Inheritance

Can someone give me a quick overview of IRS position on gifts and inheritance from non-US citizens?  At some point I will inherit from my British mother and it will be a substantial amount.  I know the UK will want a piece of her estate in inheritance tax, but how will the US treat the part I inherit?  Wondering if I need to persuade her to start parting with meaning ful amounts of cash now. Ta.

If she's not a US citizen or US resident, you don't need to worry. 

If she's not a US citizen or US resident, you don't need to worry.

+1

Any taxes due will be paid on the estate to HMRC and the monies distributed to the beneficiaries will be tax free to the recipients, and no US taxes when large sums are moved to anyone in the USA.

From an inheritance perspective you’ll need to file a 3520 with the IRS for amounts over $100,000.

Wondering if I need to persuade her to start parting with meaning ful amounts of cash now. Ta.

From a UK tax standpoint then if she expects her estate to be subject to IHT (of 40%) then that would be a good plan.  Note that in calculating her estate for IHT then personal pension savings such as SIPPs are exempt, so drawing funds from other sources first is preferable from an IHT planning standpoint.  Making gifts now can save a lot in IHT. When a gift is made the clock starts ticking, if the recipient dies 7 years after then no tax is due.

The 7 year rule
No tax is due on any gifts you give if you live for 7 years after giving them - unless the gift is part of a trust. This is known as the 7 year rule.

If you die within 7 years of giving a gift and there’s Inheritance Tax to pay, the amount of tax due depends on when you gave it.

Gifts given in the 3 years before your death are taxed at 40%.

Gifts given 3 to 7 years before your death are taxed on a sliding scale known as ‘taper relief’.

Taper relief
Years between gift and death   Rate of tax on the gift
3 to 4 years   32%
4 to 5 years   24%
5 to 6 years   16%
6 to 7 years   8%
7 or more   0%

Thanks all. I was aware of the HMRC position,  think we’ll just have to accept that some of her estate will be taxed at 40%, good news that the IRS won’t want some too.