Inheritance Tax Planning for Expats

Effective inheritance tax planning starts with understanding which rules apply to your circumstances. This guide explains how inheritance tax works for expats, the common cross-border challenges to be aware of and the planning strategies that may help reduce your overall inheritance tax exposure.

What Is Inheritance Tax?

Inheritance tax is used differently across jurisdictions. Some countries tax the estate before assets are distributed, while others tax beneficiaries on what they receive. The UK calls its charge Inheritance Tax, but it is generally assessed on the deceased’s estate and paid by the estate’s personal representatives.

The definition, scope, and regulations regarding inheritance tax vary across jurisdictions. For instance, in the UK, there is no estate tax, and inheritance tax is levied on the decedent’s finances, property, investments, certain life insurance policies, and personal possessions such as art or jewellery, and not on the beneficiaries directly.

Understanding inheritance tax is crucial for:

• Preserving your wealth
• Minimising tax liabilities
• Maximising your estate’s value
• Reducing the risk of administrative complications during wealth transfer

How Does Inheritance Tax Work?

IHT regulations defining applicable rates, thresholds, and exemptions differ between countries, with the following factors determining the final sum:

What Challenges Do Expats Face When Planning Their Inheritance?

Considering their ties to multiple countries, expats often face unique inheritance tax challenges, including:

1. Different tax laws in their home and host countries
2. Changing regulations
3. Double taxation
4. The complexity of determining residency and domicile status
5. Tax Rules and Succession Rules Are Different
6. Forced Heirship

Different Tax Laws in Their Home and Host Countries

The primary difference in inheritance taxation laws across territories originates from varying tax frameworks, exemption rules, and applicable tax rates. For instance, Canada does not impose a separate inheritance tax on beneficiaries. However, a deceased person is generally treated as having disposed of capital property immediately before death. This deemed disposition can trigger capital gains and other income tax liabilities in the final tax return, subject to available exemptions, elections and rollover provisions. Some countries, such as Portugal, have abolished traditional inheritance tax and instead apply a Stamp Duty (Imposto do Selo) at a flat rate of 10% on Portuguese-sited assets passing to non-direct heirs (siblings, more distant relatives, or unrelated beneficiaries). Spouses, children, grandchildren, parents, and grandparents are fully exempt, regardless of value.

Several European countries, like Spain and France, have progressive inheritance tax rates. The amount a beneficiary is liable for depends on the value of the inheritance and their relationship to the decedent.

Some jurisdictions provide an estate-wide threshold. Others calculate tax separately for each beneficiary, apply relationship-based allowances, or impose tax without a general estate threshold.

Due to their ties with multiple jurisdictions, expats may find navigating cross-border inheritance tax regulations challenging.

Without a clear understanding of the relevant tax regime and applicable rules, you risk overlooking valuable tax reliefs and exemptions, which could result in less wealth being passed on to your beneficiaries.

For this reason, it’s advisable to seek assistance from knowledgeable tax consultants at Titan Wealth International. They can help you plan your estate to minimise the inheritance tax burden, reduce administrative complications, and ensure cross-border compliance.

Changing Regulations

Tax laws are subject to frequent revisions that can affect different aspects of inheritance tax, such as rates, thresholds, eligibility, allowances, or reliefs.

Monitoring these revisions is crucial as the changes can directly impact the value of the estate you plan to leave to your beneficiaries.

Some revisions may allow you to utilise exemptions and relief programs that were previously unavailable, while others may reduce the relief options you intended to use.

However, understanding the nuances of these updates and their impact on your specific financial situation can be challenging if you aren’t familiar with relevant terminology.

Working with an experienced tax consultant is strongly recommended. A professional expat tax consultant is up-to-date and knowledgeable of all recent inheritance tax law changes and can help you structure your estate in a tax-efficient manner that complies with all relevant laws.

Double Taxation

Owning assets in multiple countries can expose your estate to double taxation if more than one jurisdiction has the right to tax the same assets after your death. Without careful planning, this can reduce the amount ultimately passed on to your beneficiaries.

Many countries have signed double taxation agreements (DTAs) to help prevent the same assets or income from being taxed twice. However, these agreements don’t always cover inheritance or estate taxes. Where no relevant treaty applies, relief from double taxation may instead be available under a country’s domestic tax rules.

Because every country’s treaty network and tax rules are different, it’s important to review how they apply to your individual circumstances. Identifying any available treaty relief or domestic exemptions can help reduce unnecessary tax and preserve more of your estate for your beneficiaries.

