I have some good news for you! If the inheritance (legacy) is a lump
sum of money (say from a bank account), then your husband will not be
taxed in either the US or the UK. However, you have to be careful to
understand the difference between a lump sum of money versus income
(interest or dividends) derived from an estate. Estate taxes are
normally paid by the executor and are taken out of the estate before
being distributed to the beneficiaries and are not taxed again by the
IRS TITLE 26 > Subtitle A > CHAPTER 1 > Subchapter B > PART III > § 102
Gifts and inheritances:
(a) General rule:
"Gross income does not include the value of property acquired by gift,
bequest, devise, or inheritance."
Check your state regulations to see if it collects inheritance tax.
For example, here is Georgia:
"A. Georgia has an estate tax which is based on federal estate tax
law. We have no inheritance tax, but some people refer to estate tax
as inheritance tax. The tax is paid by the estate before any assets
are distributed to heirs. It is not paid by the person inheriting the
What is the difference between a 'legacy' and the 'residue' of an estate?
"A legacy is a specific asset or sum of money that was left to you
under the terms of the deceased person's Will.
The residue of an estate is what is left after the payment of debts
I am to receive a legacy. How will it affect my income tax liability?
"Usually you will not have any income tax liability when you receive a
legacy, except if it
* consists of an asset that produces income, for instance, a bank
account, a shareholding or a rented property. The income it produces
is your income, just as if, for example, you bought the shares out of
your own money
* is paid late and the personal representative pays you interest
on it. The interest is part of your income for tax purposes for the
year in which it is paid. It will generally be paid to you without tax
deducted, so you must report it to us even if you are not sent a tax
Where a legacy takes the form of a sum of money (for example a legacy
of £2,000) it is called a pecuniary legacy.
"When someone gets a legacy of this sort, they normally only get the
amount stated in the will (for example if the person was entitled to a
legacy of £2,000 they would get that amount and no more). The
beneficiary would not therefore have received any income and has no
tax liability in respect of the legacy."
Additional Link of Interest:
Welcome To The Centre For Non Residents
International - the office responsible for international tax issues
What do I need to do about tax when someone dies?
Our leaflet IR45 ?What to do about tax when someone dies? which will
help you understand the tax liabilities that may arise when someone
dies. It gives information about income tax, capital gains tax and
inheritance tax. There are sections about the responsibilities of
personal representatives and trustees, and about the tax treatment of
beneficiaries. You can get this leaflet from Inland Revenue Enquiry
Centres and Tax Offices.
Will any inheritance tax be payable on my death?
It depends on your circumstances. Only around 3 in 100 of all estates
pay any inheritance tax. There is a threshold, £255,000 for deaths
after 5 April 2003, below which you do not have to pay inheritance
tax. Generally, anything above the threshold is taxable at 40%,
although there are a number of specific reliefs and exemptions which
We produce a series of leaflets which provide more information on
inheritance tax. Our leaflet IHT3 ?Inheritance tax. An introduction?
is a good place to start.
*Inheritance Tax is the tax that is paid on your estate when you die,
as well as on some assets that you may have given away during your
I hope this helps. If you have any questions, please post a
clarification request *before* closing/rating my answer and I'll be
happy to reply. I'm sorry there was a delay in posting this answer. I
had it all ready to go when my computer decided it was time for a
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Request for Answer Clarification by
07 Feb 2005 14:50 PST
Hi, and thanks so much for getting back to me. To clarify, my husband
is the only beneficiary, as stated in his father's will. There will be
approximatly 50,000 pounds in cash and stocks, while the sale of my
father-in-laws house will net somewhere around 250,000 pounds. We do
have a soliciter who is handling everything about the estate, from the
funeral to the sale of the house and car. It seems to be such a tricky
issue, and with the exchange rates, we are looking at rather a large
sum of money. We are thinking it will be to our benefit to obtain a
lawyer/estate handler on this side of the big pond. Any thoughts?
Thanks so much!
Clarification of Answer by
07 Feb 2005 16:44 PST
Well, the estate, and your husband's responsibilities as executor, are
in the U.K.. In other words, he won't have to act as executor all over
again in the U.S., so a good accountant would be more appropriate for
dealing with his U.S. income tax. However, there are special issues
to consider concerning your husband's estate planning, given that he
isn't a U.S. citizen. It would be best to consult a qualified estate
planning attorney when it comes time to update your husband's will.
This is a good pamphlet for your husband to read concerning the UK:
Inheritance Tax: The Personal Representatives' Responsibilities:
I wish you and your husband well - these times are never easy but they
do pass. I hope I've been able to help to ease your minds at least a