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Old 08.01.2019, 14:21
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Wealth tax declaration: Swiss resident (UK citizen) inheriting UK assets

Please can anybody advise? I am the (British) executor of a UK will covering mainly UK-based assets. One of the heirs is a UK citizen living in Geneva. Under UK law, all the assets of someone who dies go into their estate and becomme the property of the executors until probate is declared. In other words, the heir not actually inherit from the deceased person, but from his or her estate ie her executors, and the inheritance is deemed to be from the date of the distribution of the assets. But it appears that Swiss law deems the inheritance to be on the date of death. in other words, the Swiss apparently accept that the same property belongs simultaneously to the executors in the UK AND the heir in Switzerland, which raises interesting questions of ownership under international law.

This is a complicated estate and we are unlikely to have a declaration of probate for some time, possibly a couple of years, and only at that point will we know what assets we have to distribute.

Does our Swiss heir need to make a wealth tax declaration of the inheritance this year and, if so, what should he declare, given that it will be incorrect?

Please can anybody shed any light on this?
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Old 13.01.2019, 22:18
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Re: Wealth tax declaration: Swiss resident (UK citizen) inheriting UK assets

A few points:

1. You state "mostly UK assets". To the degree that the assets are not English/Welsh and presumably other UK jurisdictions, it is the law of the situs that governs important issues. Thus real property located in New York State would pass without probate. And of course to the extent that assets are taxable, the law of the situs determines what, if any, estate or inheritance tax is due in the first instance. But see below The Switzerland-UK Tax Treaty does not include inheritance tax. Or for that matter wealth tax.

2. It is not the English executor's task to advise on Swiss wealth tax, least of all for English assets that have not, or not yet, vested.

3. For all you know, there could be a deed of variation. The heirship is not complete until it is complete, and that could be up to two years after death.

4. As far as I know (I just took a quick look at Geneva tax on successions) there is not, as there is in Germany, a tax on the recipient of assets from a foreign estate or succession. Unless of course there is Swiss real property.

That should get you started. I would argue that the assets don't belong to the heir until they are indefeasibly in his or her custody. But presumably there is a mandataire doing the Geneva tax return who knows better than I do.
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Old 14.01.2019, 10:51
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Re: Wealth tax declaration: Swiss resident (UK citizen) inheriting UK assets

Thank you so much, Caryl. You have rather confirmed my thoughts.

There are a few assets in the US and other situses (siti?), but mainly in Spain and the UK. The problem for us is that the Swiss and Spanish resident heirs are putting pressure on us, the executors of the UK estate, to provide them with information because they believe they have to make (accurate) wealth tax declarations in their own countries.

We know for sure that there will be a Deed of Variation in the UK and it will certainly take the best part of two years to prepare it because we have to wait for the UK tax authorities to make decisions on domicile, tax due etc. This will affect the final split of the estate. So we cannot possibly provide accurate information to the heirs.

Nonetheless they tell us that we must provide this information when they ask for it. That is why we are trying to find out when they actually have to make their wealth tax declarations and what the process might be to defer said declarations until we know what they will inherit and they have right of ownership over it.
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Old 14.01.2019, 11:03
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Re: Wealth tax declaration: Swiss resident (UK citizen) inheriting UK assets

Will not highjack this thread, but I am wondering what would happen the other way round, eg Swiss assets/property being inherited by our adult children in the UK (who are dual nationals).
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Old 14.01.2019, 12:04
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Re: Wealth tax declaration: Swiss resident (UK citizen) inheriting UK assets

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Will not highjack this thread, but I am wondering what would happen the other way round, eg Swiss assets/property being inherited by our adult children in the UK (who are dual nationals).
Nothing as inheritance tax is paid by the estate, not the recipient.
It greatly depends on how the UK treat their concept of UK domicile on passport holders at the time of your death & where you are living at the time. They have got much more aggressive on tax avoidance in recent times.
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Old 14.01.2019, 12:07
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Re: Wealth tax declaration: Swiss resident (UK citizen) inheriting UK assets

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Thank you so much, Caryl. You have rather confirmed my thoughts.

