A Battle With The U.K. Bare Trust—Let's Settle This Once And For All!

This presentation is a U.S.-U.K. connected individual focused presentation and is particularly timely in light of the recently effective change to the U.K. tax regime (as of April 6, 2025). There is much attention currently on the U.K. changes and elimination of the remittance based regime and traditional "non-dom" and "excluded property trust" planning. However, there are interesting opportunities available under the U.S.-U.K. Treaty for U.S. persons who are not yet considered U.K. long term residents and thus, not yet U.K. domiciled.

This presentation focuses on the operation of the U.S.-U.K. Estate Tax Treaty, with a particular emphasis on the important exception in the Treaty for a U.S. domiciliary who creates a U.S. trust (with non U.K. assets) prior to becoming U.K. domiciled which is considered a settlement. Where as for many years there was considerable focus on ensuring a trust was a bare trust, this type of settlement, which requires a non U.K. Trustee, with more limited powers to the Settlor than typical for a traditional U.S. revocable trust, takes on new importance to exclude the assets of the trust from U.K. inheritance tax if the settlor becomes U.K. domiciliary after the date it is settled.

The presentation also covers other mismatch areas where the Treaty may not assist, such as charitable gifts to entities which are not both U.S. and U.K. qualified, further increasing the potential benefit of the settlement exception. This presentation will be particularly relevant for attorneys who work with U.S. persons who spend considerable time living or working in the U.K., as well as for U.S. Trustees who may be called upon to serve for a trust that will be treated as a settlement in the U.K.

Audio versions of Beverly Hills Bar Association programs are eligible for Self-Study CLE credit in California. Visit www.bhba.org/podcasts for more information.