“Which countries are effected and what are the rates?”

The major world countries charge as follows:

International Comparison of Top Marginal Death Tax Rates

• Argentina, Australia, Canada, China, India, Indonesia and Mexico 0%
• Brazil 6% Poland 7% Singapore 10%
• Denmark and Hongkong 15%
• Chile and Italy 25%
• Netherlands 27% Belgium 28.5% Germany and Sweden 30%
• Great Britain and France 40%
• Korea 45% Taiwan 50%
• United States of America 50%
• Japan 70%
• Canada (varies from state to state and is Capital Gain Tax)

Although not exhaustive this list shows the main countries that have Estate Tax. Therefore many Expats and International citizens are potentially effected.

“What does this actually mean in terms of an estate? How much tax would be due?”

This naturally depends on which country where you are domiciled.

Let’s look at two simple examples – firstly if you will pay UK Inheritance Tax:

• Anything left to a surviving spouse (has to be legally married) will pass free of IHT
• Now assume a widower dies leaving his estate to his only daughter. The total net estate is £400,000.
• The first £275,000 of the estate is currently (2005-6 Tax Year) taxed at 0%. (Note this is not exempt merely taxed at 0% meaning this could change at some time in the future) Thereafter any balance is taxed at 40%.

Total Estate: £400,000
Nil rate band: £275,000
Balance: £125,000
UK Inheritance Tax bill: £ 50,000

This means that 12.5% of what the widower and his wife had worked for during their lives will go to the UK Government. You may feel that this is a large estate but it should be remembered that the current value of a three bedroom semi-detached house in the south east can now be worth in excess of £275,000 so to amass an estate of £400,000 is not very difficult to do.

This is even worse for an estate of £700,000 where the calculation would be as follows:

Total Estate: £700,000
Nil rate band: £275,000
Balance: £425,000
UK Inheritance Tax bill: £170,000

The larger the estate the worse it gets.

Secondly for a similar case in the USA:

Anything left to a surviving spouse (has to be legally married) will pass free of Estate Tax
Now assume a widower dies leaving his net estate to his only daughter. The total net estate is $550,000.
The first $1,000,000 of the estate is currently (2006 Tax Year) exempt. Thereafter any balance is taxed at 49%.

Total Estate: $550,000
Exempt band: $1,000,000
Balance: $NIL
USA Inheritance Tax bill: $NIL

For a net estate of $1,000,000 there would still be no liability. But for estates in excess of this figure there would be a liability.

The computations for different countries around the world would be too numerous to do but suffice to say that the amounts can be quite a significant part of an estate.

“I don’t care, I never got a bean from my parents, so my kids will get a lot more than I did, even if they do pay some tax”

Fair enough but is that what you want. Do you really want your hard earned cash to go to the tax man?

“I am concerned about paying Estate Tax but I am not sure what I can do about it”

At this stage, neither are we but there are certain steps that you can take that can reduce or even remove the liability. We would need to sit down and review your financial position and find out want you want to achieve to offer you meaningful and appropriate advice.