Trusts, estates, and intergenerational wealth transfers that span the US and UK create some of the most complex tax positions in private client advisory. The interaction between US estate and gift tax rules, the UK’s inheritance tax regime, and the trust provisions of the US-UK Tax Treaty demands careful and coordinated planning.
Our private client specialists advise on the full lifecycle of trusts and estates — from formation and ongoing compliance to winding-up and cross-border estate administration.
Who We Serve
- US persons with UK assets forming part of their estate
- UK nationals with US-sited assets or US beneficiaries
- Trustees of existing trusts with US or UK nexus
- Executors of estates with cross-border assets
- Families engaged in intergenerational wealth planning
- non-domiciled individuals in the UK structuring for Inheritance Tax efficiency
US Trust & Estate Compliance
Foreign Trust Reporting
A US person who is a grantor, transferor, or beneficiary of a foreign trust has significant IRS reporting obligations:
- Form 3520 — Annual Return regarding transactions with foreign trusts and receipt of certain foreign gifts. Filed with the individual’s return. Penalties for failure to file begin at 35% of the trust corpus for contributions, or 5% per month for distributions
- Form 3520-A — Annual Information Return of Foreign Trust with a US Owner. Filed by the trust (or the US owner acting as nominee). Separate from Form 3520
- FinCEN Form 114 (FBAR) — Required if the US person has a financial interest in or signature authority over trust accounts exceeding the threshold
US Estate Tax
The US federal estate tax applies to the worldwide estate of US domiciliaries at rates of up to 40%, subject to the lifetime unified credit (which is scheduled to reduce significantly after 2025). For non-US domiciliaries, estate tax applies only to US-sited assets — but the threshold is drastically lower.
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Book Your Consultation →Gift Tax
The US gift tax applies to gifts by US citizens and residents regardless of where the recipient lives. Annual exclusions and the unified credit interact with the estate tax. Gifts to non-US-citizen spouses have separate, lower exclusions.
UK Inheritance Tax
UK Inheritance Tax (IHT) at 40% applies to the worldwide estate of UK-domiciled individuals and to UK-sited assets of non-domiciles. The nil-rate band, residence nil-rate band, spousal exemption, and charitable exemptions are core planning tools. The April 2025 reforms brought significant changes to IHT treatment of offshore trusts and agricultural/business property relief — clients with existing structures should seek immediate advice.
US-UK Estate Tax Treaty
The US-UK Estate and Gift Tax Treaty (a separate instrument from the income tax treaty) provides relief from double estate and gift taxation. It allocates domicile and taxing rights and provides credits for tax paid to the other country. Effective use requires careful coordination of domicile positions under both US and UK law, which differ materially from each other.
Forms We Prepare
- Form 3520 — Foreign trust reporting and foreign gift disclosure
- Form 3520-A — Foreign trust annual information return
- Form 706 — US Estate Tax Return (where applicable)
- Form 709 — US Gift Tax Return
- IHT400 — UK Inheritance Tax account for settled and unsettled estates
- IHT100 — UK trust periodic and exit charge returns
Frequently Asked Questions
Do I need to report a UK trust I am a beneficiary of to the IRS?
Yes, if you are a US person and receive distributions from a foreign trust, or if you are treated as the owner of a foreign trust, there are significant reporting obligations under Form 3520 regardless of whether you received anything. The penalties for non-reporting are among the highest in the US tax code.
My parent left me a gift from overseas. Do I need to report it?
If you are a US person and received a gift or bequest from a foreign person exceeding certain thresholds, Form 3520 is required. There is no tax on the receipt of the gift itself, but failure to report carries significant penalties.
How do the April 2025 UK IHT changes affect offshore trusts?
Excluded property trust treatment for non-UK domiciled individuals changed materially in April 2025. Assets settled into trusts before the change may have transitional protection, but ongoing planning should be reviewed. Contact us immediately if you have an existing excluded property trust structure.
Related Services
Cross-border estate and trust planning requires early action. Book a private consultation with our specialist team.