AEoI Flash: "exluded account"
I was asked the following question: Does the transfer of an inheritance to a trust legally qualify as dissolution of the estate? My answer below.
Does the transfer of an inheritance to a trust legally qualify as dissolution of the estate?
The account holder (non-US person) dies. The heir (US person) submits all the required documents (certificate of inheritance, W-9). The account of the deceased is qualified as an estate and is considered excluded, i.e. no reporting under FATCA (and CRS) required. The heir wishes to transfer the inheritance to an existing account of a trust (discretionary and irrevocable). The same facts, but the inheritance is not transferred to an account of the trust but to an existing account of an underlying company (ULC).
Consideration on FATCA & CRS
Assessment of the FATCA Qualiforum: “The death of an account holder” is ended by the community of heirs when there is a division or transfer to another legal relationship, e.g. unregistered partnership or collective proprietorship.
The account is considered as an “excluded account“ until the dissolution of the community of heirs (cf. Section VIII Subsection C(17)(d) CRS) and AIA Swiss Guidelines 3.12.15 “Account of Decedents”.
The community of heirs terminates with the division or transformation into another “legal relationship”, e.g. unregistered partnership or limited partnership. From this point the reporting Swiss FI applies to the beneficial owner the provisions on the due diligence and reporting obligations in accordance with the CRS. If the reporting Swiss FI believes there has been a division of a community of heirs or it has been converted to another legal form, the due diligence obligations to be applied due to the customer relationship must be evaluated. The present cases (trust and ULC) meet the requirements of a division.
In connection with matters concerning trust laws, transferring assets to an existing trust is only possible under specific conditions, which are not considered here.