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Topic: US Citizen living in UK full time, and inheritance tax - do I pay?  (Read 1706 times)

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Hi - great forum, I hope someone has experience with this situation.

I have lived in the UK full time since 2003 (indefinite leave) and hold a US passport. I have been divorced from my British spouse for several years, and we never filed together anyway.

I do not have a registered US address and do not use my existing parent's abode for any reason because we are estranged (and I am in my 50s!).

in 2015 I inherited some money from the passing of some relatives, in two different states. I have no further attachment to either property/estate etc., as they were sold off and all proceeds distributed.

The proceeds for one went to my UK bank through an estate planner in the US, the other was handled by a firm that insisted I have a USA bank account so I had to open one just for that reason.

My questions are several: 
1) Do I need to report on the sums going into both or either of the US / UK bank accounts?
2) What are the thresholds for me to notify the US tax authorities on these disbursements?
3) Is it safe to assume the estate planners 'paid' the tax on these before they were disbursed or will I end up owing money?
4) Are they considered in a lump sum for the year, (federal level) or handled at the state-level (e.g., I need to see what the law re: inheritance taxes are in the 2 states where the people died)?
 
It's not a fortune (relatively speaking), but several tens of thousands in each case. 

I probably need a UK-based lawyer who handles these things - and a US lawyer on retainer to us as an address/POA there - so referrals are welcome!

Thanks  ;D


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Re: US Citizen living in UK full time, and inheritance tax - do I pay?
« Reply #1 on: February 20, 2016, 08:13:14 AM »
I am not a professional, so this is based on my knowledge and some research I've done in preparation for a similar eventuality.

The estate of the deceased pays any US federal tax due - you don't. The inheritance is not reported on your 1040 nor are the proceeds taxable in the UK.

Some states do impose an inheritance tax; AFAIK, these are Indiana, Iowa, Kentucky, Maryland, Nebraska, New Jersey, Pennsylvania and Tennessee. If the inheritance came from a relative in one of those states, you might need to file a non-resident state return. That's way beyond my knowledge.

Any income produced (interest etc.) is of course must be reported.

In any case, you don't need a lawyer, and likely don't need any professional. If you did, it should be an accountant.

Married December 1992 (my 'old flame' whom I first met in the mid-70s)
1st move to UK - 1993 (Letter of Consent granted at British Embassy in Washington DC)
ILR - 1994 (1 year later - no fee way back then!)
Back to US in 2000
Returned to UK July 2011 (Spousal Visa/KOL endorsement)
ILR - September 2011
Application for naturalization submitted July 2014
Approval received 15-10-14; ceremony scheduled for 10 November!
Passport arrived 25 November 2014. Finally done!


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Re: US Citizen living in UK full time, and inheritance tax - do I pay?
« Reply #2 on: February 20, 2016, 08:41:54 AM »
I see no problems at all in either the US or the UK - assuming you are currently US compliant.

The only possible problems might be here in the UK if any of the money distributed to you came from a US trust, in which case you may want a UK legal opinion on how the trust distribution should be reported and taxed in the UK.


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Re: US Citizen living in UK full time, and inheritance tax - do I pay?
« Reply #3 on: February 20, 2016, 11:45:08 AM »
Thank you vadio and guya!


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Re: US Citizen living in UK full time, and inheritance tax - do I pay?
« Reply #4 on: February 20, 2016, 02:40:00 PM »
The estate is responsible for paying tax at the federal and state levels. Your only responsibility is to take the cash.

So the only issue I could possibly see is if the inheritance money earned some interest while in probate and that was paid out to you. Then you'd have to pay tax on that. Other than that just make sure you file the required US informational forms for any UK accounts you have and pay your US and UK tax correctly form any interest and gains on your inherited cash.


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Re: US Citizen living in UK full time, and inheritance tax - do I pay?
« Reply #5 on: February 20, 2016, 05:08:54 PM »
According to this: https://turbotax.intuit.com/tax-tools/tax-tips/Taxes-101/What-are-Inheritance-Taxes-/INF14800.html:

"An inheritance tax is a state tax that you pay when you receive money or property from the estate of a deceased person. Unlike the federal estate tax, the beneficiary of the property is responsible for paying the tax, not the estate. However, as of 2015, only eight states impose an inheritance tax. And even if you live in one of those states, many beneficiaries are exempt from paying it."

So - the OP (beneficiary) may be liable for inheritance tax if the inheritance came from the estate of a person living in one of the 8 states that impose it. Again, this is way beyond my personal knowledge base. Thankfully, assuming I do inherit from my surviving parent, his state of residence doesn't impose an inheritance tax.
Married December 1992 (my 'old flame' whom I first met in the mid-70s)
1st move to UK - 1993 (Letter of Consent granted at British Embassy in Washington DC)
ILR - 1994 (1 year later - no fee way back then!)
Back to US in 2000
Returned to UK July 2011 (Spousal Visa/KOL endorsement)
ILR - September 2011
Application for naturalization submitted July 2014
Approval received 15-10-14; ceremony scheduled for 10 November!
Passport arrived 25 November 2014. Finally done!


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