Complexity of Determining Residency and Domicile Status

In many jurisdictions, your residency and domicile status (and, in some cases, the situs of an asset) will determine the jurisdiction where your inheritance will be taxed after you pass away:

1. Tax residence is determined under each country’s domestic rules. Days spent in the country are often important, but family, accommodation, work, economic ties and treaty residence rules may also affect the result.
2. Depending on the jurisdiction, it may turn on a person’s domicile of origin, residence and evidence of an intention to reside permanently or indefinitely in another country.

As an expat, you may find determining your status challenging, as your residency and domicile statuses may not align. This discrepancy can lead to confusion and ambiguity regarding the jurisdiction with the right to tax you.

For instance, you may live in one country for several years and become a tax resident there without changing your domicile, particularly if you intend to return to your home country. This can create exposure to inheritance or estate taxes in more than one jurisdiction, although the outcome will depend on each country’s domestic rules and any applicable estate or inheritance tax treaty.

Germany, for example, may impose inheritance tax on worldwide assets where either the deceased or the beneficiary falls within its unlimited inheritance tax liability rules. The detailed position depends on factors including residence, deemed residence, citizenship-related provisions, the location of the assets and any applicable treaty.

Tax Rules and Succession Rules Are Different

Inheritance tax determines how your estate is taxed, while succession law determines who is entitled to inherit your assets. These are separate legal issues and the rules don’t always align.

For expats with assets in more than one country, it’s possible for the tax treatment to be governed by one jurisdiction while the distribution of the estate is governed by another. Understanding both is an important part of effective cross-border estate planning.

Forced Heirship

Some countries have forced heirship rules that require part of an estate to pass to certain family members, regardless of what a will says. These rules are common in many civil law countries, including France, Spain and Portugal.

If you own assets in a country with forced heirship rules, your estate may not be distributed exactly as you intended, even if your will was prepared elsewhere. Reviewing your estate plan with a cross-border adviser can help identify and manage these issues.

IHT Laws Worldwide

Understanding the differences in IHT laws in various countries worldwide is crucial for navigating cross-border tax planning more efficiently and minimising liability.

United Kingdom

In the UK, inheritance tax is generally not payable if either:

• The value of your estate falls within the available inheritance tax thresholds. Every individual has a nil-rate band (NRB) of £325,000. An additional residence nil-rate band (RNRB) of up to £175,000 may also be available if a qualifying home is left to direct descendants. The RNRB is subject to specific eligibility conditions and is tapered for estates valued at more than £2 million.
• You leave assets above the available thresholds to your spouse or civil partner, or make qualifying charitable gifts that are exempt from inheritance tax.

IHT is normally charged at 40% on the taxable value above the available bands after exemptions and reliefs. A reduced 36% rate may apply where at least 10% of the relevant net estate is left to charity.

The NRB (£325,000), the RNRB (£175,000), and the £2 million RNRB taper threshold are now frozen until April 2031, following the Autumn Budget 2025. With the freeze in place since 2009 and asset values continuing to rise, an increasing number of estates fall within the IHT net each year, a particular concern for HNW expats holding UK property or investments.

Historically, the UK used the decedent’s domicile status to determine IHT exposure. While this no longer determines UK IHT directly, domicile may still influence the application of double tax treaties (DTAs).

Some treaties reference domicile when resolving taxing rights on cross-border estates, making it a key consideration in international estate planning.

Before 6 April 2025, domicile and deemed domicile generally determined whether personally held foreign assets were within UK IHT. For deaths and chargeable transfers on or after 6 April 2025, the main connecting factor is long-term UK residence. A person living in Dubai may therefore remain within UK IHT on worldwide assets during the applicable residence “tail”, even though domicile no longer determines the result directly.

On 6 April 2025, the UK replaced its domicile-based inheritance tax system with a residence-based framework. Broadly, an adult is a long-term UK resident for an IHT chargeable event if they were a UK resident for at least 10 of the 20 tax years immediately preceding the tax year in which the event occurs. Separate rules apply to people under 20 and transitional provisions may alter the result.

Additionally, a tail provision applies: individuals ceasing UK residence may remain within scope for 3 to 10 years, depending on how long they previously resided in the UK.

