How much inheritance tax will your estate pay?

How much inheritance tax will your estate pay?The concept of inheritance tax astounds most people who have paid tax on their earnings throughout their life, only to find their wealth is taxed again when they pass on.

The wealthy can have some dreadful experiences with inheritance tax in Britain, and even if they move overseas, cannot escape the net if they still own assets in the UK.

Then, in many favourite expat destinations, they fall foul of inheritance taxes again.

France is one of expat hotspots for the British – with an estimated 300,000 people living across The Channel. UK government figures also suggest 57,000 of these expats are pensioners.

The surprise is many of these expats have little financial planning in place to cope with succession tax, the French term for inheritance tax.

Expats and death taxes

Expats can have complicated estates if they own property and other assets in more than one country.

They really do need first class advice to clear up any ambiguities around residence, domicile and the validity of wills.

In many cases, lawyers will advise having a will in each tax jurisdiction.

And why go to the bother? In most countries, how much inheritance tax paid on an estate is optional.

Unlike most taxes, estate planning can whittle away at the amount due quite legally.

But the rules are different in each country.

For instance, in France, the largest estate planning savings are available to those aged below 70 years old.

French succession tax

Other recent tax changes have changed the landscape for succession tax quite a lot. For instance, tax allowances are reviewed every 15 years instead of every 10 years, which can throw estate planning out of kilter if a will has not been looked at for a while.

One key issue for expats with assets in Britain and France is that French succession tax is charged on worldwide assets and always on assets held in France.

Another difference between British and French inheritance taxes is in Britain, the estate is taxed, whereas in France, each beneficiary is assessed and taxed on succession, with the tax due within six months of the deceased passing away.

This will change in August 2015, when European Union succession laws reach the statute books.

The rules will let someone making a will elect which country’s inheritance laws apply to their estate – providing that country is within the EU.

So rather than follow the complex French succession rules, British expats can opt for the more relaxed inheritance tax rules at home to apply to their estate.

About John Cassidy

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