Factual Questions might be the wrong forum, and I’ll self-report this post (if I can).
I am looking for a factual answer, related to legal/country-country accounting advice. Tomorrow (May 24) is a bank holiday in the UK so I do have plenty of time to do some of my own research and probably zero time to speak to any professional tomorrow.
I recently had a thread on my 96 year old mom’s passing and my psychotic brother who owns guns and threatened to kill my oldest brother. Those issues likely won’t come into play.
I’m from New York City and Mom was out on Long Island (I’ve lived there too). Since 2015 I left, couple years in Ireland and over eight in the UK and my last airplane flight was from Dublin to Leeds.
My mother had a couple annuities (I’d characterize them as IRA’s as I assume they were tax-free). In her will my niece (oldest brother), nephew (MAGA brother) and myself are named. From the paper-work I’ve seen, there is a US Tax Burden. I’m therefore disinclined to have to pay regular income tax to the HMRC (IRS of the UK) as well.
This of course will eventually apply to the sale of the house, which is three ways with me and my two brothers.
I’m assuming I won’t have to pay both like 30% each - so my question is: What sort of professional do I need here? Someone skilled in UK and USA tax law. I have a Limited Company and a good accountant, yet international stuff is out of his scope as he has told me. I won’t be able to speak to him in any case till Tuesday, and even then only after 3PM British time as I presume US banks won’t open till 10AM. My niece in Brooklyn will be covering how this can be lump-summed and we can all be finished with the racist MAGA side of the family.
I can’t say I know the difference between a magistrate / solicitor and a lawyer here, yet I reckon I need some kind of specialized international tax guy? What would such a person / firm be called?
In the way of advice, will they help me avoid paying the IRS 30% and then the HMRC another 30%?
I can’t help with the main question, but I can tell you this. The US has a tax treaty with the UK (as it does with many countries), and some of the provisions of the treaty intend to prevent double taxation of the same income.
So I guess I would look for someone knowledgeable about the tax treaty.
The big accounting firms PWC, KPMG, Deloitte and EY can all handle this, but their prices are eye-watering. The average high street firm (I think that’s the term in the UK) would not, but will probably be able to refer you to a bigger one that does. It’s not going to be cheap.
The USA is one of the few countries who will want some tax payment if you make more than some amount (I believe it was about $100,000 or Euros or maybe pounds) in a foreign country. I’ve approached that amount yet could probably have done that US tax form myself.
This situation is of course “income” whether or not inheritance matters to the USA (I think it does?) and should be under $200,000 annuity inclusive of 1/3 of the house. I reckon the USA will absolutely want some of that before it “leaves” the country. Essentially same treatment as my brothers, niece and nephew.
It’s the arrival of this sum into my UK bank account that needs to be accounted for, perhaps somehow interactive with the USA. Likely the UK will want some cut yet certainly will want an explanation for whither it came. It was incredibly difficult for me to open bank accounts in Ireland and the UK, supposedly to track money laundering. If I wanted to launder anything, Malta, Panama and such would be involved. So to stay on the up & up, at the very least I will need to account for the origin.
My accountant isn’t “cheap” yet without him I risk running afoul of some law and getting fined and he certainly knows how to save me money if i just tried to self-file. Yet it’s come up before and he doesn’t know US legalese…
thus
If the costs are a huge, greedy chunk I might suddenly become ignorant or call up Malta (j//k). Yet I reckon even if I split the money between my business account and two other bank accounts it may as well be drug dealer money.
I don’t know if the “reciprocal” treaty means if I made $150,000 as a UK citizen in NY if the UK would want their cut - as I said I believe the USA is one of the few with a tax interest for those abroad.
Yet “Chartered Accountancy firm,” is a good start. Of course none will give me a quote, and certainly not a hard quote till I have all the figures, yet hopefully my accountant knows some firm I can be referred to.
My understanding, based on going through this a few years ago with my father-in-law’s estate, is that, broadly, in the U.S., when there is an inheritance, the inheritor is generally not taxed by the IRS for it – though, depending on how much we’re talking about (i.e., in the millions), the estate itself might be taxed. However, that can depend on exactly what is being inherited (money, real estate, stocks, etc.). (And, if I am incorrect on this, hopefully someone can correct me!)