There are a few assets in the US and other situses (siti?), but mainly in Spain and the UK. The problem for us is that the Swiss and Spanish resident heirs are putting pressure on us, the executors of the UK estate, to provide them with information because they believe they have to make (accurate) wealth tax declarations in their own countries.

We know for sure that there will be a Deed of Variation in the UK and it will certainly take the best part of two years to prepare it because we have to wait for the UK tax authorities to make decisions on domicile, tax due etc. This will affect the final split of the estate. So we cannot possibly provide accurate information to the heirs.

Nonetheless they tell us that we must provide this information when they ask for it. That is why we are trying to find out when they actually have to make their wealth tax declarations and what the process might be to defer said declarations until we know what they will inherit and they have right of ownership over it.
They can make an informed estimate based on information, for example if the amount was in the £100,000 - 200,000 level they could estimate £100,000. Property valuation is always an opinion rather than fact, same for a privately owned company, until it's sold it's just a guess.
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Old 14.01.2019, 13:24
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Re: Wealth tax declaration: Swiss resident (UK citizen) inheriting UK assets

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Nothing as inheritance tax is paid by the estate, not the recipient.
In the UK.

My kids (Swiss domiciled and citizens, but also Canadian and US citizens) are faced with inheritance taxes on the estate of their Canadian (citizen and domiciled) grandmother (in Canada).

Tom
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Old 14.01.2019, 18:46
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Re: Wealth tax declaration: Swiss resident (UK citizen) inheriting UK assets

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Thank you so much, Caryl. You have rather confirmed my thoughts.

There are a few assets in the US and other situses (siti?), but mainly in Spain and the UK. The problem for us is that the Swiss and Spanish resident heirs are putting pressure on us, the executors of the UK estate, to provide them with information because they believe they have to make (accurate) wealth tax declarations in their own countries.

We know for sure that there will be a Deed of Variation in the UK and it will certainly take the best part of two years to prepare it because we have to wait for the UK tax authorities to make decisions on domicile, tax due etc. This will affect the final split of the estate. So we cannot possibly provide accurate information to the heirs.

Nonetheless they tell us that we must provide this information when they ask for it. That is why we are trying to find out when they actually have to make their wealth tax declarations and what the process might be to defer said declarations until we know what they will inherit and they have right of ownership over it.
Only the courts of England and Wales have jurisdiction over the property in that, well, jurisdiction. I have been executor in two U.S. states and in England and have drafted wills and trusts in both.

You may need to apply for ancillary probate in the U.S. state where property is located. I hope that is not California because probate is so costly there that revocable living trusts are used where possible. I just drafted one of those.

In Spain there may be a succession procedure. But maybe not: I am pleased to note that both the UK, Switzerland and Spain have ratified The Hague Convention on wills https://www.hcch.net/en/instruments/...-table/?cid=40 (the USA has not because wills and probate are matters of state law and few Hague Conventions get through that hurdle (I think Child Abduction has, and doubtless a couple of others).

I would advise you to tell the complainants in writing, recorded delivery, that you are bound by English law and they should submit their demands to the Probate Court there. It may be that the Spanish property has passed (as I explained some does) by act of law independent of a will or according to the will.

I normally advise people to have separate wills in each jurisdiction where they have property. The problem is that most notaries and other lawyers are so incompetent that they are likely to draft a will that cancels all previous ones, including those for other jurisdictions. In England (as in California) I advise people to avoid probate with trusts and trust-like instruments (deeds of trust of land for example). Unfortunately UK tax law taxes trusts to death except for vulnerable persons and certain minors. I just did one of those, and then the trustee parent had to renounce U.S. citizenship because of the incompatibility (mainly but not only in tax) of a vulnerable person trust with a U.S. special needs trust.

These are nasty areas. Expect to be attacked verbally and otherwise. An acquaintance whose mother died in England recently found that his brother (presumably a spendthrift, I would't know) harassed the surviving spouse (second husband, not the father of the acquaintance) and the professional co-executor to such a degree as to make them abandon the trust arrangement designed to save £2 million in IHT. All to get at the money 2 years earlier.
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Old 14.01.2019, 18:54
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Re: Wealth tax declaration: Swiss resident (UK citizen) inheriting UK assets

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In the UK.

