kins

Hubbie and I took out life insurance policies in the UK several years ago and they have about 17 years left to run. Other than the house here they are the bulk of what we will leave to our children.

Now we're all living in the US. If we die, are the life insurance payouts taxed in the UK or the US?

I've been assuming they are included in our estate here, therefore subject to US estate tax and we should write a will to cover them here.

But I'm wondering if they're actually subject to UK inheritance tax laws.

I'm planning to talk to someone here about a will and estate tax etc but do we need a UK will as well?

Anything else here I should be thinking about?

md95065

You should definitely consult an attorney and draw up appropriate wills and powers of attorney for both health care and other matters so that you will also be covered in the unfortunate event that one of you becomes incapacitated and unable to make decisions for themself.

As far as the insurance policies are concerned, what kind of policies are they and who are the beneficiaries?

If there is a named beneficiary then, in the US at least, the proceeds from any death benefit payout would normally go direct to them and will never even be part of your estate - and that is generally what you want to have happen.

In the event that you and your spouse are named as primary beneficiaries on each other's policy with your children as contingent beneficiaries then if one of you dies before the other the surviving partner will have received the payout from the deceased partner's policy and then that amount will, of course, be part of your estate when you pass on.

Whatever you do don't end up with two wills - one for the US and one for the UK - that would be a very bad idea and has the potential for all sorts of horrible confusion. If you are resident in the US then your estate will normally go through probate in the jurisdiction where you were resident. It is wise to make sure that you have a will drawn up that conforms with the requirements of that jurisdiction so that there will be no doubts about its validity. If and when you move back to the UK draw up a new will.

Ray

I disgree ..it works very well and saved many problems

md95065

.. and what happens if copies of both wills end up in one jurisdiction and the provisions in them are not interpreted as being identical - what happens then?

Ray

They obviously contain different details...

and of course every state had different way of doing things...

I just sorted my cousins Florida will ..for his property here

and his dad sorted his UK will ...for his property there

Bob

If your not a US citizen, it's a tad more pricey kicking the bucket in the US...but anyway, have a will in the US to cover US assets and a UK will to cover UK assets, much easier to deal with and they cover local jurisdiction and leave little to faff around about.

Manc

LIFE INSURANCE BENEFITS ARE NOT TAXED. you pay into the policy/premiums with taxed income.


if it is a whole life policy, the dividends from any cash values may have CGT......

kins

I called the UK inheritance tax people to ask about this today and the woman said it was too difficult a question for her to answer so she'd get someone to call me back (which needless to say they didn't do). But her initial thoughts were that we would pay UK inheritance tax on the UK life insurance because we haven't been out of the country long enough.

But now I'm wondering how it works if you are taxed in the UK on UK assets and in the US on US assets. Do you get a UK allowance for UK assets, then a US allowance for US assets? That just doesn't sound right somehow.

I'd rather everything came under US tax, because the allowance is so much bigger at the moment, and I'd like to do one will with one trust etc.

Anyway I will carry on looking into it...

Manc

Life insurance benefits are not taxed.

I just told you

kins

It's a term life policy that pays out if we die, and there are no named beneficiaries. So the money goes into our estate then is liable to inheritance tax before our children receive it, as far as I can tell.

Manc

therefore it is imperative to name a beneficiary, both primary and secondary.

even if it is a living trust of something.

mayhemuk

Does it even cover you if you're no longer a UK resident?

Manc

yes why wouldn't they?

kins

It does - I checked this with them before we left and got a letter to confirm that we're covered no matter where we live, as long as we continue to pay our premiums..

The inheritance tax people called back this morning at 7am - the joys of giving them a UK number to call me on

They do charge UK inheritance tax on any assets held in the UK, even if you are domiciled abroad. They don't charge UK inheritance tax on any assets you hold abroad.

They said we should take legal advice on whether to have a will in each country.

So I am about to set up a trust with named beneficiaries for the UK life insurance policies as suggested...

Bill_S

The heirs get into a huge battle over the money... then Hollywood hears about it, and a new reality show is born... Ray's Millions