Uk Inheritance tax foreign wife

[jim1980]

Hi all
Got a question about uk inheritance tax and the wife, lots of confusing stuff around the internet about this.

I am a uk citizen uk domicile, non resident for the last 20 years.
My wife is not a uk citizen, non uk resident and non uk domicile, totally foreign.

I have two houses of approximately 340.000 total value in the uk, they were both buy to let properties and have never been my or hers home at any point in time. and assists and cash of about 271,000 outside the uk. Total estate 611,000
Am I correct in saying that my wife can inherit it all with out paying any inheritance tax in the uk as my estate will get 325,000 nil band tax rate and she can use her spouse nil band tax rate of up to 325.000. There has been no gifts of money or property over the time of marriage and the marriage was well after the 2013 tax change rules for inheritance.

i take it all spouses are entitled to this nil ban 325.000 rate

Have I got this right, before I may my will

Thank you all.
Jim

[Samson22]

Hi Jim,
No you are incorrect because they (judging by how you write) are Sole in your name so there would be a charge of 40% of 15k(ish). However if you still have UK Domicile as you state ALL your foreign assets/home will also be subject to inheritance tax that is the REAL danger. Unless you plan to return to the UK I suggest you draw up a statement of domicile to counter this.

[iwmtaxadvisor]

Hello Jim,
There is missing information in your post, most importantly where you now live and if you have acquired a domicile of choice where you now live (or want to), and your wife's domicile.
Problem:
But at the heart of it is - do your estate expect to have to pay IHT on the transfer of your houses to your wife - yes.
Legislation:
Two reasons, and some guesswork here that they are applicable to you -
(a) almost no IHT spousal relief for a non-dom spouse (for a UK dom high net worth individual) https://www.gov.uk/hmrc-internal-manuals/inheritance-tax-manual/ihtm11033
b) fixed assets in the UK are subject to IHT at least in theory https://www.gov.uk/inheritance-tax/when-someone-living-outside-the-uk-dies
Alternatives:
A) an obvious one is to look to see if you want to acquire a domicile of choice where you now live, by looking at the consequential local estate tax implications
B) put the properties in a company and move the share holding around now. This has got recently quite complex to maintain
C) put the properties into trust now, and you can't get anywhere with analysing this alternative until you know where you live
D) put the properties in joint names, that reduces by more than half the value in your estate on first death
E) create leaseholds assuming you own the freeholds and gift the freehold now
Is it worth getting advice:
If your combined estate is going to be over 2m then definitely. If the combined estate is the size you quote, go for the simplest cheapest alternative and you may be able to self direct.
More help
Courses are available to help people decide between the alternatives.

[jim1980]

Hi Samson22
Thank you very much for your reply.
But i have not read any place that any assists need to be jointly owned to be able to let your spouse use her the nil band rate of 325,000 on all my estate world wide.
on top of my nil band rate of 325,00 with a total of 650,000, nil band rate.
Have you got some more information about this, that i can read up on.
or am i totally missing the point.

i am fully aware of 40% tax on total estate world wide.

you got me a bit worried now.

Thank you
Jim

[AGoodman]

I respectfully disagree with Samson here.

I'd agree with your original analysis. You have a £325,000 nil rate band and £325,000 spouse exemption. If your estate grows over £650k, your spouse can elect (after your death) to be deemed domiciled for IHT for a few years (3 or 4, I forget) in order to receive an unlimited spouse exemption.

Worth ensuring that everything will indeed pass to your wife under both English law (for the properties) and the law applicable in which ever jurisdiction you are in. If you have kids, you will likely need one or more wills to achieve this.

There may of course be arguments that you are no longer UK domiciled but that's (a) much more complicated and (b) unnecessary by the looks of it

[jim1980]

Hi iwmtaxadvisor
Thank you very much for your reply.
and a bit more reading for me to do.

The missing information is i live in Thailand, no inheritance tax here
for Thai citizens, wife is Thai. we also have a double taxation treaty with Thailand so should be ok.
I have no idea about domicile in Thailand, i suspect no not dom here.
but i any intending to go back to the uk in about 10 years time. so suspect my dome is still uk.
if its not well more the better away from uk inheritance tax.
I defiantly have to give this all a lot more thought.

Thank you again
Jim

[jim1980]

HI AGoodman
Thank you for your reply
i was kind of thinking she would get the spouse nil band rate.
that should make it INT free.

My estate will not grow as im spending it down slowly, unless the uk housing market went crazy up in price, cant see that for a few years.

As for wills , going to have two wills, one Thai assists and money and one for the uk assists
not he best idea to have two wills, but a uk will and probate in Thailand can be a long train wreck, so trying to keep it clean as i can. ( i could be crazy for this )

I have no idea about domicile in Thailand, i suspect no not dom here.
but i am intending to go back to the uk in about 10 years time. so suspect my dome is still uk. if its not, well more the better away from uk inheritance tax.
I defiantly have to give this all a lot more thought.

Thank you again for your post
Jim.

[jim1980]

sorry tried to find how to edit post, but no success.
sorry for the 4 or 5 or typos in the last two posts

[AGoodman]

No need to worry about your domicile unless you outlive your wife. Particularly if you're thinking of coming back.

If your estate grows larger than £650,000 then your wife can make a simple election after your death and the spouse exemption would be unlimited. Provided she stays out of the UK and survives you for 3-4 years, the election wouldn't cost anything.

Given the size of your estate, I would not consider any cunning planning involving companies or trusts (it would need to be particularly cunning in the light of the newish anti-avoidance rules). It isn't necessary.

[maths]

1. If you intend to return to the UK in say circa 10 years time and have always intended this then if HMRC are aware of this then almost certainly you would be treated as never having lost your UK domicile of origin.

2. If however you never had this intention it could be argued that you have by now acquired a Thai domicile of choice ie lost your UK domicile of origin.

On your death, under 1 above your worldwide assets would be subject to UK IHT but there would be a 325k exemption on assets left to your spouse plus your estate would be entitled to a 325k nil rate band ie if estate 650k or less then no UK IHT. Above 650k a 40% rate would apply to the excess.

On your death under 2 above if all estate left to your spouse then no IHT irrespective of size of estate.

If it transpired that 1 applied on your death and your estate was significantly over 650k then as AG commented above your spouse could elect to be treated as UK domiciled and thus no UK IHT. However, this has the risk that your spouse would remain deemed UK domiciled under the election until she was not resident in the UK for 4 successive UK tax years (she would still be deemed UK domiciled for 4 successive tax years even if she never lived in the UK. In this case the 4 years period would commence from the 6 April after the date the election was made). This could be a bit of a gamble for her; the bigger the gamble the older she is.