Mitigating risks when dealing with US listed shares

 In Probate

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Mitigating risks when dealing with US listed sharesThe last five to ten years have seen an increase in our clients coming to us for specialist support because they are faced with dealing with an asset within an estate that is held outside of the UK. Part of this is due to increased workforce mobility – it is now more common for people to work for countries overseas and as a result they open a bank account in their temporary country of residence, and perhaps neglect to close it when they return to the UK. Or perhaps they received shares as part of their compensation package, which are not listed on the UK stock markets. Other clients find themselves dealing with a shareholding that was originally bought as a UK investment, but has since become listed overseas as a result of a merger or acquisition. An excellent example of this is shares in Cadbury, which are now part of Mondelez International, listed on the US stock exchange.

Shares in an estate

Many clients admit to us that dealing with shares is not a part of the estate administration process that they feel particularly confident about. The challenges involved in dealing with non UK shareholdings are even greater. Risk in estate administration will always be present, and it is of course vital that Personal Representatives manage this risk. One of the most common causes of complaint regarding estate administration relates to the length of time taken to complete the process. To help with this issue, it is important to manage a client’s expectations, and it can come as a surprise to many clients as to how long it can take to sell a shareholding registered in the US.

Challenges of dealing with US Listed Shares

So what causes the process to be so challenging? Firstly, share registrars in the US are simply not set up to deal with non-US shareholders. Barriers are put in place that appear to make it impossible for an Executor in particular to sell a shareholding. For example, initial correspondence will only be sent to the address held by the registrar. Of course, in many probate matters this address will be the Deceased’s last residence and as such there is often no one there to deal with this correspondence. In a recent, extreme case we dealt with, the Deceased’s last address had actually been demolished so all information regarding the shareholding was being returned to the registrar – putting the asset at risk of escheatment. In addition, dividend cheques will only ever be issued in the name of the Deceased, which can cause problems for UK Executors in paying funds into an account here.

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Unravelling the paperwork and dealing with often reluctant registrars takes time. But the final issue encountered that really extends timescales is the Federal Transfer Certificate. If the total value of the US assets exceeds US$60,000, then Federal Tax Clearance is required. This requires paperwork to be lodged with the Inland Revenue Service (IRS) for their approval. This needs to take place, and the certificate received before the asset can be sold. The timescales for this, once all paperwork has been lodged, is eight to nine months.  During this time, no amount of chasing will speed the process up – it is sadly a case of waiting for the IRS to provide the appropriate clearance, when they are ready to do so.

Mitigation of risk

In terms of mitigating the risk when dealing with US assets, Title Research strongly advise two things. First of all – begin the process as soon as possible. Ideally as soon as you are aware of the existence of a US shareholding, and are in possession of the Grant of Probate or Confirmation. Secondly – advise your clients that the process of selling the shares will take considerably longer than they would expect if they are used to the UK share sales process. If you are in any doubt as to the process then do seek specialist advice – additional delays can be incurred if the process isn’t followed, or forms are completed incorrectly.

Title Research has many years of experience in dealing with assets overseas, in particular US shareholdings. Our fixed and transparent pricing and commitment to client service helps you to progress the estate administration efficiently. If you need specialist advice on dealing with US shares please do contact our Client Service Team.

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