How the U.K. Taxes Gifts

The recent death of Bruce Forsyth, a television personality in the U.K., is a good opportunity to show how the U.K. and the U.S. treat taxes on gifts and estates differently.

In the U.S., we have an estate tax on estates that exceed the exemption amount. Currently, that amount is $5.49 million per taxpayer (increasing to $5.6 million on Jan. 1, 2018).

The estate must pay tax on the value above the exemption amount, before any assets are distributed to heirs.

The U.K. has an inheritance tax. Instead of taxing the entire estate, they tax what the heirs receive after the estate is distributed.

Forsyth disliked the British system, so he avoided it by leaving everything to his wife who has a full “spousal” exemption from the inheritance tax. She may be able to give all of Forsyth’s descendants a share of the estate without anyone ever having to pay tax on it, as the Wills, Trusts & Estates Prof  Blog discusses in “Should We Tax Gifts the British Way?

In the U.S., we have limits on the amount that may be gifted away before a person dies. Why? It is done so those with potentially large estates cannot avoid taxes by giving everything away while they are living.

The U.K. only taxes gifts, if they occur within seven years of the giver’s death. If gifts are made within that timeframe, then the gifts are considered part of the estate and subject to the inheritance tax.

Therefore, if Forsyth’s wife lives for least another seven years, then she can give everyone a large inheritance from Forsyth with no tax being owed.

Reference: Wills, Trusts & Estates Prof Blog (Oct. 24, 2017) “Should We Tax Gifts the British Way?

Hear From Our Clients

I heard Cindy’s presentation at a Senior Luncheon at my church, and was very impressed. She helped my daughter and me understand many aspects of elder law. Josh has also been very helpful in my planning to enter an independent living situation . I have told many friends about them.

- Charlotte

The very best elder law attorney and staff anyone could ever ask for! I have referred a number of clients to Cindy and she never disappoints. She is kind, caring, and extremely thorough in making sure everything is completed as it should be. I highly recommend Cindy for anyone needing lawyer services; she truly goes above and beyond for every client she helps and has had a huge impact in so many peoples’ lives. Thank you, Cindy and staff, for everything that you do- I’m so glad to know you!

- Kerri

Cindy and the Nelson Elder Care Law team are trustworthy and helpful. They are the experts in elder care law. At Leaf Cremation, we entrust our families to the care of the Nelson team when their services are needed.

- Pierce

Josh Nelson, and his staff, have been amazingly helpful to our family. The ins and outs of nursing homes, the rules and regulations that govern Medicare and Medicaid are daunting and the folks at Nelson Elder Care Law have been informative, responsive, and above all, empathetic. I cannot emphasize enough how their service has taken a weight off of our shoulders especially during a world pandemic that has targeted nursing homes across our country. I highly recommend retaining Josh and his firm!

- Marcia

I had a simple legal question to them that I needed answered and they very helpful in giving me the information I needed. I highly recommend them and will reach out to them if I need more advice or assistance. Thank you for taking your time to just answer a couple of questions I had!

- Ben