9674 Inheritance matters

We have bought a property in Le Marche and wish to make the necessary arrangements for our two daughters who (as I understand it in Italian law) will directly inherit the house when we both pop our clogs. One daughter is married and lives in Italy, the other here in the UK. I understand that the inheritance tax threshold in Italy is €1m, so my daughter in Italy should escape any tax penalty (the property is valued at less than €1m). I am not clear about the situation regarding our daughter in the UK - is her inheritance from a property registered in Italy covered by Italian law and therefore the same inheritance tax threshold - or will the UK taxman try and levy inheritance tax at UK rates? Does anyone have the answer? There must be many UK parents who have bought property abroad who are in the same situation.

Category
Legal

Submitted by Anonymous (not verified) on Fri, 05/30/2008 - 07:27

this is always a minefield. There are several threads about IHT/Wills etc. on the forum, it's worth spending some time researching them.

While I'm [B]in no way qualified to advise[/B], I can at least tell you that it's highly complex & very circumstantial (but you probably knew that, right?). At the (hopefully distant) point that the longer surviving between you & your spouse pops their clogs, will they be resident in Italy? And will they be domiciled there?

If they will not be domiciled in Italy (or if they were domiciled in the UK within 3 years of dying, or resident in the UK for at least 17 of the last 20 years prior to dying), then HMRC would (I think) look to charge IHT on their full estate, less the allowance (currently £312K I think?). The full value of the Italian house would be included in the estate as it would not be an excluded property, on the grounds that the deceased was tax resident in the UK.

The HMRC website states that Excluded Property (from UK IHT) includes "property situated outside the UK, where the person beneficially entitled to the property is not domiciled in the UK"

So, even if you can plan your domicile such that your estate would theoretically avoid UK IHT, you have a UK resident daughter who will inherit a share of the Italian property. I'd presume (though that is again just speculation) that HMRC would then deem that at least some proportion (?) of the Foreign house's value would no longer be excluded from your taxable estate, due to this "beneficially entitled" daughter being resident in the UK.

As I say, it's a minefield. The above is just my opinion based on some 'light reading'. The margin between avoidance and evasion is also an increasingly fine one too (charitable trusts, company owned property etc). You really need specialist advice if you want to be clear on your obligations and minimise overall duties - this is one of the times when spending some serious cash now on personally tailored, expert advice could save huge sums in future.

Meantime, you could take a punt on some self help guides eg. [url=http://www.taxcafe.co.uk/overseaspropertyguide.html]Overseas Property Tax Guide[/url] - or similar . I can't vouch for it, but sounds like it is at least fairly specific to your requirements.

I can't guarantee, justify, or explain further any of the above - as I say it's mainly just the result of a bit of googling I did today (as I'm also interested in the minefield, though not planning to die for a while yet!).

a few useful links for your own 'light reading' ...
[url=http://www.hmrc.gov.uk/cto/customerguide/page20.htm]HM Revenue & Customs:[/url]
[url=http://www.guardian.co.uk/money/2003/aug/11/movingoverseas]Tax | Money | guardian.co.uk[/url]
[url=http://ezinearticles.com/?Top-Ten-Tax-Tips-For-Foreign-Property-Owners&id=1069059]Top Ten Tax Tips For Foreign Property Owners[/url]

Submitted by Anonymous (not verified) on Fri, 05/30/2008 - 10:42

Pigro is right that the way in which the rules apply to you are based on your precise individual circumstances, and the dates when things occur can make a difference as to where a tax liability is due.

Books and Inland Revenue leaflets will provide a guide and if things are very clear cut then might provide the answer - but of course the rules do change from time to time, and you also need to consider the Agenzia Entrate rules too. Keeping abreast of changes could prove a task you don't want to take on. One way to be sure is to get advice from a suitably qualified accountant, and one who specialises in cross-border affairs. We have used Michael Murphy [url=http://www.mjmurphyaccounts.com]Michael.J. Murphy A.C.A[/url] and have been very happy with the services and advice provided.

Submitted by Anonymous (not verified) on Sun, 06/01/2008 - 04:13

Dear TSimmons

I am copying in a previous post.

"We, English nationals but Italian residents have just made English wills under Italian 'conditions' with Charlotte Oliver at [email]C.Oliver@studiopaoletti.com[/email]

She is an English solicitor and also an Italian avvocato (?sp). She is based in Rome (what a great excuse for Lunch in Rome) and absolutely delightful and efficient too!

Aretina

ps: and talk about a small world - she was at the same school at the same time as my eldest daughter!!"

I would strongly recommend you contact Charlotte. She has done alot of research re: overseas wills etc.

Submitted by Anonymous (not verified) on Sun, 06/01/2008 - 05:34

[quote=Aretina;90668]"We, English nationals but Italian residents have just made English wills under Italian 'conditions' with Charlotte Oliver at [EMAIL="C.Oliver@studiopaoletti.com"]C.Oliver@studiopaoletti.com[/EMAIL]

She is an English solicitor and also an Italian avvocato (?sp). She is based in Rome (what a great excuse for Lunch in Rome) and absolutely delightful and efficient too![/quote]
She has just written an article which can be found on the "Informer" website. It is a very worthwhile source of information - but you have to pay to access it. It is worth every Eurocent though. No, I'm not John and yes, I pay! :smile:

Submitted by Anonymous (not verified) on Fri, 09/26/2008 - 13:26

[quote=Nardini;90677]She has just written an article which can be found on the "Informer" website. It is a very worthwhile source of information - but you have to pay to access it. It is worth every Eurocent though. No, I'm not John and yes, I pay! :smile:[/quote]

Do you have a 'www' for this??

Thanks

Submitted by Anonymous (not verified) on Fri, 09/26/2008 - 15:10

[url=http://www.informer.it/]The Informer > Home[/url]
We found it helpful and so subscribed in the first few years we were living here.

Submitted by Anonymous (not verified) on Mon, 10/06/2008 - 16:49

Hello I am an English Solicitor working with an Italian avvocato in le Marche-we may be able to advise you if you would like more information on Italian estate law. Please write [email]avvocatolauretta@virgilio.it[/email] or call 3485500890. Gina Wills

Submitted by Anonymous (not verified) on Mon, 10/06/2008 - 17:28

Just one word of caution; I see the word "domicile" bandied about quite a lot. You need to bear in mind that if you are of UK origin and are essentially "British" it is very hard to shake off UK domicility. The reason is because domicility is really only of interest to the taxman and he wants you to pay IHT in the UK. IHT applies to ALL wordwide assets of any UK domiciled person - therefore most of us Brits. Don't think because you live and pay income tax in Italy (or anywhere else) that you automatically escape UK domicile - you don't. To get to be domiciled somewhere else, you need to fulfil lots of arduous conditions, including severing all links with the UK.
And if you intend to consult someone about UK IHT, it needs to be a specialist in the field. Most high street solicitors have only the most superficial knowledge of the subject (apologies to those very few who are slightly better than that!) and would tend to prove to be a waste of money. If you are serious about IHT, I have the name of a firm in Manchester who are acknowledged as one of the very best in the country. PM me for details.