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Where Taxpayers and Advisers Meet

Tax on UK citizens inheriting US 401k

JonathanB
Posts:1
Joined:Sun Apr 23, 2017 12:44 pm
Tax on UK citizens inheriting US 401k

Postby JonathanB » Sun Apr 23, 2017 12:55 pm

My father died last year aged 72. He was born in the UK, became an US citizen and lived in the US for 20 years before returning to live in the UK for 3 years before he died.

He has $150,000 in his US 401k account. The total value of his estate is less than the UK £325k inheritance tax threshold.

My sister and I are named as the beneficiaries on the 401k. We are both UK tax payers,

We have in mind taking out the inherited amount in the 401k as a lump sum but we are unclear on the tax treatment. I understand there is a 10% US withholding tax that the US pension fund provider would apply but I'm not clear if this applies in this situation.

I'd be grateful if anyone could help with the following:

1. What is the tax treatment by the US and/or UK authorities if we take out the 401k $150,000 as a lump sum?
2. What other options do we have for acccessing the 401k funds as UK citizens that may have a more favourable tax treatment?
3. If this is more complicated than simple answers to the above questions, any suggestions where I can go for advice?


Many thanks,

Jonathan

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