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Does your share portfolio need a protective wrapper?

Investing in an asset where its geographical location is different to where the investor is resident or domiciled can sometimes have unintended consequences such as a potential liability to inheritance and estate taxes in the country where the asset is situated (‘situs assets’). For example, UK inheritance tax and United States estate tax is assessable on situs assets regardless of whether the owner of the asset is resident or domiciled in the US or UK.

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Non UK resident/non domicile individual with UK situs assets, for example shares

  • UK inheritance tax is levied on death on UK situs assets at a rate of 40% where the total value of the assets exceed the nil rate band of £325,000
  • Transferring the shares into a life assurance/redemption policy, by way of an in-specie transfer to the product provider, is not a gift for UK inheritance tax purposes and therefore there are no UK inheritance tax implications.
  • Once the assets are held within the bond the previous owner is deemed to have relinquished all legal and beneficial rights to the assets and therefore on death the value of the shares are not assessable to UK inheritance tax.

Non US resident/non domicile individual with US situs assets, for example shares

  • US estate tax is levied on death on US situs assets where the value of the US situs assets is more than US$60,000. Tax is levied at a rate of 40%.
  • Where shares are transferred to a life or redemption policy the transfer is unlikely to be liable to estate tax where the life assurance/redemption policy is regarded as a non-US situs, alternatively, the shares could be sold and the cash used to source the premium for the life assurance/redemption policy.
  • Once the assets are held within the bond the previous owner is deemed to have relinquished all legal and beneficial rights to the assets and therefore on death the value of the shares is not assessable to US estate tax.

Know your asset locations

Often, it can be difficult to tell when assets, particularly intangibles, are located in the United States. This chart provides some examples of U.S. and non-U.S. property:

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If you are unsure on whether you have a potential tax liability then get in touch for a review of your assets.

We are here to assist. Contact us by phone or email.