Claiming an Overseas Inheritance: A Guide to Currency Exchange

If you’re the recipient of an inheritance from someone who lives overseas, you may not be sure of how to claim your windfall or what your responsibilities are as a recipient.

This article explains how an inheritance from overseas works – from making sure it’s legitimate to knowing what assets are liable to inheritance tax and how to repatriate any funds you may have inherited back to the UK as cost effectively as possible.

Make sure the inheritance is legitimate

It’s a sad truth but there are a lot of scammers out there offering false inheritances as a pretence to defraud unsuspecting victims. These approaches usually come via email, text message or phone call and are elaborate, well practised and often convincing involving lots of people, professional looking websites and official documentation.

A simple example could be a lawyer calling to let you know of an overseas windfall from distant, unknown relative with no immediate heirs and you’ve been tracked down by professional inheritance hunters. Eventually you’ll need to provide some of your personal details – from name and address to bank details – to advance the claim which exposes you to identity theft, or you may be asked to make an admin or tax payment to secure the inheritance, neither of which you’ll ever see again.

Bear in mind it’s more likely than not that any surprise inheritance that lands in your lap isn’t legitimate, but there are some simple steps you can take to verify any offer you may receive:

• Check any written communications for spelling, grammar and syntax – scam emails are often rife with them and poorly or generically written, for example not addressing you by name.
• Don’t believe the sender email address, even if it looks legitimate as it’s easy to fake the ‘from’ field.
• Don’t click on or open any links or attachments – if you want to check a website address, enter it manually into your web browser.
• There should be contact details you can check and verify – in particular a phone number, but keep your guard up if you do speak to someone as it could just be another step in the scam.
• Google all the email details to try and verify the legitimacy of any contact details, people and businesses named to see if anyone has flagged them as fraudulent.
• Legitimate professionals such as solicitors and barristers will be registered with the relevant bodies like the Solicitors Regulation Authority (SRA) or the Barristers’ Register, so check to see if they’re there.

If you do get a scam email, you can report it to phishing@hmrc.gov.uk. If you think you may have fallen foul of a scam, report it immediately to Cifas, the UK fraud prevention service, to limit any damage that may be done to your finances and credit rating from identity theft.

Do you have to pay inheritance tax?

It depends on where the inheritance itself is coming from. The benefactor may have lived overseas but that doesn’t necessarily mean all their assets were also overseas – and that will impact what is and isn’t taxable.

Essentially, only assets held in the UK are subject to inheritance tax. So if you’ve inherited a house in Spain it’s not taxable, but if you’ve inherited a house in the UK from someone living in Spain, that is taxable – it’s what’s called an excluded asset. Other excluded assets include:

• Foreign currency bank and Post Office accounts
• Pensions derived from overseas
• Holdings in authorised unit trusts and open-ended investment companies

It’s worth noting that different rules apply for trust assets, government gilts and members of visiting armed forces. The Inheritance tax and probate helpline should be able to help if you’re not sure.

It’s also important to know that your benefactor was officially domiciled in the country they lived in, and that they’d been there long enough. If they lived in the UK for 15 of the last 20 years or had their permanent home here at any point in the last three years of their life, HMRC will treat them as domiciled here as well.

Lastly, if you inherit settled assets located outside the UK but which were placed into the trust by your benefactor when they too lived in the UK, they’ll also be subject to inheritance tax.

What to do if you’re double taxed

There’s a chance you may be taxed on assets from your inheritance both in the UK and the country where your benefactor lived. Happily, the UK has double taxation treaties (agreements) in place with several countries to stop this happening or repatriate your money if it already has.

For inheritance tax, the UK has double taxation treaties in place with the Republic of Ireland, South Africa, USA, the Netherlands, Sweden and Switzerland. There are similar if slightly older agreements also in place with France, Italy, India and Pakistan.

If you’re inheritance isn’t coming from a country with which the UK has a double taxation treaty in place, you may still be able to get Unilateral Relief.

Get the right help

As you can tell, it’s not always a simple process to collect a foreign inheritance and so it’s important to get the right help and advice. Ensuring you meet but don’t exceed your tax obligations and that you know what paperwork needs to be completed requires the help of a legal specialist in overseas inheritance matters. If you’re using a UK lawyer, make sure they’re registered with the UK Law Society and know the tax laws for the country your inheritance is coming from.

Time to bring your inheritance back to the UK

With the admin sorted and the tax status confirmed and any costs paid, it’s time to think about bringing your money back to the UK. You can obviously do this with an international bank transfer, but the elevated exchange rates and fees mean you’ll end up with less of your inheritance than you might expect.

You should be able to engage a currency specialist like Clear Currency to help navigate the pitfalls of moving significant amounts of money internationally. Signing up for an account comes with zero obligations and we’ll help choose the best option for your circumstances to maximise the money you get. That means a transparent process, clear identifiable fees and the best exchange rate available based on the mid market rate, as well as consulting services should you want to discuss anything along the way. Here’s how it works:

1. Sign up to Clear Currency

Complete a quick online signup form telling us what your needs are and we’ll open an account for you and assign a dedicated foreign exchange specialist from our team.

2. Set your rate

A member of the Clear team will walk you through how the exchange process works, answer your questions and discuss how best to meet your needs and get the best rates for the currency you’re receiving. You can do this over the phone or via your online Clear Currency account.

3. Get your funds transferred

Once you’re happy with the exchange rate and quote, we’ll provide you with the details of the Clear Currency account for you to have the foreign currency you‘ve inherited transferred to.

4. Access your new currency

We send the converted pounds to the UK account you nominate, which usually arrives the same day – and then send you an email confirming everything.

5. Enjoy your inheritance

With the money in your account you’re free to access and spend your inheritance.

What’s the difference between a bank, a broker and Clear Currency?

With a bank you get:

• A poor, uncompetitive exchange rate
• No guidance on when or how is best to exchange your currency
• No customer service or follow up

With a broker you get:

• Changing exchange rates that can be misleading and unclear
• Guidance that’s often biased as it’s target driven and seldom whole of market
• Poor or no customer service or follow up

With Clear Currency you get:

• Transparency on exchange rates and the most competitive in the market
• Guidance and support every step of the way backed by partnerships with industry bodies like the Alliance of Property Owners
• Expert advisers with huge banking experience to draw from
• One to one customer service with phone support and a clear, easy to use dedicated platform.