This the case for clients for US/UK clients. Here, tools traditionally used in wealth structuring that work for US tax purposes may not be quite so efficient when it comes to the UK.
The danger is that an adviser might rely on the familiar ‘tricks of the trade’. However, where the client’s affairs are cross border, and for the purposes of this article, the client has a US/UK dimension, then it is important to ensure both bases are covered.
US / UK cross border gifts
The basis position is that there should be no fundamental issues with a UK person inheriting from a US individual directly.
Setting to one side US estate taxes issued by individual states, the current level of lifetime federal gift and estate tax allowance in the US is generous. At the moment, this is set at $12,000,000. Of course, this means that serious levels of wealth can pass without any US estate tax hit.
Can a trust bring any benefits?
A US individual settling assets on to a trust can often be highly efficient for UK inheritance tax (“IHT”) purposes.
This is because the non-UK assets of a non-UK domiciled – and non-deemed domiciled – individual are generally outside the scope of IHT. As such, a gift by our non-dom friend of his or her non-UK assets, either during their lifetime or on their death, should not result in IHT.
However, if one was to simply to bequeath those assets directly to a UK resident domiciliary then this would result in those assets falling within the IHT net. As such, it would potentially result in an IHT charge of 40% if the done held the assets on their own death.
A potential solution might, therefore, be to place those assets on an appropriate trust for the benefit of the done. It should be possible for this trust to remain outside the scope of IHT.