Additional rules for IHT planning that are relevant to UK expats include:

• Inheritance tax is paid by the executor (the person managing the estate).
• Married couples and civil partners can transfer the unused NRB. When one spouse dies, the unused NRB can be transferred to the surviving spouse, potentially increasing the surviving spouse’s tax exemption limit to up to £650,000.
• Outright gifts to individuals are normally potentially exempt transfers. They may become chargeable if the donor dies within seven years, subject to exemptions and other rules. The recipient’s relationship to the donor does not generally determine the UK IHT rate, although gifts to a spouse, civil partner or charity may be exempt.
• Certain reliefs (such as the Business Relief) can help you reduce or avoid inheritance tax.

The UK IHT ‘Tail’ for Departing Long-Term Residents: Sliding Scale from 3 to 10 Years

Under the new residence-based regime, if you qualify as a long-term UK resident, your worldwide assets remain exposed to UK IHT for 3–10 years following departure. The length of the “tail” depends on how long you have lived in the UK.

The tail operates on a sliding scale. For instance, if you have been a UK resident for 10–13 years, you must wait three years after you leave to stop being considered a long-term resident for IHT purposes. Each additional year of residence adds another year to that window, up to a maximum of ten years for those who were UK residents for 20 years or more.

An exemption exists, in which the tail is fixed at three years if you had been deemed a UK domicile on 30 October 2024, but became non-resident in 2025-26.

Ten consecutive tax years of non-UK residence will normally remove earlier UK-resident years from the rolling 20-year test. If the person later returns, long-term residence must be reassessed for each chargeable event using the relevant 20-year look-back period. If you are considering returning to the UK later in life, take this into account, as it could restart IHT exposure on your worldwide assets.

Determining Your LTR Status: The Statutory Residence Test

IHT tail is triggered when you cease to be a UK tax resident. Whether you have ceased UK tax residence in a given year is determined by the Statutory Residence Test (SRT), the legal framework used to establish UK tax residence status for each tax year. Each year is assessed separately, so your status can change from one year to the next.

To assess your residence status, the SRT considers:

• Number of days you spend in the UK
• Connections you maintain in the UK, such as family, work, or accommodation

If you have spent 183 or more days in the UK in a tax year, you are automatically a UK resident, and no further tests are needed. Below that threshold, the SRT applies a set of tests:

1. Automatic overseas tests
2. Automatic UK tests
3. Sufficient ties test
4. Application of the SRT to deceased persons
5. Split years

The SRT may not change the tail’s duration, but it determines when it begins. Given that each year is assessed independently, the tail progresses only during years in which the SRT confirms non-residence. Any year in which you revert to being a UK resident does not count toward the required period of non-residence.

IHT on Pensions from April 2027

As announced at the Autumn Budget 2024 and now legislated under the Finance Act 2026, most unused pension funds and pension death benefits will form part of the deceased’s estate for inheritance tax purposes from 6 April 2027. The change applies to both defined contribution and defined benefit schemes.

Under the 2027 reform:

• Scheme discretion or “expression of wishes” nominations no longer keep pensions outside the IHT net. Under the new rules, pension assets are valued as part of the estate regardless of how the death benefit is structured.
• Personal representatives are responsible for reporting and paying any IHT due on pension assets. PRs can issue a withholding notice instructing the scheme to hold back up to 50% of taxable benefits for up to 15 months while IHT is settled.
• A spousal exemption (introduced at the Autumn Budget 2025) means pension assets left to a surviving spouse or civil partner remain IHT-exempt, mirroring the existing spousal exemption for other assets.
• Death-in-service lump sum benefits from registered pension schemes are carved out and remain outside the estate for IHT, including for non-active members.
• Income tax on beneficiary drawdown still applies if the member died after age 75, resulting in a potential combined effective tax rate above 60% on inherited pension income.

IHT UK Planning Considerations

For UK expats relying on SIPPs, QROPS-equivalent structures or DB schemes as part of their cross-border legacy strategy, this is one of the most consequential IHT changes in a generation. To limit tax exposure and preserve wealth across generations, consider these practical steps:

• Review your expression of wishes: Although nominations no longer drive IHT outcomes from April 2027, they remain critical for ensuring benefits reach the intended beneficiaries quickly. In light of the new spousal exemption, you may want to revisit who you have nominated.
• Consider direct spousal nomination: Nominating a spouse or civil partner preserves the spousal exemption and defers any IHT charge until the second death. This may be more efficient than older “nominate the children” strategies for many estates.
• Reassess spousal bypass trusts: Pension nominations into discretionary trusts will lose the spousal exemption from 2027. Where the trust serves non-tax objectives (such as asset protection or second-marriage planning), it may still be worth retaining. Otherwise, the structure should be reviewed.
• Model lifetime drawdown vs legacy retention: For estates likely to face combined IHT and income tax above 60% on inherited pensions (applicable for deaths after age 75), drawing down at lower marginal rates during lifetime may be more efficient than preserving the pension as a legacy asset.
• Coordinate the Will, expression of wishes, and Lasting Power of Attorney: These documents need to be a part of a coherent strategy, but capacity issues can prevent late-stage updates. To avoid this common pitfall in estate planning, reviewing and aligning these documents now is strongly advisable.

