US/UK estates - Probate and tax reporting

US probate

Much like the UK, US probate is the legal process through which a deceased person's estate is settled and distributed. The specific procedures and requirements for probate can vary from state to state but generally involve:

• Filing a petition with the probate court in the state where the deceased lived.
• Notifying creditors and beneficiaries of the death.
• Making an inventory and appraising the deceased's assets.
• Collecting the estate assets.
• Settling any outstanding debts and taxes.
• Distributing the remaining assets to beneficiaries as outlined in the deceased will or according to the state law if there is no will.

The probate process can vary significantly from State to State, and the time involved depends on the local probate laws and procedures, as well as the size and complexity of the estate. In many cases, probate can be a lengthy and expensive process involving court fees, attorney fees and other administrative costs.

UK tax reporting requirements

PRs may be responsible for various tax reporting requirements, including:

• Personal Income Tax returns – if there’s any income or gains to report for the deceased to the date of death.
• Inheritance Tax forms (e.g. IHT400) – if needed.
• Estate Income Tax reporting - if there’s any reportable income earned or gains made after the date of death.
• Residential Capital Gains Tax (CGT) returns – if any residential property sold/transferred during the administration period is reportable and CGT is payable within 60 days of completion.

US tax reporting requirements

• Federal Estate Tax – if the total value of the estate exceeds the Federal Estate Tax exemption.
• State Inheritance Tax – if the State imposes their own inheritance taxes, with varying exemptions and thresholds.
• Estate Income Tax returns – for any income earned or gains made after the date of death but before the estate is fully distributed. 

Case study – US citizen with UK assets

Our experts at Buzzacott assisted a US citizen, who required US and UK probate services. She was a US resident and domiciled on her death. She had lived in the UK for many years, having wills in both the US and UK covering the assets in each jurisdiction. We worked alongside a US attorney in New York who helped us with US probate. 

The client left the UK in ill health to move back to the US, but when she died in the US, she still had assets in a UK bank and life insurance payable but written in trust.

We were able to assist with the following:

• The preparation and submission of the IHT400;
• preparation and submission of the UK probate application;
• assistance with the collation of value and detail of assets;
• registration of the estate on the Trusts Register;
• ongoing US tax compliance services for the deceased client;
• final US tax return; and 
• consideration of the US Estate Tax return and Income Tax return. 

Case study – Non-Resident Alien (NRA) with US assets

A British citizen (non-US person) died in the UK with a UK estate but had a portfolio of securities in the US consisting of directly held shares and bonds.  Our UK probate experts and US tax experts worked collaboratively to help the client navigate the probate, UK tax, and US tax processes.  The significant issue from a US tax perspective was that generally NRAs with US situs assets can face Estate Tax on US estates valued at over $60,000 on the date of death.

Fortunately, our client was resident and domiciled in the UK, and the US/UK tax treaty allows for a claim to avoid such a charge on a portfolio of securities. We were able to help the client prepare and file Form 706-NA, The United States Estate (and Generation-Skipping Transfer) Tax Return for Estates of Non-Resident Aliens. This was accompanied by Form 8833, Treaty-Based Return Position Disclosure, and we followed up with an application for a transfer certificate.  The entire process took more than a year from filing the estate tax return to releasing the transfer certificate. Once the transfer certificate was released, the US bank was able to release the funds to the beneficiaries.

How we can help

At Buzzacott, we understand the importance of providing compassionate and comprehensive support to our clients during these challenging times.

We can work with your trusted US adviser or with our US contacts to assist with US probate, if required, to help provide a solution for PRs dealing with a deceased person’s estate with both US and UK connections.

With our in-depth knowledge of UK probate law and procedures, you can rely on us to handle all aspects of the probate process with professionalism and integrity. Let us alleviate the burden of probate administration so you can focus on what matters most – honouring the memory of your loved one.

With Buzzacott as your trusted advisor, you can have peace of mind knowing that your US and UK tax obligations are being managed effectively and efficiently. Let us navigate the complexities of US and UK tax law on your behalf, so you can focus on achieving your financial goals with confidence of estate taxation. We work closely with our clients to develop tailored tax strategies designed to minimise tax liabilities while maximising wealth preservation.

For professional advice tailored to your unique circumstances, please fill out the form below and one of our experts will be in touch to discuss your requirements and how we can help. Please note that our advisory services are charged at our hourly rates and a formal engagement will need to be in place before any advice is provided.