Introduction:
For Iranian U.S. persons, transferring property and assets in Iran can be a challenging journey filled with legal and regulatory complexities. As was mentioned in our previous post, the Code of Federal Regulations by the United States Department of the Treasury defines a "U.S. person" as someone who is a U.S. citizen, a permanent resident alien, an organization established under U.S. laws or based within the United States, or anyone Physically present in the United States. In this article, we will explore three common methods of property transfer by U.S. Persons in Iran—Inter Vivos transfer, Inheritance, and Solh-e-Omra—and review their unique considerations under the regulations of the Office of Foreign Assets Control (OFAC) in the United States.
Inter Vivos Transfer:
Understanding the Basics:
Inter Vivos, Latin for "between the living," refers to the transfer of assets or property while all parties involved are still alive. This method is commonly used for gifting, sales, or other arrangements.
OFAC Considerations:
For Iranian U.S. persons, Inter Vivos transfers must be approached with caution. Many Iranians or Iranian-Americans choose to transfer property in Iran to their children while they are still alive. They do this to avoid Iran's complicated inheritance rules when they pass away and to allow themselves to continue living on the property while they are still alive. This process is called an Inter Vivos gift.
While this approach has its benefits, it is important to know that it usually does not fall under the general license rules allowed by the Office of Foreign Assets Control (OFAC). This means that to make this kind of transfer legally, you may need to obtain special permission or a "specific license" from OFAC to comply with U.S. sanctions regulations. In simple terms, it is a necessary step to ensure everything is done by the book and in line with the law. In addition, it is crucial to make sure the transaction does not involve individuals, entities, or countries subject to U.S. sanctions, which also requires a specific license from OFAC.
In limited instances, however, a special license may not be required such as when the U.S. person acquired the property through inter vivos transfer before becoming a U.S. Person and now the U.S. Person owner intends to sell the property in Iran and transfer the proceeds to the United States. For more information, please read our previous post.
Either way, it is crucial to conduct due diligence to ensure that sanctioned parties or activities are not involved in the transaction and that the transaction complies with OFAC regulations.
Inheritance:
Understanding the Basics:
Inheritance is the process by which assets and property are passed on to heirs or beneficiaries upon an individual's passing, typically as specified in a will or according to intestacy laws (when the deceased has left no will).
OFAC Considerations:
In general, the Inheritance of assets involves the transfer of assets upon the passing of an individual. When the inheritance aligns with standard inheritance practices, the U.S. persons inheriting assets usually do not require a specific OFAC license for these transactions.
In addition, under the Iranian Transactions and Sanctions Regulations (ITSR), there is a general license that authorizes the sale of inherited property from individuals in Iran and the transfer of related funds to the United States if it complies with other rules and regulations.
However, it is important to note that the general licenses mentioned above do not authorize:
(1) The wind-down of commercial enterprises in Iran;
(2) The re-investment in Iran of the proceeds from the real or personal property sales authorized in this section; or
(3) The exportation or reexportation to Iran of any goods (including software) or technology.
Solh-e-Omra:
Understanding the Basics:
Solh-e-Omra, a legal instrument within the Iranian legal system, allows property owners (Mosaleh) to maintain ownership of their properties during their lifetime and transfer ownership automatically to the chosen beneficiaries (Motesaleh) upon their passing. This legal instrument is in many ways similar to the "Life Estate" used in the United States legal system. In general, a Solh-e Omra deed allows the designated beneficiary to take ownership of a property without requiring a probate process or a court hearing.
OFAC Considerations:
It is crucial to understand that while under Solh-e-Omra the mentioned interests only transfer to the designated beneficiary after the property owner's passing, this transfer is not considered an inheritance under current U.S. sanctions regulations. This distinction arises because the transfer of property title occurs before the date specified on the original property owner's death certificate. Consequently, it falls outside the definition of inherited property as outlined in the general licenses provided by the Office of Foreign Assets Control (OFAC).
Because of this distinction, U.S. individuals who become beneficiaries of Solh-e Omra transfers in Iran typically must obtain a specific license from OFAC before engaging in any transactions related to the properties they acquire through Solh-e Omra. This additional step is necessary to ensure compliance with U.S. sanctions regulations and maintain legal adherence when dealing with these properties.
Conclusion:
Navigating property transfers in Iran as an Iranian U.S. person can be a challenging endeavor. Understanding the OFAC considerations associated with Inter Vivos transfers, Inheritance, and Solh-e-Omra is crucial to ensure compliance with U.S. sanctions regulations. Each method has its own set of rules, and it is essential to seek legal advice and conduct due diligence to make informed decisions regarding properties acquired in Iran.
Please note that this post serves as general information and not legal advice. You can learn more about our disclaimer here. For tailored guidance specific to your situation, it is crucial to consult your trusted OFAC attorney to obtain personalized advice to ensure you can navigate these processes legally, preserving your financial interests on both sides of the globe.