My kids (Swiss domiciled and citizens, but also Canadian and US citizens) are faced with inheritance taxes on the estate of their Canadian (citizen and domiciled) grandmother (in Canada).

Tom
Better to have started a new thread. Maybe the forum manager can fix.

A problem is that Canada doesn't have an estate or inheritance tax but capital gains tax on deemed sale at death. Until the Third Protocol was ratified with the USA, there was double taxation for a decade: CGT in Canada, Estate Tax (when there wasn't as now a £5 or £10 million exclusion) in the USA. HMRC taxes dual estates (40% after £325,000) but gratuitously and extra-statutorily allows you to deduct the Canadian CGT from the capital amount subject to tax, not from the tax.

But there doesn't seem to be any grounds for Swiss cantonal inheritance tax here. As I answered to someone else a day or so ago, Germany taxes incoming inheritance and gifts -- and sometimes double-taxes trusts because they don't recognise the concept. But that's not your problem and I mentioned it by way of illustration only. I looked (on behalf of an inquirer) briefly at Geneva cantonal inheritance tax law and so no imposition on incoming bequests. That doesn't mean I didn't miss it. Without going into my personal circumstances it could one day be an issue for me but I hope not.

I don't see that you have an issue except from the standpoint of guardianship. If no trustee was named, the provincial court will name a close buddy to to the job at great expense maybe. I'd have to know what the will says and a public forum isn't the place for that.
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Old 14.01.2019, 19:01
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Re: Wealth tax declaration: Swiss resident (UK citizen) inheriting UK assets

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I don't see that you have an issue except from the standpoint of guardianship. If no trustee was named, the provincial court will name a close buddy to to the job at great expense maybe. I'd have to know what the will says and a public forum isn't the place for that.
I have no issue, as they are adults.

Rather, they get emails from the notary referring to various tax things that they don't understand.

My sister has a vacation house in Canada, so I suggested that the speak to her, as surely she must have a tax person in Canada (she also used to be an accountant herself).

Thanks,

Tom
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Old 14.01.2019, 19:04
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Re: Wealth tax declaration: Swiss resident (UK citizen) inheriting UK assets

Moderators, would somebody kindly pin this excellent thread written by professional considerate authors?
It could help others in the future.
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Old 14.01.2019, 19:31
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Re: Wealth tax declaration: Swiss resident (UK citizen) inheriting UK assets

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Nothing as inheritance tax is paid by the estate, not the recipient.
It greatly depends on how the UK treat their concept of UK domicile on passport holders at the time of your death & where you are living at the time. They have got much more aggressive on tax avoidance in recent times.
Actually they (estate and heirs) are jointly and severally liable. And the law of domicile is complicated and different in England, Wales, Scotland and N.I. from any U.S. state and any civil-law jurisdiction. While the term is American, "transferee liability" exists in Britain too, as part of fraudulent transfer law.

Having a UK passport is only one badge of domicile, and mostly relevant to someone living in Britain or born of a British-domiciled father. But never mind that, Parliament has enacted several "deemed domicile" rules where continued residence means the taxpayer and estate are treated as if UK-domiciled.
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Old 14.01.2019, 21:55
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Re: Wealth tax declaration: Swiss resident (UK citizen) inheriting UK assets

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Actually they (estate and heirs) are jointly and severally liable. And the law of domicile is complicated and different in England, Wales, Scotland and N.I. from any U.S. state and any civil-law jurisdiction. While the term is American, "transferee liability" exists in Britain too, as part of fraudulent transfer law.

Having a UK passport is only one badge of domicile, and mostly relevant to someone living in Britain or born of a British-domiciled father. But never mind that, Parliament has enacted several "deemed domicile" rules where continued residence means the taxpayer and estate are treated as if UK-domiciled.
Since you don't get probate in the UK until IHT has been paid, your first sentence makes no sense for a UK estate.
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Old 15.01.2019, 07:36
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Re: Wealth tax declaration: Swiss resident (UK citizen) inheriting UK assets

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I have no issue, as they are adults.

