HMRC and Transfer on Death agreements?

Hi,

I am considering opening a Transfer on Death (TOD) account for my US Brokerage account.

TODs would seem to be an excellent idea, as on my death, the account will transfer directly to my beneficiary without going through probate.

However, I know that many excellent ideas in the States lead to big problems with HMRC. Does anyone know how such accounts are treated by HMRC, especially in regard to filing a UK tax return? I don't want to set up a 'foreign trust' (great smiley!)

janet

I agree you are right to be cautious as you may be creating a settlor interested trust (http://www.hmrc.gov.uk/trusts/types/settlor-interested.htm) and you may also have to deal with the transfer of assets abroad legislation (see HMRCs Helpsheet HS262 here: http://www.hmrc.gov.uk/helpsheets/hs262.pdf)...and then there are also the gifts with reservation of benefit rules and the pre-owned asset tax legislation to be reviewed). I'd suggest getting an English solicitor's advice before proceeding.

 

We just made our wills and I showed the TOD agreement to the attorney then.

She didn't have a problem with it, so I can only hope HMRC won't either! After all, it's really just a brokerage account and any income coming from the contents will be taxed in the US and thus subject to the tax treaty. It's only different from a normal brokerage account in that it's transferred directly to my OH after my death rather than go through probate. He'll still have inheritance tax to pay!

Eventually the countries involved in this 'know everything about everyone's bank accounts' agreement will have to recognise the 'transparent' investment structures of the other countries as legitimate. Most people are not trying to hide money, they're just trying to make a little something for the future.

janet