UK/US Trusts & Estates
What we offer for UK/US Trust & Estates
Effective planning for UK / US trusts and estates requires a deep understanding of the tax laws and regulations governing both jurisdictions. For UK residents with US connections or vice versa, it is critical to identify how trust income, gains, and distributions are taxed in each country. Special attention is needed to ensure compliance with the differing definitions of trusts and beneficiaries under UK and US tax systems, as well as navigating the potential for double taxation. Coordinated strategic planning enables trustees and beneficiaries to optimize tax efficiency while meeting their obligations seamlessly.
Cross-border estate taxes and administration presents a potentially complex situation for those with assets in both the UK and US and US citizens living long term in the UK. Taxpayers need to consider inheritance tax in the UK along with US estate tax and gift implications to avoid unexpected tax liabilities and best plan for the next generation.
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UK/US TRUST & ESTATES
UK Inheritance Tax Planning and Advice
UK inheritance tax (IHT) applies to estates of Long Term Residents above a certain value, usually at 40%. There are ways to mitigate IHT and protect assets, like making gifts, using trusts, or leaving assets to a spouse or charity. Getting expert advice helps protect your family’s wealth and we focus on effective planning for the UK and US.
US Estate Planning
US estate planning aims to preserve wealth and manage both federal and state estate taxes. While the exemption is large, effective strategies like trusts and lifetime gifts help reduce taxable estates. Special attention is needed for US assets of non-US citizens and for non-citizen spouses of US citizens. The interaction with UK IHT and direct taxes are very important.
US Estate Tax Returns (Form 706 and Form 706-NA)
Generally, estates over the federal threshold must file Form 706 with detailed asset, liability, and deduction documentation. Non-US decedents, who own US assets, use Form 706-NA. This form has complicated rules, but tax treaties may help lower the taxes you need to pay. Filings are commonly required to get a transfer certificate.
Gift Tax Planning
US gift tax may apply any time a US citizen makes a gift or a non-US citizen gifts certain US situs assets. Strategic gifting during a lifetime, outright gifts, contributions to irrevocable trusts, or funding 529 college savings plans, can be effective planning. However, it is important to understand the distinctions in tax treatment between the US and the UK to avoid unexpected liabilities such as IHT and capital gains tax.
US & UK Taxation of Trusts, Management, and Advice
Trust taxation in the US and UK is highly complex, with differing classifications and tax rules that can lead to compliance challenges and risks of double taxation. Both trustees and beneficiaries must understand the relevant tax treatment for distributions and use of trust property. Professional advice is recommended for cross-border trusts as coordinated management helps ensures tax efficiency, compliance with tax filings and changes in law.
UK Taxation of Non-UK Trusts
Non-UK trusts, with a UK resident beneficiary or with UK assets may have filing obligations for UK income tax and IHT. Additionally, UK resident settlors may be attributed income and gains, and distributions and benefits may be attributed income and gains of the trust. By engaging with us, trustees and beneficiaries can proactively address these complexities and the interaction of UK and foreign taxes.
US Taxation of Foreign Non-Grantor Trusts
Foreign non-grantor trusts present unique challenges for US beneficiaries, as distributions can trigger considerable US tax implications. The throwback tax regime has the potential to increase the effective tax rate significantly due to a compounding interest charge. We provide advice on the impact of these rules and potential mitigation as well as calculatiosn of trust income/gains under US principles.
Preparation of Form 3520 for Foreign Trusts and Non-Grantor Beneficiary Statements
Trustees and beneficiaries must also comply with US reporting obligations, including the preparation of beneficiary statements, Form 3520 and in certain situations Form 3520-A. Beneficiaries report foreign trust ownership, distributions and contributions to trusts, related transactions and loans and gifts received from foreign persons. Non-Grantor Beneficiary Statements allow beneficiaries prepared by trustees allow a US beneficiary to optimise their US tax position.
