Inheritance Tax Planning
What will you leave behind?
It's not a subject most of us care to think about, but getting the right advice is imperative to make sure your wealth is passed to the ones you love efficiently and quickly.
Many expats believe that, because they are non tax residents that they are not liable to Inheritance Tax. In the majority of cases this is wrong.
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All of the information you need to understand how to protect your wealth on death.
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Where's home ?
If you are a UK expat the chances are you will be liable for IHT as you are judged on 'where you call home' not your residency.
Protected ?
As an expat you may have assets outside of your home country. Are these protected? Are they covered in a local Will?
Local laws
Depending on where you are living, your partner may not be the direct beneficiary, it's important to look at local laws.
The idea of working your whole life and then having to pass 40% of it to HMRC can leave a bitter taste in many people’s mouths. However there are ways to minimise or even eradicate any such liability and ensure that your life’s wealth goes to the people you want it to. But it does take planning. Unfortunately it is all too common to see forced property sales and huge tax payments simply because people did not seek proper advice at the right time. There are some very simple steps to protecting your wealth and they could end saving you and your family a fortune.
If a person’s estate on death plus any gifts given to them in the previous 7 years are worth more than £325,000 there will be an inheritance tax charge. The £325,000 band is for an individual so if you are a couple then that doubles to £650,000, but that may not be the case if your spouse is a different nationality. If an individual has received any gifts, such as a deposit for a home or a helping hand with a bill and the donor dies within 7 years of the gift then they may be liable for a tax charge. (gifts are usually only captured if over a value of £3,000 but this threshold is for the total gifts gifted by the donor so a gift of £2,000 could become chargeable if the donor also gifted £2,000 to someone else in the same tax year). Information correct as of 2015
Inheritance tax in itself can be unavoidable there is a lot we can do to minimise your losses. Through the use of Trusts and with careful long term planning and effective Wills you can make sure everything you have worked for is passed tax efficiently to your chosen Beneficiaries. To understand how just some simple actions can protect your estate contact one of our Planners today.
Frequently Asked Questions
If I no longer live in the UK do the UK inheritance tax laws still affect me?
The short answer is yes. Even if you are an expat living abroad, if you still hold ownership on any property within the UK, you could find that your entire estate is liable for UK inheritance tax. This is down to legal definitions and how this affects your inheritance tax liability. It all boils down to whether your status in another country is regarded as residence or domicile. You may live in another country, yet still be a domicile of the UK - in which case your worldwide assets will very likely fall under UK inheritance tax laws.
Acquiring a new domicile is difficult. You need to be able to show that you never intend to return and once you have made this choice, it is still best practice to seek professional help!
Can't I just gift my assets or cash away?
While making a gift from your estate may sound simple, you must seek professional advice in order to ensure that it has a positive impact on your inheritance tax liabilities.
An IHT liability is measured on various factors, such as how long ago the gift was made, who it was made to and for what reason. You need to ensure that you have managed your money and estate correctly. It is important to understand that by making a gift, you are no longer entitled to benefit from that particular asset.
I have assets all over the place, do I really have to declare it all?
HMRC is a powerful force and has access to up to 7 years of your financial matters, in order to identify any activity that could be liable for inheritance tax. Upon death, your executors must submit an IHT return and be liable for the information provided.
HMRC can look into any schemes or gifts that you have organised to see if you had continued to benefit from assets that you had declared to have passed on. This means that clear advice from an experienced financial advisor is essential and documentation is key. Without clear planning or high quality advice, you may find that you or your executors misinterpret the law, which can result in your beneficiaries facing a long drawn out investigation into the affairs of your estate, in some cases be subject to fines and penalties.
Talk to us
Inheritance Tax Planning is a complex subject and it can often be your family who have to pick up the pieces when you die. Get the right advice now before it's too late by contacting your
Regional Office or call our Global Helpline on +41 22 710 7864
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