US inheritance for UK dual national resident

I have had ILR to live in the UK since 2006 and have paid tax in the UK ever since.  I file US taxes every year but I have never surpassed the threshold so never owed anything to the US.

In a very sad turn of events I have been informed that a member of my immediate family is very ill and she has everything in a trust apart from her house and car which she will be adding to a will.  From what I am being told it will be left to me.  How will this effect me here with taxes?  I dont plan to transfer the money to the UK,  I dont own property here and have recently had to stop working and apart from some money in my ISA I have no assets.  I would probably keep all of the money in the USA as I intend to move back there in a few years and buy a home.

Any advice would be appreciated! Ive been reading loads of messages on here but none seem to apply to my exact situation.

Well you don't have to worry about taxes....the estate will be responsible for paying any inheritance taxes in the US. You'll just get a check, there's no US or UK tax for you to pay.

Perhaps the bigger question is what you intend to do with the inheritance. How and where will you invest the money in the US and what are the US and UK tax implications of that?

You don't pay UK tax on a foreign inheritance - I've just checked that out. The estate in the US will be responsible for any tax due there.

But since the money is in a US trust from a UK perspective you may be receiving capital payments from a foreign trust. Somebody would have to figure out stockpiled gains within any capital payment and the resulting UK tax on the gains.

From a positive perspective the trust is probably excluded property for UK IHT purposes so if it stays an excluded property trust could escape IHT on your own death.

This kind of structure typically requires specialist UK advice.

I suppose if the trust pays the taxes there'd be no problem, but if there are unrealized capital gains that pass to the beneficiaries then there could be both US and UK personal tax due.


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Stockpiled gains are calculated using UK identification rules and offshore income gain rules and with spot historic pound/dollar exchange rates. This is typically a major accounting project to reconstruct.  There may be a loss in dollars but gains in Sterling or vice versa.

Since this is an excluded property trust and the OP is not UK domiciled it may be possible I guess for the trustees to realise all of the gains before the settlor's death and the corpus of the trust not to be distributed until after the UK tax year after the OP has left the UK. The terms of the trust deed would need to be reviewed.

Hi everyone
Thanks for your replies.I have a bit more information.

My sister and I each have a USA CD in trust for each of us in my mothers bank. Upon her death we can each cash it and do what we want with it. We plan to open new CDs in our own names.

The house and contents are in the will and will be left to us jointly. We never plan to sell. My sister will live in the house until I eventually move back to the USA but until then I will remain living in the UK.

How much do I need to tell hmrc? Its a house jointly owned with my USA based sister and either a joint CD or my own CD.

I don't want to pay tax in two places.