to-navigate-us-estate-tax


Very interesting. Does that also apply to holdings held via a UK platform either in a Trading Account or an ISA or SIPP? Presumably not otherwise I suspect that you would have alerted us of this since you clearly know about the procedures?

Dod

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Re: US Shares in Certificated Form in Estate

#453149

Postby SalvorHardin » October 26th, 2021, 11:02 am

Dod101 wrote:Very interesting. Does that also apply to holdings held via a UK platform either in a Trading Account or an ISA or SIPP? Presumably not otherwise I suspect that you would have alerted us of this since you clearly know about the procedures?

As far as I am aware the liability to American inheritance tax ("estate tax") exists regardless of where the shares are held. There may be something in the double taxation treaties whereby the American tax reduces the UK tax due, but I've never bothered to look any further.

Medallion Signature Guarantees aren't needed for dealings within brokerage accounts, SIPPs (if they were it would be a nightmare and the end of cheap dealing in American shares!).

Medallion Signature Guarantees are required only when transferring or selling shares held in certificated form or directly held with the registrars. It's all about providing a guarantee to the registrar ("transfer agent" in America) that the signature and the instruction to sell or transfer the shares comes from the correct person (and if it doesn't then whoever provides the signature guarantee is liable if there's fraud).

I know about signature guarantees from experience. The need for signature guarantees is why many brokers won't accept transfers into your account if it is an American share certificate (or if they do they charge a lot do so so). Fortunately I have no intention of selling my one holding which is affected by this (but if I did it would be a real PITA). The law was introduced in 1992, Wikipedia has a nice summary:

https://en.wikipedia.org/wiki/Medallion_signature_guarantee

Dod101
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Re: US Shares in Certificated Form in Estate

#453169

Postby Dod101 » October 26th, 2021, 11:43 am

SalvorHardin wrote:
Dod101 wrote:Very interesting. Does that also apply to holdings held via a UK platform either in a Trading Account or an ISA or SIPP? Presumably not otherwise I suspect that you would have alerted us of this since you clearly know about the procedures?

As far as I am aware the liability to American inheritance tax ("estate tax") exists regardless of where the shares are held. There may be something in the double taxation treaties whereby the American tax reduces the UK tax due, but I've never bothered to look any further.

Medallion Signature Guarantees aren't needed for dealings within brokerage accounts, SIPPs (if they were it would be a nightmare and the end of cheap dealing in American shares!).

Medallion Signature Guarantees are required only when transferring or selling shares held in certificated form or directly held with the registrars. It's all about providing a guarantee to the registrar ("transfer agent" in America) that the signature and the instruction to sell or transfer the shares comes from the correct person (and if it doesn't then whoever provides the signature guarantee is liable if there's fraud).

I know about signature guarantees from experience. The need for signature guarantees is why many brokers won't accept transfers into your account if it is an American share certificate (or if they do they charge a lot do so so). Fortunately I have no intention of selling my one holding which is affected by this (but if I did it would be a real PITA). The law was introduced in 1992, Wikipedia has a nice summary:

https://en.wikipedia.org/wiki/Medallion_signature_guarantee


Pursuing the IHT aspect, does that mean we are complicating matters for our executors if we hold US shares in that they will need to get probate (or the equivalent) in the US upon the holder's death? I guess we all should really know about this although I appreciate that it is not quite germane to the OP's question.

Dod

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Re: US Shares in Certificated Form in Estate

#453217

Postby SalvorHardin » October 26th, 2021, 1:32 pm

Dod101 wrote:Pursuing the IHT aspect, does that mean we are complicating matters for our executors if we hold US shares in that they will need to get probate (or the equivalent) in the US upon the holder's death? I guess we all should really know about this although I appreciate that it is not quite germane to the OP's question.

Yes, it could get complicated. Many solicitors will struggle with probate for American shares and will hire a specialist firm to deal with it.

I've never paid much attention to it because IHT isn't something I worry about due to my personal circumstances. My solicitors will sort it out when I'm gone

It's just one of the important differences between America and the UK for investing and taxation. e.g. L investors in American domiciled funds get taxed on gains realised within the fund, unlike UK funds. Dividends on quoted LLPs are taxed as American earned income, so the IRS want a tax return!

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Re: US Shares in Certificated Form in Estate

#453223

Postby Lootman » October 26th, 2021, 1:43 pm

SalvorHardin wrote:
Dod101 wrote:Pursuing the IHT aspect, does that mean we are complicating matters for our executors if we hold US shares in that they will need to get probate (or the equivalent) in the US upon the holder's death? I guess we all should really know about this although I appreciate that it is not quite germane to the OP's question.

Yes, it could get complicated. Many solicitors will struggle with probate for American shares and will hire a specialist firm to deal with it.

