Frequently Asked Questions About IRS Clearance And Form 706-NA

FAQs on IRS Transfer Certificates, Form 706-NA, US shares after death and UK-US Estate Tax Treaty relief.

Following our recent article on IRS Transfer Certificate delays and the growing backlog affecting Form 706-NA applications, we have compiled answers to some of the questions we are most frequently asked by UK executors and beneficiaries dealing with US assets. This FAQ explains when IRS clearance may be required, how Form 706-NA works, common pitfalls to avoid, and the practical issues that can arise when administering estates containing US shares and other US situs assets.

What is an IRS Transfer Certificate?

An IRS Transfer Certificate (Form 5173) is a clearance document issued by the Internal Revenue Service confirming that any US estate tax reporting requirements have been satisfied. It is commonly required before US shares or other US assets belonging to a deceased non-US resident can be transferred, sold or distributed to beneficiaries.

When is an IRS Transfer Certificate required?

A Transfer Certificate is often required where the deceased owned US situs assets with a value exceeding US$60,000 at the date of death. This frequently applies to estates containing shares in US-listed companies such as Apple, Microsoft, Amazon, Keurig Dr Pepper, IBM, Johnson & Johnson, Coca-Cola or Disney, as well as some of the share companies which have been recently reincorporated in the US, such as Ferguson.

What is Form 706-NA?

Form 706-NA is the US estate tax return used for individuals who were neither US citizens nor domiciled in the United States when they died. It is typically used by executors seeking to obtain IRS clearance and a Federal Transfer Certificate for US assets held in an estate where the deceased was not a US citizen, such as UK or Irish estates where the deceased held US investments.

How long does it take to obtain IRS clearance?

Historically, applications often took six to nine months to process. However, many executors are now experiencing waiting times of two to three years due to IRS backlogs, resource constraints and delays that originated during the Covid-19 pandemic. Lester Aldridge is currently seeing significantly longer timescales than many published IRS estimates suggest.

If an estate is selected for audit by the IRS, this usually adds at least an additional year to the wait time. Whilst audits may be selected on a random basis, inconsistencies or deficiencies within an application or its supporting documentation can increase the likelihood of further IRS enquiries or additional scrutiny.

Can I sell US shares while waiting for the IRS Transfer Certificate?

In most cases, no. Transfer agents and registrars will generally not allow the transfer, sale or distribution of the shares until IRS clearance has been obtained. For example, if an estate holds Johnson & Johnson shares worth £150,000, the registrar will often refuse to process the sale until the required IRS documentation has been approved.

Do all estates holding US shares have to pay US estate tax?

No. Many UK estates benefit from relief under the UK-US Estate Tax Treaty. Whilst a filing obligation may still exist, treaty relief often means that no US estate tax is ultimately payable. The availability of relief depends on the estate’s circumstances, and the application must be completed correctly to claim it. With Irish estates, the process is different, usually resulting in a payment to the IRS with a credit being granted by the Irish tax authorities.

What happens if I complete Form 706-NA incorrectly?

Mistakes can lead to IRS information requests, supplemental filings, audits and substantial delays. In some cases, correcting errors can take many months and increase professional costs significantly. It is therefore often more cost-effective to ensure that the application is prepared correctly from the outset.

It is also worth noting that even if the form is completed correctly, the IRS do sometimes make mistakes on the clearance certificates that they issue, which requires additional communications with the relevant teams to get these rectified.

Can I use YouTube videos, online guides or AI tools to complete Form 706-NA myself?

Whilst online resources may provide general information, they do not always explain important matters such as treaty relief claims, supporting documentation requirements and the interaction between UK inheritance tax and US estate tax rules.

Executors should be cautious before relying solely on self-help resources for complex international estate matters. We have reviewed examples of online guidance which provide simplified explanations of the process but do not always reflect the approach required for UK estates with US assets.

What documents are needed alongside Form 706-NA?

The requirements vary between estates but often include:

• Death certificate
• Grant of Probate or Letters of Administration
• Valuations of US assets
• Evidence of domicile
• UK inheritance tax information
• Treaty relief documentation
• Supporting schedules and declarations
• Additional IRS forms where applicable
• Fiduciary relationship declarations

The IRS instructions do not always clearly explain all supporting documents that may be required, which is one reason applications are frequently rejected or delayed.

My relative only owned a small number of US shares. Do I still need IRS clearance?

Possibly. The key factor is usually the value of the deceased’s total US situs assets. For example:

• 50 Apple shares worth $8,000 may not trigger a filing requirement on their own.
• A portfolio containing $120,000 of US stocks across several companies, including $8,000 worth of Apple shares, may require Form 706-NA and an IRS Transfer Certificate.

Every estate should be reviewed individually and even if IRS clearance is not required, you will likely still have to correctly complete a W-8BEN or W-8BENE form to ensure that sale proceeds or dividends are not incorrectly taxed. When these are not completed correctly, withholding taxes of 30% may be deducted.

What are US situs assets which usually trigger a requirement for IRS clearance?

US situs assets declarable on an IRS 706-NA application commonly include:

• Shares in US corporations
• US brokerage accounts
• Certain US investment holdings
• Some US bank and financial assets

For example, holdings in Microsoft, Alphabet (Google), Tesla, Amazon or Meta are generally considered US situs assets for estate tax purposes.

What is a Medallion Signature Guarantee?

A Medallion Signature Guarantee is a specialised certification required by many US and Canadian transfer agents before they will process a transfer or sale of securities. It confirms the authenticity of the signature and the authority of the person signing the documents.

Can I get a Medallion Signature Guarantee in the UK?

Yes, but providers are limited. Lester Aldridge is one of very few UK law firms able to provide an in-house Medallion Signature Guarantee service through authorised members of its team, allowing transactions to proceed without the need to locate a third-party provider.

Can Lester Aldridge deal with the entire process for me?

Yes. We can assist with:

• Preparing and filing Form 706-NA
• Claiming UK-US treaty relief
• Obtaining an IRS Transfer Certificate
• Corresponding with the IRS
• Obtaining Medallion Signature Guarantees
• Dealing with transfer agents and registrars
• Selling or transferring US shares
• Completing withholding tax forms
• Distributing the assets to beneficiaries

This enables executors to have a single specialist team managing the process from the initial IRS filing through to the eventual release and administration of the US investments.