UK parent gifting me, a US resident alien, not yet citizen

June 7, 2016 12:59 PM

My father is going to give me around £20,000 within the next couple months. YANML/tax expert.

Do we both need to consult a lawyer/tax expert?
Has anyone had experience with this?
I have googled and it just has me confused. I want to make sure we do this right and there are no repercussions for either of us.
I have read that there may be a complication if he dies within 7 years of giving it to me. I'm not sure if that's only a factor in England or here in the US too.

I really appreciate any stories/resources/pointers.

Thanks!

Throwaway email: [e-mail]

posted by anonymous to Work & Money (6 answers total)

For the US side, there's a helpful IRS page. Short answer: It's under USD100K so neither you nor your father need to do anything.
posted by ROU_Xenophobe at 1:08 PM on June 7, 2016 [1 favorite]

You have no issue in the US or in the UK. See: Gift Tax.
posted by DarlingBri at 1:42 PM on June 7, 2016

If your dad dies within 7 years, this will have to be counted towards the inheritance tax threshold (currently £325,000). This may not affect him (only about 5% of estates have to pay IHT), but it might be an issue if he has substantial savings, or if he owns his own home and doesn't have a spouse to pass it on to.
posted by verstegan at 1:43 PM on June 7, 2016

I'm more familiar with the U.S. Here, there is an estate tax, but it applies only if the estate is more than $5.45 million. The gift tax is integrated with the estate tax, so if you want to leave $10 million, you can't just give someone $2 million a year for 5 years: that money would be added together.

However, you can give up to $14,000 a year that is basically ignored. Some people think that means that you have to pay tax if you give more than $20,000. You don't; you just have to report it so that if all your gifts and your estate totals more than $5.45 million, you might have to pay tax.

The UK system seems similar, except it's only £3,000 a year in gifts that's ignored, and the threshold is £325,000. And the amount of gifts (if they above £3,000 a year) are integrated only if they are within 7 years. I don't know if it matters that you are outside of the U.K.

So the short version: If your father anticipates having an estate of £325,000, or something close to it, he should probably check with a U.K. tax person. There may be a way to save taxes, for example by gifting £3,000 a year. If not, it seems that there would be no tax consequences, though he should still figure out if and how he needs to record or report the gift.
posted by Mr.Know-it-some at 1:51 PM on June 7, 2016

there may be a complication if he dies within ___ years of giving it to me.

This is not legal advice, and pertains only to the U.S., but I think I know what you've been hearing.

A gift may be treated as part of the giver's estate if he dies too soon after the gift is made.

Also, if a gift is given in order to remove assets from the giver's estate in order to avoid a judgment, or just before a bankruptcy, it can be considered a fraudulent conveyance.

Neither of these concepts should be a problem for you as long as the gift is just a gift.
posted by JimN2TAW at 1:55 PM on June 7, 2016

There's also the US/UK tax treaty to consider. That should prevent double taxation, and you should end up paying just the higher of the UK and US tax (if any) on the transaction.

(In the US see Foreign Tax Credit.)
posted by monotreme at 3:33 PM on June 7, 2016