[WSBAPT] Foreign inheritance taxes

[John Wickham]

Many thanks to John S. and Diane.

John Wickham

On 6/16/2020 9:35 AM, John J. Sullivan, Esq. wrote:
>
> 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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