International early inheritance - so many questions!

deewee1611

Hi everyone,

sorry far the lengthy post, but I over Christmas had a few discussions which left me very confused. I appreciate any pointer in the right direction since I am completely clueless with inheritance, first time I thought about it was 4 days ago - so please give me the easy treatment! :-)

Better start with the basics:
- I am a dual national (no idea if this makes any difference in this context: UK/German, UK resident), my father is German and living in Germany, divorced from my mother, who is a UK national, living in the UK. I have a half-sister who is living in Germany.
- I am in my 40s, my father in his 60s, just retiring and sorting out his financial "stuff" - which is what started his thinking process.
- He is financially in a comfortable position (house without mortgage, decent pension - more than enough to live of - and over €300k in saving, which in his own words, he "doesn't really need").

He proposed over xmas a deal and asked me to check if this would work for me (his idea - took me completely by surprise and I have no idea where to start! ... HELP!!!):
- He is proposing that I inherit €20k-€30k every year until roughly half his estate is inherited or until he dies (which is when his will would kick in and sort out the rest!). According to him, his estate is roughly €1m to €1.5m.
- He checked with his German financial/tax advisor - this would be completely tax exempt under German law - so if I was living in Germany and was subject to German taxation, I would receive €20k-€30k a year tax free!. He asked me to investigate how the tax situation is for me as UK resident / tax resident.
- I am financially in a comfortable position in the UK, this money would go in mortgage overpayment or privat school fees for our little one - definitely not in our day-to-day financials!
- If I this would be taxed with the normal 40% tax rate, it would not make an sense to go down this route!

So... my questions:
- Where to get advice on this? The normal pension advisor/FA? IMHO out of his depth on the international element.
- I still hold a German bank account (normal current account) - is it possible to just use this and transfer to the UK as taxed income? Rather not I'd assume...
- There is no time pressure, I rather get it right and wait a year!

Any help/pointers/advise/contacts are highly appreciated!

Cheers
Dan

xylophone

Your father has confirmed with his German adviser that there is no tax liability in Germany.

There is no tax for you to pay in the UK on a gift from your father.

Your father may make his gift by payment into your German bank account and you can remit the money to your UK bank account as desired and use as required.

Interest earned on your deposit income is taxable.

mgdavid

Inheritance , and therefore inheritance tax, only applies when the source of the funds is deceased. You will be receiving an annual gift not an inheritance until your father dies.