What Happens if a Foreigner Dies with Real Estate in the U.S. Under Florida Law?

If a foreigner who owns real estate in the United States passes away, and the owned property is subject to Florida probate law, then the property must be probated in Florida. This is because Florida courts have exclusive jurisdiction over real estate within the state.

What is FIRPTA?

The Foreign Investment in Real Property Tax Act of 1980 allows the U.S. to tax foreigners on dispositions of real property interests within the United States. Per the IRS, a disposition includes but is not limited to, a sale or exchange, gift, transfer, redemption, liquidation. Under FIRPTA, a foreign person is defined as a nonresident alien individual, foreign estate, partnership, trust or foreign corporation. 

When Does FIRPTA Apply in a Real Estate Transaction?

FIRPTA applies when a buyer purchases U.S. real property interests from a foreigner. The buyer is required to withhold 15% (After February 17, 2016) of the gross sales price from proceeds that will be due to the IRS within 20 days after closing. 

Are There Exemptions to FIRPTA Withholding?

Withholding of funds is not required under FIRPTA if an affidavit is signed by the buyer, during or before closing, stating their intention to use the property as his/her home for at least 50% of the time the property is occupied, for each of the first two 12-month periods after closing date. It is also required for the sale price of the property to be $300,000 or less in order for the exemption to apply. 

What is a FIRPTA Withholding Certificate?

Another avenue to exemption is through an application for a FIRPTA withholding certificate. This certificate applies when the selling price of a property is 15% more than the tax that will be owed on the sale. If approved, the withholding amount will be reduced based on the gain of the sale as opposed to of the selling price. However, this certificate cannot be applied for prior to closing of the property. Additionally, both buyer and seller must have or, at least have applied for, a US tax ID in order to qualify.