UK-US Double Taxation Exemption for Inheritance

[NonDom41]

Hi all,

I have a quick question regarding the following situation:
Father and son (EU citizens) are resident in the UK. Father owns a house in California, to be inherited by his son. In the event of the former's death, does inheritance tax arise from this transfer, or is this accounted for and avoided somewhere in the double taxation agreement between the US and the UK? I have previously been pointed to an estate tax exemption in paragraph 8(5) but just wanted to get some assurance that this applies in this case.

Thanks in advance!

[AGoodman]

I don't read 8(5) as an exemption. It just caps the US estate tax to levels that US residents would pay. In practice this may of course give them the full $13,610,000 exemption so that they wouldn't pay any actual tax there.

That said, i hope you've noted that it applies to UK "nationals", defined as UK citizens and subjects with a right of abode in the UK. I'm sure you've got the latter but have you got the former, given you refer to them as EU nationals.

If not, the US exemption could be as little as $60,000.

If US estate tax is payable, you should get a credit against any UK inheritance tax payable on the US property.

[NonDom41]

I was so homed in that I totally missed that critical detail on UK nationals, thanks for pointing that out. No, they are Austrian citizens, so this seems like a dead-end.

Really appreciate your response, thanks again.