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inheritance tax


hoverfrog

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my late parents' estate is in the process of going to probate, etc, in the UK.

Now I'm resident in France and paying French tax does anyone know what will happen?

Tax will be paid in the UK, already complicated by the fact that there will be a deed of family varience as they died 14 months apart, but will I have to pay tax here too?

I would've thought my share would be liable for tax here not in the UK but aparently this is not the case.

hoverfrog
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Liability to inheritance tax (IHT) in UK depends on domicile (not easy to define but in simple terms the country which was considered to be the intended permanent home or final resting place) of the person who has died. The domicile or residence of the beneficiaries of the estate of a UK-domiciled person is irrelevant for UK IHT.

Transfers between UK domiciled spouses are exempt, as are gifts to legitimate charities. Otherwise, IHT is payable at 40% on the value over £275,000 (i.e. the value of all assets - houses, land, savings, personal effects, cars, cash, etc. less funeral expenses and genuine debts.) Gifts made within 7 years of death are brought back into the estate for IHT purposes to avoid last-minute tax avoidance, although there is an annual £3,000 exemption (i.e. total value of all gifts in one year) which is not subject to the 7 year rule.

The deed of variation was no doubt entered into to save tax by making use of the £275,000 allowance available to each parent - often "wasted" by spouses leaving their estates to each other (exempt anyway) and therefore bunching up all assets into estate of second to die with just one allowance. If Wills have been made to ensure the allowance is obtained twice (or if same result can be achieved by varying terms of Wills within 2 years of first death - often quite simple to do), there is a potential tax saving for the ultimate beneficiaries of £110,000 (£275,000 at 40% if the estate of the first to die held assets of at least that value).

I'm sorry, I do not know what the French tax consequences are for a French resident who inherits funds from a UK estate. I would hope that under reciprocal agreements they would not be taxed again but no doubt someone versed in French tax laws will be able to comment.

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[quote user="Alan Zoff"]

I'm sorry, I do not know what the French tax

consequences are for a French resident who inherits funds from a UK

estate. I would hope that under reciprocal agreements they would not be

taxed again but no doubt someone versed in French tax laws will be able

to comment.

[/quote]

They would not be taxed twice. I was in the opposite position with my

parents dying domicled in France and myself a UK resident. The

inheritance tax was paid only in France and it would be the same the

other way round because of tax agreements between France and the UK :-)

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many thanks to both of you :)

I think UK IHT is less than French, so that's probably a good thing that it will be paid in the UK!

Yes, the deed of variance is to make use of both their tax allowances, as they had indeed left everything to each other.

Not that they weren't going to do something about it, just that events overtook them ... in fact Mum had already booked the appointment with the solicitor but was takn into hospital a few days before.

Just goes to show - one should sort these things out a long time beforehand!

hoverfrog

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