# UK inheritance tax on charitable bequests to foreign charities



## pattiwhaley (Jul 7, 2017)

Hello, this is a question about taxation of bequests outside of wills. I have made a UK will, that's all fine. My understanding is that my UK pension, if unused at my death, passes to its designated beneficiaries outside of the will. Does this mean that it is not subject to estate tax? specifically, can I leave it to a USA charity without attracting UK estate tax? 

(By way of explanation: I was told by my lawyer that any charitable gifts of USA funds beyond the UK estate tax threshold must be given to UK charities, or else the UK government will tax them (!!!). Therefore the only way I can leave gifts to USA charities is to designate a USA charity as beneficiary to a fund that passes directly to a beneficiary outside of the will. In short, I would have to leave my USA funds to UK charities, and my UK pension fund to USA charities. Perverse, in my view. So, just to check, will donating my UK pension fund to a USA charity be tax-free?) 

Copious thanks for any reassurance you can give me on this.


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## pattiwhaley (Jul 7, 2017)

Sorry, one other question: if I have a USA IRA, and the designated beneficiaries are USA citizens, is that also exempt from UK estate tax?


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## dmesa12 (6 mo ago)

pattiwhaley said:


> Hello, this is a question about taxation of bequests outside of wills. I have made a UK will, that's all fine. My understanding is that my UK pension, if unused at my death, passes to its designated beneficiaries outside of the will. Does this mean that it is not subject to estate tax? specifically, can I leave it to a USA charity without attracting UK estate tax?
> 
> (By way of explanation: I was told by my lawyer that any charitable gifts of USA funds beyond the UK estate tax threshold must be given to UK charities, or else the UK government will tax them (!!!). Therefore the only way I can leave gifts to USA charities is to designate a USA charity as beneficiary to a fund that passes directly to a beneficiary outside of the will. In short, I would have to leave my USA funds to UK charities, and my UK pension fund to USA charities. Perverse, in my view. So, just to check, will donating my UK pension fund to a USA charity be tax-free?)
> 
> Copious thanks for any reassurance you can give me on this.


Hi Pattiwhaley,

UK pensions are not considered an asset for estate tax purposes, and therefore are exempt from UK IHT. The beneficiary, even if a charity, should not trigger any UK estate taxes. By way of explanation, your lawyer is likely referring to any funds outside of pensions given to non-UK charities. 

On the IRA's, if you are domiciled in the UK, they will likely be subject to UK IHT if the value is over the IHT threshold (£325k) as UK inheritance taxes apply to worldwide assets. 

Hope this helps!
- Daniel


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## pattiwhaley (Jul 7, 2017)

dmesa12 said:


> Hi Pattiwhaley,
> 
> UK pensions are not considered an asset for estate tax purposes, and therefore are exempt from UK IHT. The beneficiary, even if a charity, should not trigger any UK estate taxes. By way of explanation, your lawyer is likely referring to any funds outside of pensions given to non-UK charities.
> 
> ...


Thanks Daniel! It does help. It's slightly weird that the UK considers a US pension plan as an asset, and a UK pension plan NOT an asset, but...I've quit expecting things to be logical! Thanks, I'll structure things on that basis then.


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