USA / UK TREATY BASED ESTATE TAX RETURNS
US/UK Treaty based Estate & Gift Tax on USA situated Assets
Have you recently lost a loved one who on the date of his or her date of death owned assets in the United States?
If so, and if you are an executor, surviving spouse, trustee, or a beneficiary of such a person, it may be important for you (and especially so for those dealing with the person's US estate) to take legal advice from a US qualified lawyer. Such a lawyer needs to be experienced in both the preparation of US estate tax returns and in relation to determining available treaty based relief, and to be aware of the following described matters:
If a spouse or other family member of yours has died owning US situated assets the value of which exceeds $60,000, whether such includes shares of stock, rental homes, bank accounts, etc. or other assets, it may be very important to take care in seeking experienced legal counsel in order to determine all options possible in relation to any estate tax liability claimed against the estate and any gift tax on lifetime gifts, and to address any possible fines and penalties further to late submission of estate tax and/or gift the US situated estate.
Normally, when a foreign national owned US situated assets, the estate shall owe US estate tax wherever the value of the deceased's US situated assets exceeds a $60,000 "unified credit" available to the US estates of foreign nationals. This can mean a charge against the foreign national's estate for USA estate tax. A table can be found below providing how USA estate and gift tax is calculated depending on the nationality of the deceased and the value of the USA estate.
Additionally, there is a treaty between the USA and UK which may provide a basis for reducing and, in many cases, totally avoiding any payment of US estate & gift tax on the foreign national's estate's US situated assets.
Please contact us to address this with you in detail.
1. The threshold amount at which a person's estate may be required to file a US estate tax return, and possibly a gift tax return.
Note: The threshold amount of assets which triggers the requirement to file a US estate tax return and potentially a US gift tax return is dependent upon the law for the calendar year in which the person died and on whether the deceased was a (a) a US citizen or a US permanent resident, or was instead (b), a foreign national on the date of his or her death.
(1A). If the deceased was either a US citizen or a US permanent resident, he or she is thereby entitled to a large "unified credit" for both estate tax and gift tax which is determined by the US government each year. The unified credit for calendar year 2019, such being $11.4 million per individual, was increased from $11.18 million in 2018. It is important to note that the worldwide assets, and not just the USA situated assets of a US citizen must be reported on a Form 706. A deceased US citizen will not need to file or pay a US estate tax if the value of the estate is below $11.4 million dollars.
(1B). If the deceased was neither a US citizen nor a US permanent resident, he or she is subject to US estate tax only on their USA situated assets. However the estate would only be entitled normally to a $60,000 credit against US estate tax which will be charged against only the deceased's US situated assets. Please note that a foreign national is only entitled to a $60,000 unified credit which results in only a $13,000 deduction from any applicable tax.
(1C). With regards to any annual lifetime gifts made by a foreign national, there is no unified credit available on death. Like a US citizen, a foreign national can make gifts in any given year to an unlimited number of persons of no more than $15,000 for each individual person.