United States

Inheritance tax is not a federal tax in the United States; state governments regulate it. As of 2026, five states impose an inheritance tax on their residents (Iowa was the sixth, but it repealed its inheritance tax effective 1 January 2025):

State inheritance tax may depend on the deceased’s domicile, the location and type of property and the beneficiary’s classification. Non-residents can still face tax on real estate or tangible property situated in a taxing state.

Australia

Australia has no general inheritance or estate tax. Federal estate duty and the corresponding state death duties were abolished through reforms completed by the early 1980s. While beneficiaries aren’t taxed on the inheritance itself, there are certain tax considerations dependent on the type of inherited assets, such as:

1. Capital gains tax: It may apply when a beneficiary sells an asset they inherited.
2. Income tax: It applies if a beneficiary generates income from shares or properties they inherited.
3. Tax on superannuation death benefit: Your beneficiaries may be liable for tax if they inherit your super’s death benefits.

UAE

The UAE does not currently impose a general inheritance or estate tax.

Despite the lack of inheritance tax in the UAE, your beneficiaries may be liable for inheritance tax in a different jurisdiction. A person living in the UAE may remain within UK IHT on worldwide assets if they are a long-term UK resident or remain within the post-departure tail. The relevant test concerns UK tax residence in the applicable 20-year period, not the number of years spent in the UAE.

The UK–UAE double taxation agreement concerns specified taxes on income and gains; it is not a UK estate or inheritance tax treaty. UAE residence therefore does not, by itself, remove UK IHT exposure.

Inheritance Tax Planning Advice for Minimising Liability

The primary objective of effective inheritance tax planning is to minimise your tax liability so you can preserve more wealth for your beneficiaries. Certain strategies can help you achieve that:

1. Utilising gifts
2. Establishing trusts
3. Note on relief caps from 2026
4. Structuring your inheritance plan with an expert

Utilising Gifts

Lifetime gifting can be an effective way to reduce the value of your estate, although the rules vary between countries.

For example, in the UK, you can give away up to £3,000 each tax year using your annual gift exemption without it counting towards your estate for inheritance tax purposes. If you don’t use the full exemption in one tax year, you can carry the unused amount forward for one tax year only. Gifts above this amount are not automatically subject to inheritance tax, as other exemptions and rules may also apply.

The timing of gifts is also important. In the UK, an outright gift to an individual will usually fall outside your estate if you survive for seven years after making it. However, this treatment may not apply if you continue to benefit from the gifted asset, such as giving away your home but continuing to live in it rent-free. If you die within seven years, the gift is taken into account when calculating inheritance tax, although this does not necessarily mean tax will be payable. The amount due will depend on the value of your estate, available allowances and exemptions, and the application of any taper relief.

In the US, the federal annual gift tax exclusion allows you to give up to $19,000 per recipient in 2026 without using any of your lifetime gift and estate tax exemption. The lifetime exemption is $15 million per individual in 2026. Married couples may be able to benefit from a combined exemption of up to $30 million, provided the relevant requirements are met. For US citizens with a non-citizen spouse, the annual gift tax exclusion is $194,000 in 2026.

Establishing Trusts

Trusts are legal arrangements through which you (the trustor) can transfer money, investments, or property to another person (the trustee) for the benefit of a third party (beneficiary).

Once you set up a trust, the trustee has a legal responsibility to manage and distribute your assets to your beneficiaries after your death.

Note that there are various types of trusts, such as gift trusts or discretionary trusts, and they can have different tax treatments depending on their structure.

Certain types of trusts are especially practical for inheritance planning because once you transfer assets or cash into these trusts, they no longer belong to you. A valid transfer may remove assets from the settlor’s personal estate, but that does not make the trust free of IHT. Entry charges, ten-year charges, exit charges, gifts-with-reservation rules and charges arising on death may apply, depending on the trust, the assets and the settlor’s circumstances.

