Italian and English Inheritance and Wills

[teresani]

Hello there
I wonder if someone can help

My husband and i have been living in uk for 50 plus years. We did claim Italian Domocile some 15 years back for Tax purposes, but question has never arisen since.

We made a will in England some 30 years ago leaving everything to each other and know that we need to revise this as we now have 3 children,but wonder if someone could tell us how the situation stands at present.

My husband ownes property in Italy, that is in his name only. In Italian Law i believe that if a parent dies their assets are divided between spouse and children --- which in effect is how we would like it to be --- but would the English Will we have made overide this? and also what IHT would have to be paid on English assets and Italian assets --- would it be different for each country?
Thanks for any help

[maths]

Are each of you British citizens and/or Italian citizens?

Are your parents British or Italian?

Where were each of you born?

[teresani]

Thanks Maths for your reply

Husband Italian passport but has been residing here for 60 years and worked all his life here, so for normal income tax purposes is English resident. His parents were Italian and he has a second home in Italy. We declare all our income from let property in Italy, which has tax paid in Italy, on English Tax forms, so are not needing to claim Italian Domicile for using the 'Remittance" basis. Issue is how do we stand for IHT purposes?

Myself --- Italian parents but born here and British passport ---- likewise worked here and paid English Tax on earnings. I do have a part share in some property in Italy ( all fully declared) as above.

Any help much appreciated

[ensigntaxation]

Hi Teresani,

How's it going?

On the assumption that you are non-UK domiciled then, from an IHT perspective, you are subject to IHT on worldwide assets if you have become 'deemed domiciled' for IHT purposes. This broadly happens when you've been resident in the UK for 17/20 tax years. This can happen after just over 15 calendar years. UNtil this time, you would only pay UK IHT on UK assets. You are probably getting / got to this point.

However, the fact that you are Italian domiciled provides potentially valuable IHT benefits. You should consider making sure you / your family have Italians wills dealing with your Italian (other foreign?) assets. The effect should be:

1. Remove any liability to UK tax on your Italian assets.
2. With further planning, remove UK IHT from your current UK assets.

The effect is that the assets in 1 and 2 become subject to Italian death taxes. As I remember, the rates are lower and exemptions more generous.

I am not being deliberately ambiguous - if you wanted to go down this route you should get proper advice.

Hope this helps. Any Qs then let me know.

Cheers
Andy

[maths]

Based on the information it is not possible to be conclusive as to your respective domicile status.

There are two issues. Under UK domestic law as you have each been here for 17 tax years you are each "deemed" UK domiciled for IHT purposes only and hence exposed to UK IHT on worldwide assets.

However, given the length of time you have both spent in the UK (whilst of itself is not conclusive), it is likely to cause HMRC to assert on death that you have in any event acquired what is referred to as a UK domicile of choice (hence, liable to UK IHT on worldwide assets and also to income tax and CGT on worldwide assets).

There is an IHT agreement between UK and Italy; if you are UK domiciled (as a domicile of choice) but also under Italian law Italian domiciled then it would be necessary to resolve this dual domicile status in favour of the UK or Italy. Prima facie, this may well be in favour of the UK.

It is therefore important if IHT is likely to be an issue that you resolve this with professional advice.

Re wills, any Italian real estate will be governed by Italian law even if the property is gifted under a will prepared under UK law.