Thomas C. Roberge & Company

April, 12 2005

Thomas C. Roberge, CPA
St. Petersburg & Sarasota

It is amazing to non real estate professionals like us to see how hard realtors have to work to earn their fees when taking a sale to completion with all the regulation they are subjected to in Florida. What's even more amazing is how easy it is for the least little thing to upset the transaction after all this work.

This is why we are covering real estate sales involving foreign decedents who were on the title to the property at the time of their demise. If you are not aware of a few simple points, you risk losing the deal - even after you have a signed contract in hand!

There is an automatic federal estate tax lien when a foreign person dies owning U.S. assets whose value exceeds $60,000 at the time of their death. U.S. assets include real estate, stocks, tangible personal property, collectibles, etc. The real estate cannot be sold until the closing agent receives a Transfer Certificate from the IRS. This document allows the sale to be completed with title being transferred free and clear to the new owner. A competent closing agent will insist on receiving this document to protect them from statutory executor liability with the IRS. It normally takes us 20 to 30 days to obtain this document from the IRS.

Even though Florida law allows property to pass automatically between husband and wife when it is owned as tenants by the entirety, federal estate tax law does not work the same way and you must obtain a Transfer Certificate so the sale can close. The IRS treats any person in possession of the funds as a "statutory executor" and will hold them personally liable for the federal estate tax if the sale closes and the funds are disbursed outside the U.S. before a Transfer Certificate and Estate Tax Closing Letter is issued. A statutory executor includes anybody putting their hands on the sale proceeds - the realtor taking the deposit on the contract, the closing agent and the buyer.

The Transfer Certificate allows the sale to close and all parties to be paid their fees. The Certificate usually states that even though the sale can close the funds have to stay under the control of the closing agent until the IRS reviews and accepts the estate tax return at a later date.

The rules for foreign decedents are very detailed. Our firm has extensive experience in getting realtors, closing agents and the heirs of foreign decedents through this maze of complex rules. We suggest you contact us any time you think you could be dealing with a foreign decedent on a real estate listing or sale.