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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4380
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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My mother, a permanent resident of the UK, died in April in

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My mother, a permanent resident of the UK, died in April in the UK; she was however, a US Citizen and had some UK assets in her name. During this UK probate process (which is complex to say the least) her estate grew during the time that she died and the present, while the estate was being probated. Is this "windfall" subject to US or UK taxation?
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

Lane :

Hi,

Lane :

FIrst. can you tell me whether the estate (excluding lifetime taxable gifts) if more than $5,250,000?

Customer:

No, but this estate us being probated under UK law, because my mother was a UK resident, and therefore to UK probate law.

Lane :

I understand, but the US system taxes all citizens regardless of residency, so I wanted to get that out of the way first - as well as to get a feel or general size ... also has probate in UK closed or not? THe answer will turn on this

Lane :

You normally can't get access to the assets in the estate until you've received a grant of probate (or confirmation in Scotland).


You need to know the estate's worth to fill in the probate application forms and show whether or not Inheritance Tax is due.

Customer:

No, the UK probate is still open and appears to be an endless process, the estate closing time of which is unknown.

Customer:

This is a windfall, OUTSIDE of the estate...the velue of the estate just happened to increase since the the time she dies and the present day

Customer:

These are the exact questions I have been asked of me time and time and time again.

Lane :

There WILL be an accounting as a part the court putting the seal on the probate estate ... in some instances, the executor is asked to sign and verify for the final accounting ... let me see if I can find that documentation for you .... short answer is yes .... However, if you (or the representative or executor) has ALREADY been asked to verify the accounting and this windfall occured AFTER that time, you may have dodged the proverbial buller ... IF you can hang with me, I see if I can get this from HMRC

Lane :

Can you rephase or provide specificity when you say "outside" of the estate? Do you simply mean AFTER she passed or are you referring to items that pass through agreement such as life insurance that bypasses the probate process?

Lane :

My apologies, in UK life insurance IS part of the estate

Lane :

See this:

Lane :

Assets are anything that has a value, such as:



  • money in bank, building society or savings accounts

  • houses and land, including farmland

  • businesses, or business assets, owned by the deceased (or a business partnership of which they were a member)

  • investments such as stocks and shares, including family shares

  • personal belongings, including jewellery, antiques and other collectibles

  • furniture, fixtures and fittings in a house

  • motor vehicles

  • pensions that include a lump sum payment on death (as opposed to an ongoing annuity to a surviving partner)

  • assets in a trust from which the deceased benefited

  • payouts from life insurance policies

  • foreign assets held abroad including foreign bank accounts, property or shares

Customer:

I mean her Estate grew AFTER her her death out of sheer market conditions.

Lane :

OK just a sec thanks for that

Lane :

Confirmation that you've paid all Inheritance Tax due


Inheritance Tax must be paid within six months after the death. However in some cases you can pay by instalments if the estate includes certain types of assets.


If you've supplied the necessary information on your Inheritance Tax forms and paid all the tax and interest due, HMRC will send you a letter confirming that no more Inheritance Tax is due.


You may have chosen to pay by instalments but also paid Inheritance Tax due that isn't part of the instalment plan. In this case you'll get a letter confirming that you've paid the Inheritance Tax due except for the tax due by instalments.


When all of the instalments have been paid, HMRC will send another letter to confirm that all of the tax due has been paid.


These letters mean HMRC can't ask you to pay any further Inheritance Tax on the estate in question unless:



  • you haven't told HMRC about something that was relevant

  • you've given false information

  • assets are discovered later that should have been included, for example a transfer into trust

  • further tax becomes payable as a result of the will being challenged or 'varied' (see 'More useful links' below)

Lane :

This is the answer ... paid within 6 months, based on what was included on the tax form ... once paid you get the confirmation letter ... the valuation is AS OF DATE OF DEATH

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 4380
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and other Tax Specialists are ready to help you
Expert:  Lane replied 1 year ago.

Thanks Jack.

Here are two links that might be helpful:

http://www.hmrc.gov.uk/inheritancetax/paying-iht/record-keeping.htm#4

http://www.hmrc.gov.uk/inheritancetax/paying-iht/record-keeping.htm

Let me know if I can help further

Lane

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Lane
Lane
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Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986