US fosters wealth creation through favorable inheritance and estate taxes, according to UHY study
New York, NY (PRWEB) April 07, 2014 -- A new study, recently conducted by UHY International, found that “Old” world economies charge higher inheritance and estate taxes than “New” world economies.
The study looked at inheritance and estate tax rates in 23 major economies around the world, measuring the amount of inheritance tax paid on estates of individuals living in those countries. Generally countries do not access a transfer tax on estates passing from a deceased spouse to the surviving one. The level at which inheritance tax thresholds are set is a crucial issue for middle class families; therefore, if exemptions or thresholds are not adjusted in line with inflation it can mean that taxes that were originally designed to apply only to the wealthy will start to affect a larger portion of the population.
By contrast, in the UK, the inheritance tax threshold has been frozen at £325,000 (US$ 544,862) and is expected to remain at the level until at least 5 April 2018. This is actually below the average London house price of £409,881 (US$686,058), and not far above the UK average house price of £250,000 (US$418,450).
The US, on the other hand, provides a $5,340,000 exemption before any taxes are assessed and is adjusted for inflation annually. The study found that the UK and Ireland impose the highest taxes on inheritances of all major economies, with the UK Government taking 25.8% from the estate of an individual passing an estate worth $3m to their heirs, and Ireland 26%.*
“With the current high threshold for the US federal estate taxes, the great majority of estates will escape such taxation but could be subject to state estate taxes.” said Joseph Falanga, partner and member of the Private Client Services Group at UHY LLP, a US member of UHY International.
“State level taxes are another matter, and while a majority of the states do not impose an estate tax, many retirees consider the existence of such taxes when selecting a retirement location. Certain states, such as Florida does not impose a state income tax to help increase their attractiveness when consideration of such taxes is part of their analysis. With the anti-tax movement continuing to gain ground in the US, we may well see more states increasing their exemption or repealing their estate taxes. Several major developed and emerging economies including: Australia, New Zealand, Israel, India and Russia have repealed inheritance taxes in a bid to encourage more wealth creation and transmission.” said Falanga.
Ladislav Hornan, Chairman of UHY International adds “In established European economies, by contrast, Governments are becoming increasingly reliant on the substantial income streams generated by inheritance tax. It can be seen as a way of creating tax revenues from aging populations as retirees frequently have lower levels of taxable income, but substantial assets such as mortgage-free homes.”
“In many countries where there is less bank financing available, an inheritance is often a crucial source of funding a new business. Also with low or no estate taxes, the family business can succeed to the next generations. Otherwise, the business may have to be sold to pay the taxes if not planned for. Emerging markets economies, with their much more youthful populations, have no pressing demographic reason to need an inheritance tax.”
*in the US, 14 out of 50 states impose a state-level estate tax, ranging from 12% to 16%, with tax free allowances from $675,000 to a high of $5.25 Million. A federal estate tax applies from $5,340,000 million. UK figures assume doubling up of the £325,000 threshold when the deceased has survived their spouse or civil partner. Where this does not apply e.g. because the individual has never been married, the tax take would be 32.9% on an estate of US$3m.
(See attached chart)
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About UHY LLP
UHY LLP, a licensed CPA firm, provides audit and other attest services to public and private companies. UHY Advisors provides tax and consulting services to a variety of sectors. UHY Advisors FLVS provides forensic, valuation, intellectual property, electronic discovery and international arbitration services to law firms and their clients. Many of these services grew from client business needs and their requests for assistance in a variety of areas of expertise.
UHY LLP, operating in an alternative practice structure with UHY Advisors, forms one of the largest professional services firms in the US. While that scale might provide confidence for some clients, others tell us our greatest value is the way we bring these resources to bear to help address today’s evolving business challenges. It’s a philosophy we call “The Next Level of Service”. To learn more visit http://www.uhy-us.com.
All of the above entities are members of UHY International, a global network of independent professional services firms that provide audit, tax and consulting services around the world. UHY International member firms comprise one of the top international accounting networks in the world. As a member firm, we provide our clients with resources in business centers strategically located around the globe. We are an active member in this organization with significant participation that brings the power of an international network to bear for our clients.
UHY LLP is a licensed independent CPA firm that performs attest services in an alternative practice structure with UHY Advisors, Inc. and its subsidiary entities. UHY Advisors, Inc. provides tax and business consulting services through wholly owned subsidiary entities that operate under the name of “UHY Advisors.” UHY Advisors, Inc. and its subsidiary entities are not licensed CPA firms. UHY LLP and UHY Advisors, Inc. are U.S. members of Urbach Hacker Young International Limited, a UK company, and form part of the international UHY network of legally independent accounting and consulting firms. “UHY” is the brand name for the UHY international network. Any services described herein are provided by UHY LLP and/or UHY Advisors (as the case may be) and not by UHY or any other member firm of UHY. Neither UHY nor any member of UHY has any liability for services provided by other members.
Shannon Gnesda, UHY LLP, +1 5868432637, [email protected]
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