Wintersong

I'm looking into inheritance tax and monetary gifts, and this is what I've been able to gather so far (if anyone can confirm or correct, that would be great).

From a UK tax perspective:

• There is no annual limit on monetary gifts.
• Inheritance tax is payable on estates over £325,000.
• There's a sliding scale of payable inheritance tax if gifts were made within the 7 years prior to a person's death, and if those gifts put the estate over the £325K threshold, minus a £3,000 annual exemption.

From a US tax perspective:

• If the donor is not resident in the US for tax purposes, their gifts are not taxable and aren't subject to the $14,000 annual limit.
• Gifts from foreign sources only need to be reported if they are over $100,000.
• Federal inheritance tax is payable on amounts over $5.45 million per individual.

So, if I'm understanding correctly, monetary gifts from the UK can be given to a US citizen tax-free and don't need to be declared, assuming they remain below $100,000 (presuming this is per 'transaction'?).

The estate value is above the UK threshold for inheritance tax, but below the US threshold. Tax will be paid on the estate within the UK at the time of probate, and also on any monetary gifts which were made within the preceding 7 years. No federal tax will be payable when the money is transferred to the US, but it will need to be declared as it will be above $100,000. State tax *may* be payable (I haven't looked into this yet).

Going by all of this, am I correct in assuming that I can receive monetary gifts from a parent (under $100K) without reporting to the IRS at all?

Presumably any such gifts should be recorded somehow, so as to provide evidence to Inland Revenue as to which year they were given and therefore how much, if any, inheritance tax is payable on them. Any advice as to how to keep such a record?

Just_Joy

Do an international money transfer from the UK bank to your US bank

morpeth

I don't think an inheritance can be considered a gift.

Cook_County

It is a little more complicated than that. The foreign estate is a foreign person. There may be FBAR & 8938 reporting. There may be income and gains during the administration period, including foreign currency gains.

Wintersong

It's a monetary gift if it's given before the person dies.

Cook_County

Is the NRA donor a covered expatriate for US tax purposes?

Wintersong

Sorry, it looks as though I was a little unclear in my post - I'm talking about my living parent giving us money prior to her death, not on dealing with an inheritance.

The reason I mentioned inheritance tax is because it comes into play if the money is given within the 7 years prior to the person dying from a UK tax perspective, but that doesn't appear to be the case on the US side.

It looks as though amounts less than $100,000 can be given and, assuming she outlives the gift by 7 years or more, there will be no tax penalty or need for reporting on either side of the Atlantic. I don't know if that's $100,000 in any one transaction, $100,000 in a year, or $100,000 total.

Wintersong

Do you know if that will suffice, or if there's a need for any official statement from the person who's doing the gifting?

Wintersong

No - she is, and always has been, a UK citizen and UK resident.

I'm assuming that, in this case, NRA means something other than National Rifle Association

theOAP

So it's safe to assume the NRA was never a US Green Card holder?

Being a covered expatiate (via USC, Green Card, or US Long Term Permanent Resident status) can lead to a 40% tax (payable by the beneficiary) on all amounts sent to the US.

Wintersong

That's not applicable in this instance, but useful to know - thanks!

Cook_County

You'd also want to worry about deprivation of assets rules.

PetrifiedExPat

Pretty sure it's not by transaction, otherwise people would send 99,999 USD all the time to skirt the law (which btw, would be a huge red flag anyway). I would say the limit is $100,000 per year.

My parents just sent over some money as a wedding gift (GBP to USD), using a broker. The broker themselves use Barclay's Bank to move the money, and at the end of the form my parents filled in, it asked 'reason for transfer/notes'. This section is not mandatory, but they filed 'wedding gift', and that note now appears on all the receipts and both mine, and my parents, bank statements. I feel that is great to clear up any potential tax questions.

I think its worth noting that there are federal and state limits for gifts before they are taxed. Make sure you know them all.

The UK tax rules I do not care about, thats my parents problem!!

Wintersong

That wouldn't be an issue, but good to note

Wintersong

Yep - at the moment I've just looked at federal limits, need to do some more digging into state rules.

Congrats on your wedding!