Estate planning with overseas child

aroominyork

https://forums.moneysavingexpert.com/discussion/comment/81879002#Comment_81879002

I don’t agree. There needs to be a standard process, partly because inherited SIPP and inherited non-SIPP assets would be taxed differently after receipt by the beneficiaries. Also, the SIPP might have different beneficiaries from the other assets.

mybestattempt

https://forums.moneysavingexpert.com/discussion/comment/81879021#Comment_81879021

My understanding is there will be a step by step process which involves the SIPP provider, the executor(s) and non-exempt beneficiaries to establish any IHT attributable to the date of death value of the SIPP and whether/how it is paid by the estate or the beneficiary before distribution by the SIPP provider to the beneficiary.

aroominyork

I am struggling to find the right specialist advice about UK-France tax. The lawyer drafting our wills linked us to a London-based French law firm, and while they can advise on some issues they would have to do fresh research to find out how SIPPs are taxed if the beneficiary is a French tax resident. I would rather be advised by someone who has come across this situation in practice. I have spoken to a couple of (I)FAs but they either i) only assist expats in France, or ii) are wealth managers who have UK-France knowledge but whose main motivation seems to be to manage our money. Is there such a thing as a one-stop shop who can, on an advice-only fee basis, advise on these issues?

The kind of issues, just to give a flavour of where we need help, are:

• Can he open a UK or International SIPP with SIPP funds he bequeaths from us (this seems to be, at least in part, dependent on our SIPP provider)
• If he could, should he – or would he subsequently be taxed on income which would be worse than liquidating the SIPP funds immediately
• If he immediately liquidates the SIPP and either keeps the funds in the UK or moves them to France, is this considered income by France and taxed a second time on top of French inheritance/succession tax; depending on this and also on whether he be taxed on this withdrawal as income by HMRC, could/should he get an NT coding from HMRC and have France tax it as inheritance/succession (offset by UK IHT already paid) and not again as income
• Exactly how does the dual tax treaty affect inheritance/succession tax and subsequent tax liabilities.

PS I am not sure if I am looking for a cross-border lawyer or a cross-border tax accountant?

aroominyork

News update... have found a UK-France tax accountant who seems the person to advise on all issues.

aroominyork

Well, that went well… we engaged a London-based tax accountant firm that specialises in UK-France issues. They advised that after IHT is applied to the estate, France would assess our France-based son's share and tax it at France's gift rate for the excess over the IHT paid. I pointed out that under the inheritance tax treaty between the UK and France, no French tax is payable on inheritances from long-term UK residents. You do not need to pay any French succession tax, provided the deceased was a long-term UK resident and there are no French assets. The estate will have been subject to UK tax. They accepted I was correct and said they had only sent draft advice. They had also unintentionally sent me their internal correspondence on questions I had asked, to several of which their staff wrote "Ask AI". At that point I 'dis-engaged' them.

We are now working with a (proper) lawyer to revise our wills and he, understandably, is unable to advise on France's attitude to inherited SIPPs, saying we would need advice from a French lawyer. Given that we are likely to run down our SIPPs to the top of each year's basic rate tax band (as discussed here, although probably not empty the SIPPs completely), and laws might change before we shuffle off, my hunch is there is little to be gained from taking French legal advice at the moment. Does anyone have views on this or, by chance, experience of bequeathing a SIPP to a French resident?

Dead_keen

Does anyone have views on this or, by chance, experience of bequeathing a SIPP to a French resident?

I asked Mistral AI, a French LLM and it just shrugged.

flaneurs_lobster

https://forums.moneysavingexpert.com/discussion/comment/82131399#Comment_82131399

….and said "Bof"?

Dead_keen

Does anyone have views on this or, by chance, experience of bequeathing a SIPP to a French resident

I've done my best to avoid understanding French tax on things like this. It is complex and I assume based on nuances that we don't care about. For example, the UK does not care whether the SIPP is trust-based or contractual but France (and the DTA) might. Also, I don't know whether it would make sense to avoid a French resident benefitting from the SIPP if you die age under 75 and instead give them a corresponding benefit from the estate. There is no UK income tax on the inherited SIPP but I suspect there may be French income tax (on the basis that whenever I have sought advice from a French tax adviser on French tax, there has always been French income tax, but that is just a hang up of mine). The DTA is also interesting post age 75 in that someone will have to decide whether article 18 or 23 will apply (the pension won't be based on the French resident's employment and there may or may not be a trust involved).

Would I take French advice now? Probably not unless the amount at stake was material. If it was, I'd probably initially try to find out whether it would make sense to split things so that, before age 75, the UK beneficiaries got the SIPP and the French beneficiaries got the equivalent value from the estate.

aroominyork

Very helpful idea about splitting pre-75 - I'll look into that.

What do the articles 18 and 23 refer to, please?

Dead_keen

What do the articles 18 and 23 refer to, please?

The double tax agreement between the UK and France. Before looking at it, it's necessary to understand the income tax treatment in the UK (taxable after age 75) and France (no idea). If neither tax it, the DTA is just not relevant.

Article 18 is to do with pensions - "pensions and other similar remuneration paid in consideration of past employment" - but I don't know if an inherited SIPP has a close enough connection with a past employment. I know that after a DB to DC transfer, the DC scheme is to do with past employment of the same individual. But I have no clue about an inherited one.

Article 23 is to do with other income - "Items of income … which are not dealt with in the foregoing Articles …, other than income paid out of trusts or … shall be taxable only in that State". If it is not a pension, is it here? what if the SIPP was trust-based?