Rather, they get emails from the notary referring to various tax things that they don't understand.

My sister has a vacation house in Canada, so I suggested that the speak to her, as surely she must have a tax person in Canada (she also used to be an accountant herself).

Thanks,

Tom
It occurs to me that the (adult) beneficiaries may have trouble finding a financial institution willing to work with them (for FATCA reasons outside the USA and USA PATRIOT Act and KYC reasons inside the USA. They should be wary of PFIC and FBAR risks from the moment they had/have entitlement to foreign assets. They need an accountant and/or lawyer familiar with US-Canada cross border issues. Switzerland poses less of a problem other than cantonal tax returns.

You mention "notary": only civil-law jurisdictions have notaries as family- and property-law lawyers so that refers to Quebec or Switzerland? The whole point of a lawyer is to put things in terms a client understands. And a tax accountant needs to take into consideration tax treaty rights to avoid double taxation (not, I think of the estate but of the heirs. No credit for wealth tax though).
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Old 15.01.2019, 07:48
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Re: Wealth tax declaration: Swiss resident (UK citizen) inheriting UK assets

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Since you don't get probate in the UK until IHT has been paid, your first sentence makes no sense for a UK estate.
Probate isn't given until IHT421 is approved by HMRC. But that has nothing to do with liability for tax. Most UK "estates" never go through probate. There is a de minimus effective exemption and according to this comment that can be as high as £30,000 https://www.todayswillsandprobate.co...nt-of-probate/ -- and in the case of joint property no tax certificate is needed. See Form DJP https://www.gov.uk/government/collec...registry-forms

I have an approved IHT421 in my safe for which probate was never applied for, and never needed despite substantial assets: IHT was zero and all cash assets were used for funeral expenses.

Banks are instructed to lend funds to pay IHT to release property, on the principle you stated. But foreign property? Property in trust or trust of land? Physical assets? Pensions and life insurance, including (or especially) foreign? Foreign community property, joint tenancy and "payable on death" (Totten trust) assets? The list goes on just proving that estate planning is an art.

Much IHT due is never collected because the English notion of domicile is in conflict with foreign ones and if assets and heirs are abroad there is no way for HMRC to enforce its rights, even if it knows of them. Unlike IRS, HMRC can make a decedent bankrupt but what's the point in that case? The Society of Lloyd's did that to one of its deceased "Names" (investors) and got nowhere: decedent estates in the USA are covered by state probate, not federal bankruptcy, law, even if insolvent. http://uniset.ca/lloydata/css/bk_57747781_harrison.pdf

Back to the sentence you criticised: liability for tax exists even if it isn't or can't be collected, even if probate is never sought. Lots of interesting cases. And to the degree it's relevant one is not deemed to have "ceased doing business" in England until all debts have been paid including taxes, a jurisdictional opening for HMRC to make a company or individual bankrupt: Theophile v. Solicitor-General, [1950] A. C. 186.

Last edited by Caryl; 15.01.2019 at 08:55.
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Old 15.01.2019, 07:57
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Re: Wealth tax declaration: Swiss resident (UK citizen) inheriting UK assets

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You mention "notary": only civil-law jurisdictions have notaries as family- and property-law lawyers so that refers to Quebec or Switzerland?
Quebec.

Tom
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Old 15.01.2019, 09:02
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Re: Wealth tax declaration: Swiss resident (UK citizen) inheriting UK assets

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Quebec.

Tom
The problem with seeking clarification from the notaire (as I'll call him/her to avoid ambiguity), or any lawyer, is that it goes on the clock. I've heard of lawyers charging just to discuss their bill.

There are treatises and online blogs and explanations that might help, such as this: https://lecourshebert.com/le-droit-d...quebec-canada/

Or if it's just words they don't understand there are legal dictionaries: I have one I bought at U Montréal bookstore years ago. In the cave of my apartment in Switzerland as it happens. Lawyers use jargon to impress, but that's the contrary of doing their job.
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