What taxes are paid on inheritance from an estate in USA? - Community Forum (2024)

HiI’d be grateful for any advice, or instruction, you are able to give.I (along with some other family members) am a beneficiary in the will of my aunt. She had lived in California for many years and was a US citizen. The assets from the will are essentially in two parts and I’m trying to clarify what tax, if any, is due on each part of the inheritance.Part 1:Income from my aunt’s savings accounts. Ballpark estimates are around £30,000 per beneficiary.My understanding is that as long as her USA tax affairs are in order, then there is no inheritance due in the UK. Is that correct?Part 2She also had a traditional IRA. This is valued at around a further £30,000 per beneficiary. The intention of each of us is to take this as a one-off lump sum.The ‘beneficiary distribution’ forms from the provider suggest that Non Resident Aliens (non US citizens) should have a default 30% tax withholding.But I’ve also read that there is a USA/UK reduced tax treaty rate, to prevent people having to pay tax in both countries.Please can you advise the steps we should take?-Do we withhold 30% tax and then submit US tax returns to check if that was the right amount-Or should we opt for no withholding on the basis we will pay tax in the UK, and reference the tax treaty?-If the latter option, as a lump sum inheritance will is this in fact taxable in the UK? Or does one just pay tax on the interest, as I’ve seen referenced elsewhere?As a further complication, my daughter is under 18 and I’ve been told the only way to get her share distributed is for her to create an ‘inherited IRA’ first. Would that change any of the answers given?Thank you

HiConfusedbeneficiary,
Beneficiaries of an estate whether foreign or domestic, are not charged inheritance tax in the UK.
Only the estate of the deceased is.
We are unable to give financial advice on any matters.
You will need to seek the advice of an accountant or other specialist for answers to your questions.
Thank you.