CoachMB

Hi all,

My folks have been looking into estate planning, etc back in the UK, and are fairly unsure as to the implications of me being in the US, as a soon to be Permanent Resident/GC Holder.

Does anyone have any decent links or recommended reading on the topic?

Or better yet, anyone with real knowledge on the subject that wants to weigh in!

Happy to do some reading up myself if anyone has a good resource to recommend. Thanks.

mrken30

One thing that may come into play is if you have signature authority on the estates trust while it is in probate. This affects FBAR I would think.

aless02

I'm no guru, but once nice thing I found is that gifts received from non-US citizens seem to not incur any US tax. Gifts over a certain amount do need to be reported, but at least there's no double-taxation!

durham_lad

Not sure what specific questions you are asking, but we have received inheritances in recent years while living in the USA and they were not taxable in either country.

As mentioned above, you need to be aware of reporting rules should you have signature authority over any trusts or accounts. In our case we specifically ensured that one of our siblings were named as executor in our parents' wills so that when they died we had no signature authority over any financial accounts.

robin1234

This was my experience when my mother died. My sister (in UK) was the executor, and the solicitor she employed transferred the ££ to my Isle of Man bank account at the end of the probate rigmarole. There was no tax on my distribution in US, UK or Isle of Man (estates are subject to inheritance tax, depending on size.)

The US reporting required was/is IRS form 3520, reporting the distribution, then annual FBAR and IRS form 8938 (annually, if foreign accounts exceed a specified amount.)

Pulaski

That advice is critically dependent on which state you live in - a few states have an estate tax levied on the recipient of the bequest. IIRC I think NJ is one of them - and it starts at a very low value of inheritance, much lower than the threshold for federal tax on the estate as a whole (pretty distribution).

durham_lad

Excellent point, I had forgotten that. (I've seen it mentioned before - probably by you).

Giantaxe

Pretty sure we've discussed NJ before and it only applies when the person who passedi away lived in NJ:

"The inheritance tax is applies when someone who lived in New Jersey, or owned property there, leaves property to someone who isn’t a close relative."

New Jersey Inheritance Tax | Nolo.com

Not sure about other states who have an inheritance tax.

Pulaski

We've talked about inheritance tax in NJ, but I don't remember that detail.

I will remember for future information.

Steve_

The problem in NJ and some other jurisdictions is mainly if you're an LPR, because they use the same rules as the Feds, which are basically designed to stop people from getting a mail order bride and then transferring their estate to that person to avoid the estate tax. Not such a problem if the spouse who inherits is a US citizen. Another good reason to get citizenship. If the spouse inherits, there is then no estate tax (if a US citizen) so the spouse can then use normal avoidance techniques.

No-one has mentioned the US-UK estate tax treaty which is an important thing. Effectively it limits the taper relief for UK inheritance tax to three years, instead of seven, which is a huge benefit imo. I think in reality it is effectively two years and 183 days because those days count as a tax year. This makes tax planning much easier obviously. Not sure how that came about but I know IHT in the UK is a big deal for the first three years and the IRS has to draw a conclusion about the accuracy of a tax return after three years, so that's probably the reason for the lower 3-year limit.

Bear in mind you have to proactively claim the relief under the tax treaty, so knowing it exists is really important and worth mentioning in Wills. Remember the estate tax treaty is an entirely separate treaty from the income tax treaty.

Inheritances have to be reported to the IRS on the back of Form 3520 if the amount is more than $100,000.

durham_lad

I am not aware of the US-UK estate tax treaty, I'll have to do a search for, and read up on it. We do plan on giving cash gifts to our children over the next 20 years. This year we plan on giving a large gift to our son to help him buy a house and have assumed that we will need to file IRS form 709(?) to get a credit against the US estate tax lifetime limit, and also with HMRC start the 7 year clock running. We are dual US-UK citizens living in the UK.