Discretionary trusts can still play an important role in inheritance tax planning for UK expats, but the rules have changed.

If you set up an offshore discretionary trust before 30 October 2024, some assets may qualify for transitional protection under the previous rules. However, this does not automatically mean the trust will remain outside the scope of UK inheritance tax.

Since 6 April 2025, the inheritance tax treatment of many trusts depends on whether the settlor is considered a long-term UK resident. If they are, the trust may become subject to UK inheritance tax charges, including periodic charges every 10 years and charges when assets leave the trust.

As these rules are complex and depend on your individual circumstances, anyone with an existing offshore trust should review it regularly to ensure it remains suitable and tax efficient.

For new trusts established after this date, if the settlor is classified as a long-term UK resident, the trust enters the relevant property regime, making it subject to 10-year and exit charges.

Transitional protections may be lost if the settlor reacquires UK long-term resident status.

Note on Relief Caps from 2026

From 6 April 2026, the UK Government has capped Agricultural Property Relief (APR) and Business Property Relief (BPR), two crucial inheritance tax reliefs commonly used to pass on farmland, trading businesses, and shares in private companies.

Key changes (now in force under the Finance Act 2026) include:

100% relief is restricted to the first £2.5 million of combined qualifying APR and BPR assets per individual. The £2.5 million figure was raised from the originally proposed £1 million on 23 December 2025.

Value above the £2.5 million cap qualifies for 50% relief, producing an effective IHT rate of 20% on the excess (50% taxable at the 40% rate).

The £2.5 million allowance is transferable between spouses and civil partners, allowing a couple to pass up to £5 million of qualifying assets at 100% relief, provided the will is structured to make use of the transferable allowance.

AIM-listed shares are restricted to 50% relief from April 2026, with no £2.5 million allowance. Investors using AIM portfolios for IHT planning will see effective IHT rates rise from 0% to 20%.

Anti-forestalling provisions apply to lifetime transfers made between 30 October 2024 and 5 April 2026, where the donor dies after 5 April 2026 within seven years, meaning some pre-Budget gifting strategies remain subject to the new caps on later death.

This change may significantly increase IHT liability for HNW and UHNW individuals with UK-based agricultural assets, family trading companies, or AIM-listed share portfolios.

For expats who own qualifying trading businesses, qualifying agricultural property or business interests that may qualify for relief, it is essential to:

• Review asset eligibility for APR or BPR under the new capped regime, including the new £2.5 million 100% relief allowance and the 50% restriction on AIM shares.
• Audit any lifetime transfers made between 30 October 2024 and 5 April 2026. Anti-forestalling rules mean these may be recalculated against the new caps if the donor dies within seven years of the transfer.
• Restructure Wills to capture the spousal transferability of the £2.5 million allowance. Where the statutory conditions are met, a couple may have up to £5 million of combined 100% APR/BPR allowance between them. The result depends on ownership, qualifying status, the availability and transfer of unused allowance, earlier transfers and the terms of each estate.
• Reassess the benefit of retaining UK-based business interests as part of a cross-border estate, particularly for UHNW expats whose trading businesses or AIM portfolios significantly exceed the £2.5 million threshold.

Structuring Your Inheritance Plan With an Expert

Working with experienced tax advisers is a critical aspect of successful inheritance planning as knowledgeable tax experts are familiar with cross-border tax rules and can help you take advantage of them to reduce your tax liability. They can:

• Assist you in determining your residency and domicile status: Experts can accurately evaluate your residency and domicile status and explain how your home country’s tax laws impact your global wealth. They can also offer advice on whether it’s possible to change your status and minimise inheritance tax.
• Help you identify financial opportunities: Opportunities for lowering inheritance tax depend on various factors, from your residency and domicile status to your connection to the beneficiaries. Tax experts can assess your situation in detail and create a structured plan for tax efficiency.
• Provide advice on cross-border estate planning and wills: Tax experts can offer valuable inheritance tax advice if you hold assets in multiple jurisdictions. They can also help you create or update your will to align with applicable inheritance tax laws and your personal wishes.
• Help coordinate wills across multiple jurisdictions: If you own assets in more than one country, you may benefit from separate wills covering different jurisdictions. A specialist adviser can help ensure these documents work together and don’t accidentally revoke or conflict with one another.
• Ensure law compliance: Knowledgeable tax experts will only suggest inheritance tax planning strategies that comply with all legal requirements in your home and host countries, helping you avoid common pitfalls.