Lagomorpheus

Hi,
Sorry for the OT question, but I am hoping some Brits living in the US
might be able to help out with an answer or point me in the right
direction. My husband (UKC, US PR) is going to be receiving some money
as an inheritance from a deceased relative that lived in and was a
citizen of the UK. Has anyone ever dealt with a situation like this
regarding the tax implications (do we pay both UK and US taxes)? I've
begun to do some internet searching and am coming up with a lot of
garbage links as well as IRS forms I can't make heads or tails of.

Thanks for any info!
Marie

Rete

I have been in that situation recently. However, it was Germany and the US. I paid taxes on the inheritance in Germany and the monies will be tax free here in the US as per my accountant. As long as it is under a certain threshold you should not have to be taxed on it in both places.

CharlieS

I've actually been wondering something along these lines myself.
My mother has decided to distribute part of our inheritance now; which means I will be receiving a lump sum, over the $10k threshold that needs to be declared when it comes into the US.
Would the same rules apply, and the declaration be more about traceability than anything else or is there duty to be paid at the "bend over" rate?

hcj1440

The US (federal tax law anyway, not sure for states) has a "death" tax, not an "inheritance" tax. That means taxes are paid by the estate of the deceased, not by the person who inherits the money/stuff.

The IRS cannot tax your UK relative who dies, because your relative is not in the US nor a USC. And they will not tax you, the inheritor, because we don't have an inheritance tax. So while you may have to pay UK taxes -- I have no idea about UK taxes -- you will not have to pay US taxes. At least not to the IRS. But there could be a state inheritance tax so you need to be careful of that.

meauxna

Lagomorpheus,
hcj & Rete have it right as far as I know. Once the foreign currency was in the DAH's name, he wire transferred it in. CPA had no issue with it.

Charlie, the declaration is all about traceability. Make sure you're not a drug runner. Or worse.

Can you believe the loan officer at the bank today told me I couldn't use my loan to send money to 'Saddam' or the bank would cancel my credit.

Squire

In message <[email protected]> , hcj1440
<member19487@british_expats.com> writes
    >> Hi,
    >> Sorry for the OT question, but I am hoping some Brits living in the US
    >> might be able to help out with an answer or point me in the right
    >> direction. My husband (UKC, US PR) is going to be receiving some money
    >> as an inheritance from a deceased relative that lived in and was a
    >> citizen of the UK. Has anyone ever dealt with a situation like this
    >> regarding the tax implications (do we pay both UK and US taxes)? I've
    >> begun to do some internet searching and am coming up with a lot of
    >> garbage links as well as IRS forms I can't make heads or tails of.
    >> Thanks for any info!
    >> Marie
    >The US (federal tax law anyway, not sure for states) has a "death" tax,
    >not an "inheritance" tax. That means taxes are paid by the estate of
    >the deceased, not by the person who inherits the money/stuff.
    >The IRS cannot tax your UK relative who dies, because your relative is
    >not in the US nor a USC. And they will not tax you, the inheritor,
    >because we don't have an inheritance tax. So while you may have to pay
    >UK taxes -- I have no idea about UK taxes -- you will not have to pay US
    >taxes. At least not to the IRS. But there could be a state inheritance
    >tax so you need to be careful of that.
The relevant tax in the UK is called Inheritance Tax. Whatever sum is
payable, if any, is levied upon the estate of the deceased and is the
responsibility of the Executors or Administrators. Any tax obligation to
the UK Inland Revenue is payable prior to distribution - in other words
the legacy once received will suffer no further UK taxes.

--
squire

Rete

Sorry, Charlie. I have no clue about pre-distribution estate monies and their taxability either in the US or worldwide.

Just curious why does it have to come into the US?

Ray

Spend it all there or buy Premium Bonds ..if you still have a
UK bank account and address

hcj1440

As long as your mother is not subject to US taxation, neither of you will be taxed by the IRS. A foreign citizen living outside the US can give you as much money as they want, 100% free of US federal taxes on both your parts. I do not know about state tax.

Rete

Quite honestly, my accountant does not agree with you on this, and I find it a bit hard to believe even without his input.

The foreigner is not subject to US taxes but the receiver of that money is if they are a USC and/or US LPR. If it is not an inheritance (which comes after death) it will be considered a gift and there is such a thing as a gift tax.

fatbrit

???

If we stick to US federal tax only, there is both an inheritance and gift tax. In the case of the gift tax, the donor (not the recipient) is responsible for the tax.

hcj1440

Hi Rete -- I found it a bit hard to believe as well, but looked into it because I was in that situation. It was several years ago. I received the money, it was wire-transferred and thus reported by the bank to the IRS (presumably), and I was not taxed. As Fatbrit says, there is such a thing as gift tax and each year (for those subject to US taxation) you may make a tax-free gift of up to $11,000 to any one individual. If you make a gift of over $11,000 to any one person, the person making the gift has to pay the gift tax. But the person receiving the gift does not pay tax. In the case of a foreigner living outside the US giving you money, you are still on the receiving end and do not have to pay tax on it.

I look at it this way: the US does not object to more money flowing into the US economy. They do object to money passing hands *within* the US without taxation, but money coming from outside is money that they didn't have their grubby hands on to begin with.

Lagomorpheus

Thank you everyone for your input, especially on my OT question. It has
been very helpful!

Cheers,
Marie

fatbrit

Should also be mentioned that there is a "unified credit" that applies to both the gift and inheritance tax. Hence, you could make a larger gift and postpone any tax liability till probate.