Beneficiaries named on retirement accounts, life insurance policies, or annuities or joint account owners on bank accounts or securities accounts (TOD or POD designations) may have to wait between 18 and 24 months to have these assets transferred to them.
Most people don’t know that when a non-US citizen (aka a non-resident alien or NRA) or a non-resident US citizen owns accounts in the United States with direct beneficiaries, the custodian of that account (e.g., bank, brokerage firm, financial firm, etc.) can require that the beneficiary obtain a Transfer Certificate before the custodian will release the asset to the beneficiary. A Transfer Certificate is an official document issued by the Internal Revenue Service (IRS) stating that the account or asset in its custody is not subject to US estate tax. This certificate gives assurance to the custodian that when the custodian releases the account or asset to the beneficiary, the custodian will not owe US estate tax that should have been paid out of the account or asset.
This happens much more often than you might think. There are two situations where the requirement for a Transfer Certificate from the IRS comes up most often. First, when a non-US citizen who does not reside in the United States (think snowbird or someone who worked in the US but returned to their home country) has an account or asset with a direct beneficiary. Second, when a US citizen who no longer resides in the United States (think US citizens living abroad) has named a direct beneficiary on an account or asset. In both situations, the custodian will require a Transfer Certificate before releasing the account or asset to the named beneficiary.
Many people are under the impression that if they name a beneficiary, the beneficiary will be able to get the account or asset instantly after the account owner dies. However, although a named beneficiary becomes the legal owner at the moment of death, that doesn’t mean that the account or asset isn’t subject to having any estate tax that may be owed to the federal government paid out of it.
The technicalities of applying for and obtaining a Transfer Certificate are somewhat complex. If the US assets of an NRA decedent exceed $60,000 or if the worldwide assets of a non-resident US citizen exceed the federal exemption amount ($13,990,000 in 2025), then a US estate tax return must be prepared and filed and a closing letter from the IRS must be obtained before requesting the Transfer Certificate. The IRS is currently quoting that the time to process estate tax returns is between 18 and 24 months from the date the return is received by the IRS.
Barclay Damon’s Trusts & Estates Practice Area attorneys have assisted with preparing and filing US estate tax returns (Forms 706 and 706-NA) and applying for Transfer Certificates. They’re also available to advise on other cross-border and international estate planning or estate administration matters.