Tag Archives: U.K. inheritance tax

U.S. International Tax Planning for the Canadian and U.K. Investor in U.S. Real Estate

The goal of the U.S. International Tax Planning for the Canadian and U.K. Investor is to a double tax issue.  On one side, there is income tax.  On the other hand, there is inheritance tax (for the U.K. citizen), estate tax in the U.S. (which will be repealed but only for a few years) and the Canadian deemed sale at death tax.

We all want the American 20% long-term capital gain tax rate.  However, this means the foreign investor can’t own the U.S. real estate in a corporation.    Both a domestic corporation and a foreign corporation incur two U.S. income taxes.    For the domestic corporation, the second tax is called “the accumulated earnings and profits tax”.

For the foreign corporation, the tax is called the “branch profits tax”.   Foreign shareholders of a corporation owning U.S.  real estate are subject to the U.S. estate tax (but not the gift tax).

U.S. International Tax Planning for the Canadian and U.K. Investor uses a Nevada Trust

Wealthy Americans have the same tax problem.  They solve the problem by using a special type of a trust.  Here is a short video on reducing U.S. taxes with the use of a trust.   If you want to learn more about a Nevada Self-directed trust for your tax planning, then contact me, Brian Dooley, CPA,MBT  at [email protected]

A Nevada is one of the few states that have a special trust law. It is called a “self-directed” trust. As the name implies, you can direct the trustee.   The IRS has issued favorable rulings on this type of trust. 

U.S. International Inheritance Tax Plan for the British, French, Dutch, Germans and Canadians

International inheritance tax plan for the United Kingdom citizen, the French citizen, Dutch citizen, German citizen and Canadian citizen is unique.   Citizens of these countries have numerous tax treaties allowing for unique tax treaty planning. 

The “trick” is to balance the inheritance tax law in the U.K., France, the Netherlands and Germany with both the U.S. estate tax laws and income tax laws. The U.S. laws are different from the laws in other countries. 

Canada does not have an estate tax or an inheritance tax.  Thus, the “trick” is to balance the U.S. income tax laws with the Canadian income tax laws using the income tax treaty.

While some European countries do not recognize trusts, these countries do either because of their local laws or European treaties.   The United States has many types of trusts.  There is almost always a trust type that will reduce the inheritance tax and or the U.S. estate tax.

One of the special rules that the U.S. has for estate planning, is the use of a “private annuity”.

Here is an example.    Ian owns property in the U.S. and the U.K.  He is a U.K. citizen and resident.   Part of his assets are in the U.S. stock market.     Ian decided to create a trust in the state of Nevada.  Nevada trust law allows Ian to direct the trust investment and direct distributions to any person other than himself.

Ian settles the trust with an initial gift of $2,000,000,  He wants to limit his gifts (for both U.K. and U.S. tax reasons).    He decided to places an additional $2,000,000 into the trust with the agreement that the trust will pay him a lifetime annuity.  

Ian is age 75. Based upon an IRS tax table, the trust will pay him $200.000 a year.  

By using the annuity, Ian avoids having a gift in both the United States and the United Kingdom.  The annuity payment can be deposited in a U.S. bank account or a bank account in another country.

International Inheritance Tax Planning Involves Income Tax Planning

There is more than just avoiding tax upon death.  You want your heirs not to pay income tax because you took a shortcut in your international  inheritance tax planning.

Learn more about UK  tax planning on this link,

Learn more about French tax planning on this link.

The United States has a special tax savings law for heirs.  The property inherited gets a new tax cost for income taxes.  The new tax cost is the value of the asset on the date of death of the decedent.   If you would like to strategies your international inheritance tax plan, then please contact me, Brian Dooley, CPA, MBT at [email protected]