[WSBAPT] Foreign inheritance taxes

[John J. Sullivan, Esq.]

John:

 

You describe the foreign tax as an inheritance tax. If what you describe
operates like the various state level inheritance taxes here in America it
is not an estate tax (as in WA and at the federal level) imposed upon the
transfer from the estate to the beneficiary for which the estate (and if
improperly left unpaid the personal representative) is responsible. It is a
tax upon the beneficiary's receipt of the distribution from the estate.
Incidentally, my understanding of history here in WA is we actually had an
inheritance tax until about 1980 when a pick up estate tax was passed by
initiative. 

I would be stunned, shocked and amazed to find that the foreign inheritance
tax law imposes responsibility upon the estate or personal representative or
has jurisdiction to do so if the estate has no contacts with the foreign
country other than the beneficiary. I would recommend you check with the IRS
website to see whether there is an estate tax treaty with the beneficiary's
home country and if so whether it says anything about that country's
inheritance tax. 

 

Another thought. If the will simply leaves the property or its proceeds
outright to  the foreign beneficiary, perhaps the beneficiary might wish to
consider whether modifying the will through a TEDRA agreement to hold the
inheritance in a testamentary trust here, or offshore, might remove the
inheritance from the reach of the foreign inheritance tax. I would advise
the client of the need for tax law advice by a licensed attorney in the
foreign country as to whether this would work.

 

On the issue of apportioning the tax among the beneficiaries, unless there
is some very specific provision in the will, I do not believe the estate or
other beneficiaries should bear any part of the inheritance tax burden if it
falls upon the recipient and not the estate as transferor. 

 

John J. Sullivan

 

From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com>
On Behalf Of Diane J. Kiepe
Sent: Tuesday, June 16, 2020 8:09 AM
To: WSBA Probate & Trust Listserv <wsbapt at lists.wsbarppt.com>
Subject: Re: [WSBAPT] Foreign inheritance taxes

 

Hi John,

 

Interesting question and why tax provisions in Wills can become crucial.  I
would start with the Will and, if it says, as many Wills do, that taxes
charged by reason of death of decedent  is paid from the residuary of estate
I would say yes.

 

This is simply my gut response but I seem to recall this topic from days
gone by in the discussions of drafting personalized tax provisions for QTIP
property and other unusual circumstances.

 

Best to you,

 

Diane J. Kiepe

 

Diane J. Kiepe

Douglas Eden

717 W. Sprague Ave.

Suite 1500

Spokane, WA  99201

djkiepe at depdslaw.com <mailto:djkiepe at depdslaw.com> 

509-455-5300

 

From: wsbapt-bounces at lists.wsbarppt.com
<mailto:wsbapt-bounces at lists.wsbarppt.com>
<wsbapt-bounces at lists.wsbarppt.com
<mailto:wsbapt-bounces at lists.wsbarppt.com> > On Behalf Of John Wickham
Sent: Monday, June 15, 2020 5:31 PM
To: wsbapt at lists.wsbarppt.com <mailto:wsbapt at lists.wsbarppt.com> 
Subject: [WSBAPT] Foreign inheritance taxes

 

Listmates:

Hypo: in a Washington probate, the Will contains a specific bequest to a
citizen of a foreign country, who resides in that foreign country, of a
modest piece of Washington real property.

That foreign country will assess a stiff inheritance tax when the citizen
receives the bequest, whether it is still real property or whether the PR
sells it and sends the net proceeds.

Does the estate bear any responsibility to the foreign government for its
tax on its own citizen?

Thanks for your thoughts.

John

--
John D. Wickham
P.O. Box 893
Friday Harbor, WA 98250
360-378-7178
360-378-0849 Fax
  
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