American in Britain – Wealth Management

Many people don’t like to think about what will happen in the event of their death. For US persons living in the UK, the subject of inheritance tax is one that can be very important due to the large differential in the nil rate inheritance tax bands available in the UK as compared to the US. A lack of understanding about how inheritance tax works can end up costing loved ones hundreds of thousands, if not millions of dollars. However, proper planning can help minimise the amount of inheritance tax payable and help ensure that loved ones are left with an estate that will provide for their needs after death. Proper strategies will largely depend on whether an individual is deemed to be UK domicile or non-UK domicile at the time of death.

What Is Inheritance Tax? Inheritance tax is a levy that is assessed by the government based on the net value of an estate. In its simplest definition, the net value of an estate is based on the fair market value of all assets on the date of death less any debts. Includable assets are most often, among others:

  • Cash in the bank
  • Investments
  • Any personal property
  • Any real property or businesses owned
  • Cars
  • Life insurance policy pay-outs.

In the UK, everyone is currently allowed a net estate valued up to £325,000 before any inheritance tax is assessed. This is called the nil-rate band. Any estate valued above this threshold is subject to tax at 40% (or 36% if at least 10% of the residual assets are left to a HMRC qualified charity).

Click here to see the article written by Andrea Solana.

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