Close-up of a hand signing a Last Will and Testament, symbolizing inheritance planning for UK assets moving to the US

Transferring a UK Inheritance to the US: Key Planning Points

For many UK expats living in the United States, receiving an inheritance from the UK can raise complex financial and tax questions. While an inheritance may be a welcome addition to your wealth, moving the assets across borders requires careful planning to avoid unnecessary costs and complications.

Whether the inheritance involves cash, property, or investments, the rules of both the UK and US must be considered. Understanding these issues in advance can help preserve the value of your legacy.

UK Inheritance Tax (IHT)

In the UK, inheritance tax applies based on the estate of the deceased, not the recipient. While the estate normally pays the tax, liabilities can fall on beneficiaries or trusts in certain cases.

  • Tax threshold: The current threshold is ÂŁ325,000, above which estates may be taxed at 40%, with some allowances for passing property to spouses or direct descendants.
  • Location of assets: UK property is always subject to IHT, even if the heirs live abroad.
  • Impact on expats: If you receive an inheritance from a UK estate, the tax burden is handled before you receive your share. However, you may still face US reporting requirements.

US Tax Considerations

The US does not levy an inheritance tax, but it does have an estate tax on worldwide assets for US citizens and domiciliaries. For expats, the key issues involve reporting and how inherited assets are treated once received.

  • Cash inheritances: These are not taxable as income, but must be reported to the IRS if they exceed $100,000 from a non-US person (Form 3520).
  • Inherited property or investments: Future gains (when the assets are sold) may be taxable in the US. A “step-up in basis” to the date-of-death value usually applies, which can reduce capital gains exposure.
  • Foreign accounts: If inherited funds remain in UK accounts, they may need to be reported annually on FBAR and Form 8938.

Currency and Transfer Issues

When moving inherited cash to the US, the exchange rate and transfer method can materially affect how much you receive.

  • Exchange rates: Large transfers may benefit from using forward contracts or currency specialists.
  • Transfer costs: High street banks often charge more than international money transfer services.
  • Timing: Splitting large sums into staged transfers can help reduce the risk of exchange-rate volatility.

Estate Planning for the Next Generation

Inherited wealth also has implications for your own estate planning.

  • Once assets are in the US, they generally fall within the scope of US estate tax.
  • Coordinating wills and trusts across both the UK and US ensures that assets pass efficiently to your heirs.
  • Without planning, families can face unnecessary complexity or exposure to taxation in both jurisdictions.

The Bottom Line

Receiving an inheritance from the UK while living in the US requires careful handling. While you may not pay tax on the inheritance itself in the US, reporting obligations, capital gains exposure, and cross-border estate planning issues all come into play.

At BlackPoint Capital Partners, we help clients integrate inherited assets into their broader wealth strategy, ensuring tax efficiency and long-term alignment with their financial goals.

Some of the content of this communication was provided by third parties of BlackPoint Capital Partners.  We have not verified the information contained herein, but we believe the content is reliable.  None of this content should be construed as legal, accounting or tax advice.  Tax laws are complex and often have highly-individualized requirements, you should seek the advice of a competent tax professional if you have specific tax questions.

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