This link to a page on the IRS’s site has a short questionnaire which one can take to get an understanding of what may be taxable, and it appears to have a link for international taxpayers. I’d still make sure to talk with a lawyer, but this might give you a starting point.
Oh thanks (and thanks to all so far and in advance)
It would seem the house (property) sale is not taxable. It’s a bit vague about the annuity and has a link to another site. I don’t really have the numbers or know if 2/3 of us can “lump sum” it or all have to agree.
In either case, I need to know if the HMRC has a similar view on foreign inheritance. So the best result would be showing them it’s inheritance and not drug money so basically all clear, though again I’d likely need some paperwork. Yet I shall now look for a similar questionnaire.
As useful as Mighty_Mouse’s info was, I don’t need to be buying a new BMW for some tax guy.
Let’s say the house was bought way back when for $100K. That’s your “basis” in the house. Let’s assume houses in that neighborhood now sell for $900K. Had the decedent sold the house shortly before dying they’d have owed capital gains tax, not ordinary income tax, on their gain of 900K sale -100K basis = 800K.
Now, instead of selling, let’s say they die. To make it simple, let’s say you inherit the whole house, with no annoying siblings involved. At the time of death, you get what’s called “stepped up basis”. Meaning it’s as if you got the house valued at $900K with no capital gains taxes owed.
So now a year later you go to sell the house. By then houses in that area are selling for $950K. At that time, you’d owe capital gains taxes on 950K sale - 900K basis = 50K of gain. Still capital gains taxes, not ordinary income taxes.
Bottom line: you inheriting the house is not a taxable event. In fact due to stepped up basis it’s an anti-tax event. But when you sell the house later, that is a taxable event on the gain from the date of death. The same logic would apply if the estate sells the house to raise cash to divvy amongst the heirs. What would be taxable to the estate in that case is the gain between date of death and date of sale.
You might want to make sure that you’re up to date on all of your tax filings in the US for the last ten years or so: it’s not clear from your post whether you have, but it’s going to cause difficulties if you haven’t. Even if you owe the IRS nothing, you still have to file (and report on your UK bank account balances).
You probably know this and have done so, but just in case.
From what my brother has reported on similar sales, the market is pretty good on Long Island and he has fairly good confidence in a quick sale. So if I read you right - and there is a fairly (month or two) sale we’re clear of capital gains as even at (what to me was surprising) the higher sale price it’s only a bit over doubled in 35 years so not all that lucrative an investment. Yet one cannot live under S&P funds or treasury bonds.
Yikes. I did a few times and never for my Limited Company (7 years) so thanks for the warning. At least I can say I do not owe the IRS any money.
The house should be appraised as of the date of death. They can do retroactive appraisals. That number will become the estate’s basis of the house.
When the estate sells it a couple months later you’ll know your sale price. If there’s a profit there (net of selling costs), that is something that goes into the estate’s taxes. Most likely it’ll be a small number and will probably wash out to zero by the time you’re done with the various exemptions, exclusions, etc.
I don’t know anything about the US side but from the UK point of view:
The disperment of funds will almost certainly need to be done through a solicitor. They are lawyers that directly serve members of the public. You will need one that specialises in Wills and Estates though many firms of solicitors with have people who cover most / all areas in there staff.
Expect it to take a while for the funds to go through probate, my my mother dies we were told it would take about 16 weeks but actually took 10 months.
Don’t worry about magistrates they are a type of judge, you also don’t need to worry about barristers they are contracted by solicitors to argue a case in court.
Inheritance tax is only payable if the estate is worth more than £350,000. If it is the tax rate is 40% of the value above £350,000.
When my mother died her estate was below £350,000 the legal fees and the likes totalled about £4000.
UK inheritance tax on foreign assets
… Also, the value of the inherited estate determines Inheritance Tax liability. If the total value is below £325,000, there’s usually no Inheritance Tax.
So I might incur some issues with the IRS and “where’s your tax returns?” as Dr. Drake advised/warned. Ignorance is no excuse yet there was no fraud or tax evasion.I’ll mention this to my brother whom I had thought could have just dumped the funds into my US Paypal account. Yet at worst, I either pay the IRS penalties or some H&R block person to fix things, which will suck but not the cost of a BMW.
