US assets in UK estates: Key risks and what legal professionals need to know
Discovering US assets in a UK estate can significantly complicate the administration process.
US shareholdings and investment accounts are increasingly common in the estates we work with. Sometimes, the deceased may not even have actively invested in a US company. A historic UK shareholding could have become a US holding following a merger or acquisition. Whatever the circumstances, administering US assets is rarely as straightforward as dealings with their UK equivalents. Different documentation requirements, US tax clearance, lengthy processing times, and the risk of assets becoming dormant can all create unexpected delays.
Understanding these challenges early can make a significant difference.
Where should you start when you discover US assets?
Before deciding how to administer a US asset, you first need to establish exactly what the estate holds. Ideally, you will have a recent statement showing details such as:
The account holder’s name and address
The number of shares held
The account or holding number
Whether shares are certified or held electronically
The relevant Transfer Agent or investment company
However, the information available is not always this clear. You may only have an old share certificate, dividend correspondence, or historic documentation that provides little indication of the asset’s current status or value. In these circumstances, you may need to verify the holding directly with the relevant US institution before you can establish its date-of-death value and determine next steps.
This is particularly important because the combined value of US assets can affect whether US tax clearance is required.
When is a Federal Transfer Certificate required?
One of the most important considerations when dealing with US assets is whether the estate requires tax clearance from the Internal Revenue Service (IRS).
Where the combined value of US assets exceeds $60,000 USD at the date of death, a Federal Transfer Certificate, also known as Form 5137, may be required before the assets can be transferred. For a UK-domiciled deceased who was not a US citizen or resident, the US/UK Estate Tax Treaty can help prevent the same assets being taxed twice. However, that does not remove the need to demonstrate to the IRS that the estate has been dealt with appropriately for tax purposes.
An application for a Federal Transfer Certificate can require:
UK Inheritance Tax documentation
Details and valuation of the US assets
Relevant IRS forms
Supporting information about the deceased and estate
Getting this right at the start matters. Submitting transfer documentation before establishing whether tax clearance is required can result in paperwork being rejected, creating additional costs and delays.
Be prepared for lengthy IRS timescales
One of the biggest challenges with Federal Transfer Certificates is time. IRS tax clearance can currently take around two to three years.
Once clearance has been obtained, there can still be further steps before a US shareholding is transferred or sold. For legal professionals, this can mean an otherwise largely completed UK estate remains open because a US asset is still outstanding.
Identifying US assets and beginning the appropriate process as early as possible can therefore help manage expectations and reduce avoidable delays.
What is escheatment and why does it matter?
Lengthy administration times create another potential problem: escheatment.
In the US, financial assets that remain dormant for a certain period can be transferred into the custody of the relevant state. The exact rules vary between states, but assets can typically be considered dormant after around three to five years of inactivity.
For shareholdings, inactivity could include:
No contact from the account holder
No change to the registered address
No additional investment activity
Dividends remaining unclaimed
Unfortunately, all of these can naturally occur following the death of a shareholder. If the estate administration is already facing a lengthy wait for IRS clearance, the risk of escheatement becomes particularly important.
What happens when US shares are escheated?
Once the holding has been transferred to a US state, the shares may be liquidated and proceeds placed on an unclaimed property register. The estate can still reclaim those funds, but the original investment may no longer exist. This can create several problems.
The estate loses the opportunity to benefit from any future increase in the share price, and establishing the precise value of an asset that has already been liquidated can become more complicated.
It may also affect valuation used for probate and tax reporting.
Recovering escheated assets requires a claim to the relevant state and supporting evidence demonstrating the estate’s entitlement to the funds. Requirements differ between states and may include certified documents, identification, and strict submission deadlines. If those requirements aren’t met, the process can be delayed further.
How can you reduce the risk of escheatment?
The most important step is to act early. If you identified US assets in an estate:
Check correspondence for warnings about dormancy or escheatment
Establish which Transfer Agent or institution holds the asset
Verify the holding and its current status
Confirm its date of death value
Establish whether IRS tax clearance is required
Ask the institution what steps can be taken to maintain activity on the account
Taking action early won’t necessarily remove every delay, particularly where IRS clearance is required, but it can help prevent additional complications.
What is a Medallion Signature Guarantee?
A Medallion Signature Guarantee is another requirement that can catch UK practitioners by surprise.
It is an anti-fraud measure used when transferring US and Canadian securities and confirms that the signature on the transfer documentation is genuine. For probate matters, this will usually relate to the Executor or Administrator. The Guarantee must be applied to the relevant transfer forms and have a sufficient financial limit to cover the value of the shares being transferred. If the appropriate Medallion Signature Guarantee is missing, or its limit is insufficient, the paperwork may be rejected.
Title Research can arrange Medallion Signature Guarantees as part of our US and Canadian share services.
Other common pitfalls when dealing with US assets
Tax clearance and escheatment aren’t the only issues that can cause difficulties.
Outdated information
An old share certificate doesn’t necessarily tell you what the estate owns today. Corporate actions, mergers, acquisitions, stock splits, and other changes can affect the number and type of shares held. Verifying the holding can therefore be an important first step.
Incorrect valuation
Using incomplete or historic information can result in the asset being incorrectly valued for probate or tax purposes. A professional date-of-death valuation can establish the position and help determine whether the $60,000 US tax clearance threshold has been exceeded.
Unclaimed dividends
Dividend payments may continue while an estate is being administered. These can require separate action and may also contribute to an account being treated as dormant if they remain unclaimed.
Assuming US processes work like UK processes
Perhaps the biggest pitfall is treating a US asset in the same way as a UK shareholding. Different terminology, documentation, tax requirements, and processing times mean the administration needs to be approached differently from the outset.
Case study: Resolving a complex North American shareholding
The complexities of North American shares aren’t limited to US estates. In one case, Title Research was instructed by a Solicitor who has been trying to resolve two Canadian shareholdings for eight years.
The holdings were registered jointly in three names; two of the shareholders had died, and four Executors had been appointed for each deceased shareholder. This meant nine people needed to be coordinated to complete the process. The original shares were also missing.
Our team guided the Solicitor and signatories through each stage, arranged for replacement certificates to be issued, and progressed the sale of the holdings. The entire matter was completed within nine months, allowing the Solicitor to finally close the estate before retiring.
The case demonstrates how quickly an unfamiliar North American asset can become a long-running problem, and the difference specialist support can make.
How Title Research can help with US assets in UK estates
Cross-border estate administration can involve unfamiliar processes, multiple institutions, and requirements that simply don’t exist when dealing with UK assets. Our specialist cross-border team can support legal professionals with:
Federal Transfer Certificate Applications
Medallion Signature Guarantees
Escheatment Claims
Rather than coordinating different providers for each stage, we can help manage the process from verification through to the eventual transfer or sale of the asset. Most importantly, we can help identify potential problems early, before they become unnecessary delays.
If you’ve discovered US or Canadian assets within an estate you’re administering, speak to our cross-border specialists to find out how we can help.