I can imagine how much of a hassle that would be. But how typically would a US probate court get involved in the first place? Something would have to happen to trigger their attention given that they know nothing about the deceased or the death. And if there was no prior requirement to file a 1040NR, and the death is not registered in the US, then how would any US authority know about the UK probate?

I can see how this might be a problem for certificated holdings perhaps. But not for US shares held in a UK nominee account, which presumably could just be sold or transferred without anything happening in the US.

As for the tax treaty, both the UK and the US apply inheritance/estate tax at 40%, so they might cancel out especially since the nil rate band in the US is far higher than in the UK.

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Re: US Shares in Certificated Form in Estate

#453225

Postby Dod101 » October 26th, 2021, 1:53 pm

Lootman wrote:
SalvorHardin wrote:
Dod101 wrote:Pursuing the IHT aspect, does that mean we are complicating matters for our executors if we hold US shares in that they will need to get probate (or the equivalent) in the US upon the holder's death? I guess we all should really know about this although I appreciate that it is not quite germane to the OP's question.

Yes, it could get complicated. Many solicitors will struggle with probate for American shares and will hire a specialist firm to deal with it.

I can imagine how much of a hassle that would be. But how typically would a US probate court get involved in the first place? Something would have to happen to trigger their attention given that they know nothing about the deceased or the death. And if there was no prior requirement to file a 1040NR, and the death is not registered in the US, then how would any US authority know about the UK probate?

I can see how this might be a problem for certificated holdings perhaps. But not for US shares held in a UK nominee account, which presumably could just be sold or transferred without anything happening in the US.

As for the tax treaty, both the UK and the US apply inheritance/estate tax at 40%, so they might cancel out especially since the nil rate band in the US is far higher than in the UK.


OK. I am presently consulting my solicitor anyway about IHT and Wills and will ask her for her opinion on this. Not something I had really thought of before.

Dod

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Re: US Shares in Certificated Form in Estate

#584673

Postby Jam1 » April 23rd, 2023, 12:50 pm

Dod, if you do not mind me asking, what was the outcome of your question whether US shares held in a UK nominee account would result in US death duties? Have you sold any US equities as a result?
Thank you
Jam (tomorrow)

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Re: US Shares in Certificated Form in Estate

#584686

Postby yorkshirelad1 » April 23rd, 2023, 1:45 pm

Jam1 wrote:Dod, if you do not mind me asking, what was the outcome of your question whether US shares held in a UK nominee account would result in US death duties? Have you sold any US equities as a result?
Thank you
Jam (tomorrow)


I'm also interested in this matter. I'm not currently holding any direct US shares (and tend to keep away from them for that, and other, reasons, and don't want to leave my exors a headache or a high legal bill). However, I wonder if companies thinking of moving from London to New York listing (e.g. CRH), the matter of US IHT (or equivalent) may become more pertinent.

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Re: US Shares in Certificated Form in Estate

#584740

Postby 1nvest » April 23rd, 2023, 5:12 pm

The US has pretty well moved over to electronic/digital registration of shares. Whilst older paper certificated form are still valid, transference is more expensive and would likely entail a costly signatory note etc. i.e. really the older paper form certification should have been transferred over to electronic/digital years ago.

As I understand it if you hold US assets over $60,000 value then you (heirs) have to file US Estate Tax report in order to have those assets released, but where under US/UK tax treaty the same tax rate/allowances apply as per US citizens and where that allowance is generous, around $11.4 million IIRC before any tax is applied i.e. most wont incur any US taxation. But you have to file the correct form, correctly completed, within the correct timescale, or otherwise fall outside of that tax treaty allowance and where taxation is more punitive. There are UK agents around who are well versed in such form filing and typically at more modest/usual type fees similar to what it would cost to employ a solicitor for other purposes, where its better to use them rather than filling in the forms yourself even though they're relatively straight forward. If you do incur US Estate Tax then again the UK/US tax treaty I believe discounts any US tax paid from UK inheritance tax 1:1

As most stock trading accounts are now nominee, where you deposit money with a broker and they buy the shares that you like in their name, there's a disconnect between actual owner and beneficial owner. However I believe that it is still considered as being required to file for US Estate tax as the beneficial owner is a individual. When however US stocks are held via/within a fund (ETF) then I believe that disconnects the beneficial owner, has the fund as the beneficial owner (of which you are a shareholder) and funds don't die (so avoids having to file US Estate tax risk when a fund shareholder dies).

So the simple answer is to hold US stock exposure via index funds, and where Ireland has the same US tax treaty as the UK so Irish based ETF's where a W8BEN is registered incur just 15% US dividend withholding taxation and where on death heirs just have to report/record standard UK notices (probate) and not file US Estate Tax forms.

If you inherit direct US share holdings, or worse older US certificated share holdings, then the release of assets/value is more involved. Not so bad for electronic versions - just a relatively straight forward form, but more awkward/expensive for paper certificates (such as having to get a signatory), that's even difficult/awkward for US citizens.


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