FATCA, CRS and estates

Trusts Discussion
1

Is an estate in the course of administration an Entity for the purpose of FATCA or CRS?

The executors of an estate wish to open an account with a discretionary investment manager and are required to “classify” themselves. Do they do so as an Entity (see below – if they are akin to a trust) or as individuals?

FATCA

Article 1(z)(3)(hh) of the 2021 US/UK IGA provides the following definition:

The term “Entity” means a legal person or a legal arrangement such as a trust.

It is clear that a trust is an Entity but there is no reference in the IGA to an “estate”, and I am struggling to see how an estate in the course of administration can be a legal person.

HMRC’s FATCA implementation guidance (August 2014) refers to the tax residence of Trusts (in the context of where a Financial Institution is resident) by reference to the residence of the trustees but no mention is made of executors/personal representatives.

However, Section 3.2 of the guidance provides:

Trusts and Estates

Where a Trust or Estate is listed as the holder of a Financial Account then they are to be treated as the account holder, rather than any owner or beneficiary (although accounts held by the estate of a deceased person are not Financial Accounts – Section 3.14).

However, when a Trust/Estate is treated as the account holder of a Financial Account this does not remove the requirement to identify the Controlling Persons where that entity is a Passive NFFE

which suggests that an estate IS an Entity in the form of a Passive NFFE. But this wasn’t repeated in the IEM.

CRS

The International Tax Compliance Regulations 2015 define “Entity” by reference to that which is found in the CRS at Section VIII ( E) (3):

The term “Entity” means a legal person or a legal arrangement, such as a corporation, partnership, trust, or foundation.

Again no mention of an estate in the course of administration, although reference is made to such in the definition of a [Jurisdiction A/B] Person which is

an individual or Entity that is identified by a [Jurisdiction B] Reporting Financial Institution as resident in [Jurisdiction A] pursuant to due diligence procedures consistent with the Common Reporting Standard, or an estate of a decedent that was a resident of [Jurisdiction A].

Under the terms of the will, it is a trust which is the ultimate beneficiary – so when the administration of the estate is complete, it will be clear that the Trust is an Entity and the discretionary beneficiaries maybe the controlling persons. However, while the estate is in administration, would it be the recipient trustees in the meantime?

2

Is it not unusual for the executors to have a power to invest? This could explain why there is no guidance.

I suggest that it should be the trustees who would open the account with the discretionary fund manager, rather than the executors.

Paul Saunders FCIB TEP

Independent Trust Consultant

Providing support and advice to fellow professionals

3

Dear Claire,

You pose a difficult problem for the simple reason that FATCA is so complex and with so many different opinions, that most people are adopting a practical “best guess” approach. That is all that any sensible adviser can do.
We have found that the US IRS treats a deceased’s estate as a separate entity for US tax purposes and (for the larger estates only - when the assets exceed US$60,000) a separate tax identity number must be obtained for the “Estate”. Also, many US financial advisers insist on transferring financial assets not from the Deceased (in the name of the deceased) to the UK Executors, but first into a separate “Estate Account”, and then from that Estate Account to the UK Executors. They usually have forms to create the Estate Account.
You file with such advisers (and with share registrars for smaller shareholdings) Form W-8BEN-E for the deceased’s “estate” and for each executor form W-8BEN. In Form W-8BEN-E in part 1(4) you tick “estate” and in Part 1(5) you tick “Passive NFFE”. You then go to part XXVI and tick 40(a) and 40(b). We have been doing this for some time, and the advisers and share registrars have not queried the way in which Form W-8BEN-E has been completed.
For the larger estates our USA local lawyer files with the IRS a US “local” tax return - sometimes this is also filed for the deceased, but more usually for the separate “estate” because the larger estates may well have received dividends and the like during the course of the estate administration. We have had the IRS look at such tax returns, and the IRS have on occasion given us a refund without even being asked, so it seems that so long as one does ones best, and files when needed to appropriate tax returns, treating the the deceased as a separate “estate” in its own right is perfectly acceptable. Most advisers have recently been insisting upon such approach.
Sorry not to be able to quote chapter and verse, because as mentioned, there are so many different points of view as to how the Form W-8BEN-E should be completed and filed. We have adopted the practical approach and the US IRS so far seems happy with such approach. The best approach is not to hide anything and make full disclosure.
Yours sincerely,
Peter Double / Probate Resealing Services Ltd.

4

Thank you Paul. The executors have full investment powers and need to open the account as the estate is still in administration. It is some time before we can fund the trusts unfortunately.

5

Dear Paul

Thanks for your answer as this has come up in one of my matters.

Can you please confirm if the executors should also complete questions 6-10 of Part 1 as well and, if so, is there further guidance you can provide here?

Many thanks

Rafael Singer

6

Dear Rafael,

Thanks for your e-mail. You do complete question 6 – you insert the current address for receiving correspondence.

Ignore Question 7 if the answer to Questions 6 is correct.

Question 8 - you ignore unless the Deceased had a USA Social Security Number in which case you insert the number.

Question 9 – you insert the deceased’s National Insurance Number in box 9b.

Question 10 – Generally you leave this blank unless you want to insert your Firm’s own reference number.

Make sure you complete Part XXVI – put a tick in Box 40a and in box 40b.

Also, put a tick in the box just above the signature line.

Yours sincerely,

Peter Double / Probate RS

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