What is Excluded Property in Probate?
03 April 2019
Excluded property in Probate refers to any property that won't be liable for UK Inheritance Tax. Certain property situated outside the United Kingdom will be excluded property if the owner of this property was also domiciled outside the United Kingdom at the time of their death.
In order to establish if a property is an excluded property, and therefore exempt from Inheritance Tax, you will first need to establish if the deceased was considered to be domiciled in the UK for Inheritance Tax Purposes. This is important, as a UK domiciled individual is subject to UK Inheritance Tax on their worldwide assets, whereas a non-UK domiciled individual is subject to UK Inheritance Tax on their UK assets only.
Establishing Domicile for Probate Purposes
There are three types of legal domicile which can apply to individuals.
1. Domicile of Origin
This is acquired at birth and is deemed to be the same as the domicile of your father (if your parents are married) or the same as your mother (if your parents are un-married). Domicile of origin is often mistakenly assumed to simply follow the country of our birth, however, consideration needs to also be given to where the parents are considered domiciled.
2. Domicile of dependency
The domicile of a minor follows that of the person upon whom they are dependant. Therefore domicile of dependency will only apply to minors under 16 and individuals of unsound mind.
3. Domicile of choice
There are circumstances where an individual can acquire a domicile of choice. Generally, an individual needs to physically move to another country with the intention of permanently or indefinitely remaining there. To establish a domicile of choice the individual's personal circumstances will be considered and evidence will be required
So Which Property Qualifies as Excluded Property?
As stated above, if a person is deemed to be domiciled in the UK then Inheritance Tax will be payable on their worldwide assets and no property will be considered exempt for Inheritance tax purposes.
However, if a deceased person is deemed to be not domiciled in the UK for Inheritance Tax purposes, the following are likely to be considered as excluded property and therefore be exempt from Inheritance Tax:
- Foreign Currency Bank accounts
- Property situated outside of the UK
- Property held in trust that is situated outside the UK unless the settlor was domiciled in the UK
- British Government Securities, known as Gilts - these can also be referred to as 'free of tax to residents abroad' Gilts (FORTA)
- Government sponsored savings schemes, where the owner is domiciled in the Channel Islands or the Isle of Man. These can include War Savings Certificates, National Savings Certificates, including Ulster Savings Certificates; but not National Savings Income Bonds, Premium Savings Bonds, Deposits with National Savings Bank or with a Trustee Savings Bank
- Foreign Pensions relating to service in certain foreign colonial territories
Get Help with Excluded Property in Probate
If you're not sure whether or not certain property qualifies as excluded property in Probate, our Probate Specialists can help you. With our Probate Complete Service, we can take care of all of the legal, tax and administrative work that Probate entails, including applying all available tax reliefs and identifying excluded property.