UK inhertance tax and Aus assets

[MMac]

Trying to unravel some complicated family finances...

My mother (UK resident) has Australian assets (property, investments) from her years living in Australia. Because the UK inheritance tax has global reach,  she wants to divest these assets in order to protect them from the British taxman. In the UK, there is a 7 year rule on giving away assets (for assets to be exempt inheritance tax, the giver has to survive 7 years after making the gift, I understand). Can anyone tell me if the 7 year rule applies to Australian assets? ie, if she gives her Australian assets away to Australian friends and family, does she have to survive 7 years in order for them to remain exempt from UK inheritance tax on her death? She is turning 80 and struggles with financial decision making so I'm trying to find out the facts for her. 

Many thanks!

[Ken]

2 hours ago, MMac said:

Trying to unravel some complicated family finances...

My mother (UK resident) has Australian assets (property, investments) from her years living in Australia. Because the UK inheritance tax has global reach,  she wants to divest these assets in order to protect them from the British taxman. In the UK, there is a 7 year rule on giving away assets (for assets to be exempt inheritance tax, the giver has to survive 7 years after making the gift, I understand). Can anyone tell me if the 7 year rule applies to Australian assets? ie, if she gives her Australian assets away to Australian friends and family, does she have to survive 7 years in order for them to remain exempt from UK inheritance tax on her death? She is turning 80 and struggles with financial decision making so I'm trying to find out the facts for her. 

Many thanks!

Sorry, but there's nothing in the 7 year rule to say it applies to only UK assets. Since UK inheritance tax has global reach then it follows that the 7 year rule does as well.

[Gbye grey sky]

3 hours ago, MMac said:

Trying to unravel some complicated family finances...

My mother (UK resident) has Australian assets (property, investments) from her years living in Australia. Because the UK inheritance tax has global reach,  she wants to divest these assets in order to protect them from the British taxman. In the UK, there is a 7 year rule on giving away assets (for assets to be exempt inheritance tax, the giver has to survive 7 years after making the gift, I understand). Can anyone tell me if the 7 year rule applies to Australian assets? ie, if she gives her Australian assets away to Australian friends and family, does she have to survive 7 years in order for them to remain exempt from UK inheritance tax on her death? She is turning 80 and struggles with financial decision making so I'm trying to find out the facts for her. 

Many thanks!

I reckon that you probably know the answer to that one but if you are seeking confirmation then, yes, assets outside of the UK are subject to the same limits.

It may be of interest to you to be aware that if these assets were jointly held with your father and passed in total to your mother on his death then potentially the inheritance tax threshold could be doubled as his allowance would still be attributable if unused.

[Alan Collett]

Yes, the 7 year rule for Potentially Exempt Transfers applies to worldwide assets, if the deceased was UK domiciled at death.

=>   The starting point is to consider your mother's domicile status.    Note that this is not necessarily the same thing as tax residency, though being a UK resident can cause one to become UK domiciled.

Note that the value of gifted assets starts to reduce in the value of the estate once the donor has survived for 3 years from death.

Consider also the gifts out of income exemption, and making use of the IHT annual exemption for gifts.

Watch also the risk of CGT in Australia and the UK if investment assets are gifted - and CGT on death if CGT assets in the estate pass to non Aus resident beneficiaries.

If your mother's estate is going to trigger an IHT position it is probably best to consider taking some capital tax planning advice across the two jurisdictions.

Best regards.

[MMac]

Thank you for replies - sorry, I didn't get notification hence the delay. 

Oh, bit disappointed to learn that the 7 year rule also applies worldwide. 

My parents are separated but not divorced, father domiciled and tax resident in Australia (and alive!), mother domiciled and tax resident UK. My father is organised and has his affairs in order but my mother struggled with some unhelpful advice years ago and has nothing in place (she was advised against setting up trust funds or divesting assets in case her daughters divorced and their husbands took half the inheritance). 

I will continue to urge her to engage professional advice - the spirit is willing but she tires easily and the process of digging out all the relevant paperwork I think feels like too much to her.

Thanks again

[MMac]

Allan - are you with BDH tax?