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Where Taxpayers and Advisers Meet

Taxation of inherited deferred annuity from the USA

Posts: 1
Joined: Tue Oct 16, 2018 11:33 am

Taxation of inherited deferred annuity from the USA

Postby dlgallagher » Tue Oct 16, 2018 12:00 pm

I am a dual US / UK citizen who has been resident in the UK for 30+ years. In 2017, I received an inheritance from an aunt in the USA that included deferred annuities. These assets passed by contract to the named beneficiaries - all of whom are US taxable persons - and did not pass through the estate. My aunt's death ended the tax deferred nature of these annuities which made the difference between the market value at her death and her tax basis subject to US tax that needed to be accounted for and paid by the beneficiaries (including me). There was an option for a successor annuitant, but I opted to take the entire value as a lump sum. I have paid the required US tax, but I would like to know if there is any UK tax liability related to these assets? All of the US taxable income that I accounted for re these annuities arose during my aunt's lifetime. There has been no income or gain since her death. I simply paid the US tax due and received an amount for the capital sum net of US tax due. Any advice would be much appreciated.

Posts: 195
Joined: Thu Aug 16, 2012 4:31 pm

Re: Taxation of inherited deferred annuity from the USA

Postby DavidTreitel » Wed Oct 17, 2018 12:16 pm

As a US citizen you remain subject to US tax on worldwide income and gains and may need to file information returns - including (but not limited to) an FBAR.

Relief for double taxation is generally provided under the resourcing Article of the US/UK tax treaty (Article 24) which allows you to claim relief in the US for any UK tax.

From a UK perspective you'd want to establish if this was a personal portfolio bond. If it was not, you'd start by looking at the UK domestic rules for qualifying life insurance policies.

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