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Old 03.09.2010, 14:21
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UK IHT/Swiss resident/UK domicile

If a UK national, resident in CH but domiciled in UK, is married to a Swiss national, with a UK child, can the UK national leave everything to the Swiss national with a private legal contract that the estate be ceded to the child? Would this effectively avoid the children paying UK IHT, if due?
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Old 03.09.2010, 14:36
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Re: UK IHT/Swiss resident/UK domicile

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If a UK national, resident in CH but domiciled in UK, is married to a Swiss national, with a UK child, can the UK national leave everything to the Swiss national with a private legal contract that the estate be ceded to the child? Would this effectively avoid the children paying UK IHT, if due?
I would seak professional advice on this one. Also remember that ledgislation can change over time in either of the countries, which may change an outcome!
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Old 03.09.2010, 16:31
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Re: UK IHT/Swiss resident/UK domicile

No it won't work if you're hoping to get assets transferred free of IHT from you to your kids via a foreign domiciled husband. As the rules currently stand, transfers to foreign domiciled spouses do not get the full exemption from inheritance tax that transfers to a UK domiciled spouse would. Exempt transfers to foreign domiciled spouses are capped at £55,000. Therefore anything over the normal nil rate band plus £55,000 will be taxed.

By the way, chidren don't pay IHT when they benefit under a will. The deceased person's estate pays the tax before the transfer to the kids is made. Trustees/administrators/personal representatives are personally accountable to the Inland Revenue for deducting the tax, which is why they should take their responsibilities seriously.

Have you considered taking steps to lose your UK domicile. If you plan to live abroad permanently you can do this but it takes time and it means severing all links to the UK, though you can keep your UK citizenship.

I'm with Telandy. Seek professional advice.
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Old 03.09.2010, 17:15
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Re: UK IHT/Swiss resident/UK domicile

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If a UK national, resident in CH but domiciled in UK, is married to a Swiss national, with a UK child, can the UK national leave everything to the Swiss national with a private legal contract that the estate be ceded to the child? Would this effectively avoid the children paying UK IHT, if due?
if your'e domiciled in the uk, then you may be subject to iht on your worldwide assets.

iht is often referred to as the voluntary tax as it can be planned around. but it does require planning and not just half-assed attempts. if you've got a sizeable estate, it would be well worth getting the right advice.

one other thing is to check whether the swiss national is uk domiciled for iht purposes.
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Old 03.09.2010, 17:21
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Re: UK IHT/Swiss resident/UK domicile

if you want an example of how complex domicile can be take a look at this example:

"In 1940 Angela was born and raised in New South Wales to parents who were always so domiciled. Accordingly, she has a domicile of origin in New South Wales (not Australia) and this did not change during her minority.

In 1960 she married Barry, who was domiciled in England although he was currently working in West Germany (as was). So Angela now has a domicile of dependence in England.

In 1963, while still resident in West Germany they had a son Charles. His domicile of origin is also England. They returned to England in 1966.

However, in 1970 Barry decided to leave England for good and move to Spain permanently (a domicile of choice in Spain). Angela and Charles did not want to go and stayed in England most of the time. Despite this Angela & Charles now have a Spanish domicile (of dependence).

In 1972 Angela & Barry separated. Angela broke her ties with all other countries and decided to stay in England permanently with Charles. Neither of these events changed her domicile. She still has a Spanish domicile while married to Barry.

On 1 January 1974, the domicile of dependency ceased so that Angela now has a domicile of choice in Spain. However, if she is still resident in England and still intends to stay permanently in England she now acquires a domicile of choice in England instantaneously.

As a result of the 1973 Act Charles’ domicile is now dependent upon his mother’s domicile and acquires a domicile of dependence in England. Charles can change his domicile on or after his 16th birthday in 1979."

i'd also argue that the 'domicile of choice' examples are not so clear cut in real life. expect an argument from the authorities of acquiring a new domicile through choice results in less tax payable.
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Old 05.09.2010, 15:10
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Re: UK IHT/Swiss resident/UK domicile

Thank you all for the responses. I wonder if there are any dissadvantages to being non domicilled?
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Old 05.09.2010, 17:06
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Re: UK IHT/Swiss resident/UK domicile

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Thank you all for the responses. I wonder if there are any dissadvantages to being non domicilled?
In terms of your lifestyle, plenty or none, depending on your point of view.

In order qualify as non domiciled you need to cut all links to UK. Links mean things like property there so you couldn't keep a home in the UK - freehold or leasehold - so no boltholes. Also intending to retire there or be buried there when the times comes will qualify as a link so you can't do that. The Revenue would also look at the amount of time you spend there so visits should be kept to a strict minimum. Even educating your children there or maintaining banks accounts, investments or other assets there might constitute a link. There is no acid test - the courts would look at all the circumstances before deciding whether you were domiciled in the UK or not. The golden rule is the less you have to do with the UK the better. For many people, the downside of the family/social implications of cutting all links to the UK outweigh the upside tax advantages.
There was discussion here:
Losing UK Domicile?
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