Death Taxes – Do You Really Care?

I remember many years ago, there was a general consensus that Inheritance Tax in the UK might well be abolished. At the time, few people actually paid it but these days it is a huge earner for the British taxman. My little old granny died having made no provision and it made a huge dent in her legacy and certainly had my Father and Uncle tied up in correspondence with HMRC for a very long time.

Estate Tax or Inheritance Tax is a fact of life in many countries but at least in the UK and the US and you probably get to pass everything to your spouse or legal partner free of any taxes.

Don’t assume that just because you have lived overseas for decades, you are exempt. Many people think this tax doesn’t apply to them, but they are usually wrong. Can you afford to ignore it?

In the UK, Inheritance Tax is levied on worldwide assets of anyone the government deems domiciled in the UK and you can be non-resident for many, many years but still be considered UK domiciled.

If you are UK domiciled but you are married to a person who is not then you only get to pass on the current Nil Rate Band free of tax, the rest is taxed at 40%

I recently helped one client who has a potential tax bill on death of almost GBP1 million to reduce that by GBP130,000 immediately simply by re-arranging a small portion of his liquid assets into a structure that gives him full access to that money on a set of pre-arranged dates in the future. Over the next few years we can gradually work on reducing more and more of that bill and at very low cost.

If you have assets in the US such as a property, then you pay Federal Estate Tax at 40% on everything above USD60,000. State taxes often apply in addition to that.

If you buy an apartment New York, for example and you are not American then you might get a nasty surprise, or rather your wife will if you happen to die unexpectedly.

Take a development we are jointly offering in New York at the moment. These range from US$637,000 to US$2.4 million. Non resident alien holding such a property would be looking at Federal Estate Tax on death of USD230,800 on the lowest rice unit and almost US$1 million on the most expensive. In addition, New York State death duties are levied on graduated scale from 3.06% right up to 16%.


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