And I’ll still pay money to some firm to make it all on the up & up to the UK. I will indeed be surprised if the HMRC allows me to deposit like £150K and not tax me so long as I can prove the provenance/origin of the funds.
This is mainly the knowledge I needed - missed it after my last post so thank you!
(sorry about your mom) yet she was a British Subject? I know from the USA side there will be probate, yet once my brother/the estate lawyer has the funds I don’t have to wait in the UK to access them?
Or should I expect to?
I hope then a solicitor is the kind of person that can provide the provenance/origin of the money as an inheritance as opposed to drug money?
(I have emailed my brother about the possibility of the IRS inquiring about my tax returns)
We eventually gave up on using professional tax preparation (Aus/USA) for my parents affairs. Using a specialist firm, that handled that kind of business, they still made mistakes.
The IRS is chronically understaffed and incompetent, which has too effects: (1) it doesn’t matter if you don’t get it exactly right, as long as you’re not cheating, they are unlikely to notice, (2) If they do notice, they are probably wrong: even though they have a specialist department, that handles that kind of business, they still make mistakes.
As I understand it, HMRC is also presently understaffed and incompetent, which is presently affecting contractors and other people with odd income. After they make a mistake, it can’t be handled by their online system, so you wait for an hour on the phone, to talk with someone who has only worked there 6 weeks, and knows less than you do. I don’t know if this is also affecting inheritance tax or tax treaties.
Sorry if “British Subject” sounded weird or archaic. As a contractor in the UK, I sometimes see the phrase mentioned as a requirement for Defense roles. Or if I get cold-called from an agency who hasn’t fully read my CV (USA + Irish + 8 years in UK) as soon as they start talking about defense I tell them “I am not a British Subject so there’s no chance here.” and I understand that.
I (can) live in the UK because I am a citizen of the Republic of Ireland. And because I’m a peacenik I never sought a defence role when I lived in the USA.
No problem, I am old enough to remember when commonwealth citizens were referred to as British subjects, I didn’t know the details but was aware they had some but not all the rights of British Citizens.
I actually was just thinking that either you had used a slightly incorrect term (like saying English instead of British) or used the American / Irish term for their own citizens.
“American Subjects”, eh? Don’t give Trump any ideas.
AFAIK Americans (I am one) call ourselves “Americans” because, hmm, I dunno the reason.
The Irish, excepting the top right six counties, call themselves Irish. Dunno what those in (approximately) Ulster call themselves, yet it’s funny/weird to see BBC weather and there’s some greyed out country just south of Belfast. Here there be dragons (since George sent them packing from Wales)
Met Éireann, the Irish Met (weather) service does show all of “The British Isles” yet never uses that term.
The super annoying thing about UK inheritance tax is that you need to sort out and pay the tax before applying for probate; in fact, proof of payment of inheritance tax (or proof why no tax applies to this estate) needs to be submitted together with the application for probate.
As to the OP: I agree that a solicitor with experience in wills, estate and probate will be needed; but I’d suggest picking one with expertise in cross-border estates. Your average English high street solicitor can certainly do a run-of-the-mill probate application and estate distribution, but for many of them, their experience is largely limited to straightforward cases that all play out purely under English law, and the subtleties of a cross-border case with significant interplay between two different tax regimes can easily be lost. (Heck, I’m an English solicitor myself and I wouldn’t touch this case with a ten-foot pole!)
No reason for cross-boarder legal expertise unless there really is a cross-border estate, and even then probably not.
The Will, and the Probate, and the Estate, are American. You may benefit from an American lawyer. It will be cheaper to hire a NY State lawyer in NY state, rather than paying a cross-border London lawyer to deal with a licensed NY lawyer in their NYC office.
Even if the estate is cross-border, you are unlikely to need cross-border legal help. It can be irksome getting money/title from your mother, to your mothers estate, to you, but cross-border legal experience isn’t going to help you deal with monolithic brain-dead investment companies: the nature of the problem isn’t legal. It sometimes helps to have someone on the spot, but again, that’s local, not cross-border.
We didn’t have a problem with inheritance tax (Australia has no inheritance tax), but that’s a tax problem, not a legal problem.