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US Tax Implications for UK Inheritance

US Tax Implications for UK Inheritance

Old Jul 10th 2013, 1:45 am
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Default US Tax Implications for UK Inheritance

Sorry if this is posted in the wrong forum and if this question is answered elsewhere.

I am a US permanent resident with UK citizenship. My Mother, who lived in the UK, died in February and I inherited her estate. If I were in the UK I would not be liable for inheritance tax, as the value of the estate is below the threshold.

My question, as a UK citizen in the US do I fall under the same inheritance rules as a US citizen, or am I liable for taxes due to my statues? Do bear in mind that if I were to die, my wife would be liable for taxes on my estate as I am not a US citizen; hence the reason for my question.

Thanks for reading.
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Old Jul 10th 2013, 2:02 am
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Default Re: US Tax Implications for UK Inheritance

Originally Posted by corneydavid View Post
Sorry if this is posted in the wrong forum and if this question is answered elsewhere.

I am a US permanent resident with UK citizenship. My Mother, who lived in the UK, died in February and I inherited her estate. If I were in the UK I would not be liable for inheritance tax, as the value of the estate is below the threshold.

My question, as a UK citizen in the US do I fall under the same inheritance rules as a US citizen, or am I liable for taxes due to my statues? Do bear in mind that if I were to die, my wife would be liable for taxes on my estate as I am not a US citizen; hence the reason for my question.

Thanks for reading.
Since there is no federal inheritance tax and only estate tax, the US government cannot tax a non resident alien's foreign estate and you are not taxed on any money received on inheritance. However a few states have inheritance tax.

Currently there is a $5 million exclusion on estates and unlimited exclusion when the estate is passed to a spouse including annual gifts. However if a spouse is not a US citizen, gifts are limited to $100,000 per year tax free and the spousal exclusion is $5 million tax free upon death.

Last edited by Michael; Jul 10th 2013 at 2:06 am.
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Old Jul 10th 2013, 4:48 am
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Default Re: US Tax Implications for UK Inheritance

HI Micheal,

Thank you for responding. I certainly won't be exceeding the $5m limit. Based on what I had heard about non-US citizens inheriting I am concerned that the IRS will hit me with a tax bill when I transfer the money to the US. From what you have said and I have read elsewhere I should be okay.

Thanks!
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Old Jul 11th 2013, 2:33 pm
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Default Re: US Tax Implications for UK Inheritance

In general the only issues you might have are if your state has an inheritance tax, if you hold the money in a foreign account and FBAR and FATCA kick in and if the money you inherit earns interest while in probate. That interest must be included on your 1040. Also if the inheritance is over $100k you'll need to file an IRS Form 3520, but there should be no US tax due and no issue with bringing the money to the US.
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Old Jul 11th 2013, 4:27 pm
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Default Re: US Tax Implications for UK Inheritance

Inheritance is a transfer of capital so unless there is a specific tax on the estate (e.g. inheritance tax, estate tax, in Canada it's considered a deemed disposition on death, so capital gains tax) there is no tax. If there were tax, the estate would be liable to it. I.e. you would pay whatever the UK govt. wants, the US has nothing to do with it.

Although as Nun pointed out the US has various reporting requirements if you leave it in the UK afterwards. But that has nothing to do with the money coming from an estate per se, it's just the normal stuff.
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