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.
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.