I’m a non-resident alien that have in the US a joint bank account with rights of survivorship. One of the other beneficieries of this account (also a non-resident alien) recently passed away and I have a couple of questions regarding the relevant estate taxes.
1. We were told that we need to pay US Estate Tax for those assets in our bank account that were in US Treasury bonds at the time the co-beneficiery of our account passed away. But from what I read at the IRS website (http://ift.tt/1Ei3Hp9 ), “Assets that are exempt from U.S. estate tax include securities that generate portfolio interest”. And from what I read elsewhere, it seems that US Treasury securities generate portfolio interest and therefore would be exempted from US Estate tax. For instance, Charles Schwab explains in a website page entitled How Do Foreign Investors Pay U.S. Tax?” (http://ift.tt/1Ei3Hpd) states that: assets that are exempt for U.S. estate tax generally include securities that generate portfolio interest (e.g., U.S. treasury and U.S. government agency securities and certain U.S. corporate bonds and U.S. commercial paper) [ my underlining)
If this interpretation is incorrect, I’d appreciate if you could please give me the reference, based on which US Treasury bonds would not fall within the category of securities that generate portfolio interest/
2. I understand that the money we had in the bank account that was not in US Treasury Bonds (i.e. that was in bank deposits in a checking or saving account) is exempt from U.S. estate tax since these assets were within the category of “bank accounts not used in connection with a trade or business in the U.S.” If this is so, does the Bank where the account is held have the right to freeze these assets that are exempted from US estate tax until the IRS determines the amount of Estate Taxes to be paid regarding other assets that may be subject to US Estate Tax, or is the Bank allowed to freeze only those assets within the account that are subject to US Estate tax, until the IRS determines the amount of tax to be paid for those assets? In other words, what is the legal bases for freezing assets that are clearly not subject to US estate tax?
3. Assuming that regarding the question above, the Bank has the right to freeze all assets in the account (including those that are not subject to US estate tax), aren’t we allowed to still use some of the assets in that account that are not subject to US estate tax to pay the estate tax for those assets that are subject to such tax?
Thank you very much.
Hopper
1. We were told that we need to pay US Estate Tax for those assets in our bank account that were in US Treasury bonds at the time the co-beneficiery of our account passed away. But from what I read at the IRS website (http://ift.tt/1Ei3Hp9 ), “Assets that are exempt from U.S. estate tax include securities that generate portfolio interest”. And from what I read elsewhere, it seems that US Treasury securities generate portfolio interest and therefore would be exempted from US Estate tax. For instance, Charles Schwab explains in a website page entitled How Do Foreign Investors Pay U.S. Tax?” (http://ift.tt/1Ei3Hpd) states that: assets that are exempt for U.S. estate tax generally include securities that generate portfolio interest (e.g., U.S. treasury and U.S. government agency securities and certain U.S. corporate bonds and U.S. commercial paper) [ my underlining)
If this interpretation is incorrect, I’d appreciate if you could please give me the reference, based on which US Treasury bonds would not fall within the category of securities that generate portfolio interest/
2. I understand that the money we had in the bank account that was not in US Treasury Bonds (i.e. that was in bank deposits in a checking or saving account) is exempt from U.S. estate tax since these assets were within the category of “bank accounts not used in connection with a trade or business in the U.S.” If this is so, does the Bank where the account is held have the right to freeze these assets that are exempted from US estate tax until the IRS determines the amount of Estate Taxes to be paid regarding other assets that may be subject to US Estate Tax, or is the Bank allowed to freeze only those assets within the account that are subject to US Estate tax, until the IRS determines the amount of tax to be paid for those assets? In other words, what is the legal bases for freezing assets that are clearly not subject to US estate tax?
3. Assuming that regarding the question above, the Bank has the right to freeze all assets in the account (including those that are not subject to US estate tax), aren’t we allowed to still use some of the assets in that account that are not subject to US estate tax to pay the estate tax for those assets that are subject to such tax?
Thank you very much.
Hopper
Federal Taxes: Are Us Treasury Bonds Exempt from U.S. Estate Tax
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