Inheritance from the USA is never a straightforward process. If you’re a UK resident and you inherit a US Individual Retirement Account (IRA), there can be US and UK tax obligations. Claiming the assets can also be fraught with difficulties and complications, including UK Medallion Guarantee Stamps, notarization and certified documents. Additional special tax forms may be required.
Inherited IRAs for American expats or non-US connected can be complicated with paperwork, a lack of a US tax code, or the need to get suitable paperwork. Also, as a non-resident, having an address outside America can create complications as a provider may have policies not to want to deal with you. Here’s a guide to US Inheritance in the UK, with the certification processes explained below.
Medallion Guarantee Stamps in the UK
Medallion Guarantee Stamps are an American financial service initiative that verifies the signature of a person transferring securities – such as stock or bond ownership, usually by handwriting on a document. When doing so, the party receiving the securities asks the signer to take it to a participating Medallion Guarantee agent, who provides a stamp of approval. It is typically required for a person or entity to transfer physical stock certificates or other securities.
Medallion Guarantee Stamps and UK Inheritance
If you live in the UK, have inherited property in the United States, and need to sell it, you might be asked to show a Medallion Guarantee Stamp where you transfer your U.S.-based securities. This is how it would generally work in the estate context:
- Transfer of Ownership of US Securities: If you inherit securities – stocks, bonds or mutual funds – of a US estate and want to transfer these assets into your name, the financial institution executing the transfer will require a Medallion Guarantee Stamp.
Unfortunately, getting a Medallion Guarantee Stamp from the UK is not easy. This is because an acknowledged third party usually acknowledges the reliability of information/documents, and such services are very rarely available outside the US. Resources to generate the acknowledgement are limited to a few local financial institutions and some international operations of US-based banks that may do it for your clients. You might have to:
- Contact U.S. Banks with UK Branches: Banks with branches in the United Kingdom often provide this service to their depositors.
- International Medallion Guarantee Providers: A handful of International financial services companies may offer Medallion Guarantees as a service for a fee but it could be limited to certain countries as well as more costly.
- Come to the US: At the very end, you might just have to travel to the US to go see a financial institution that will stamp the form.
What to Do if You Need a Medallion Guarantee in the UK
The Medallion Signature Guarantee Website (“MSG Website”) contains a searchable database of institutions that can provide these services. Below is a list of institutions that provide UK Medallion Signature as of July 2024.
PARTICIPANT | CITY | STATE/PROVINCE | ZIP/POSTAL CODE |
|---|---|---|---|
| FRASER AND FRASER | LONDON | UK | EC1N8EH |
| IWC ESTATE PLANNING & MANAGEMENT LTD | BRAINTREE ESSEX | UK | CM79AE |
| JPMORGAN CHASE BANK, N.A. | BOURNEMOUTH DORSET | UK | BH88UA |
| JPMORGAN CHASE BANK, N.A. | LONDON | UK | EC2V7RF |
| JPMORGAN CHASE BANK, N.A. | BOURNEMOUTH DORSET | UK | BH77DA |
| LEK SECURITIES CORPORATION (closing down) | LONDON | UK | EC2M4QP |
| LESTER ALDRIDGE LLP | BOURNEMOUTH DORSET | UK | BH88EX |
| MISHCON DE REYA LLP | LONDON | UK | WC2B6AH |
| SHARE DATA LIMITED | HORSHAM WEST SUSSEX | UK | RH121NR |
| THE BANK OF NEW YORK MELLON | MANCHESTER | UK | M11RN |
UK Equivalents or Alternatives to Medallion Guarantee Stamps
Occasionally, it’s impossible to arrange a Medallion Guarantee. If that’s the case, you can discuss alternatives with the U.S. custodian of the securities. Some U.S. financial institutions may accept another type of certification, such as notarised signature or a letter of authority (but that will depend on the institution’s rules). We suggest contacting them to see if they would accept notarised documents as an alternative to Medallion Guarantee Stamp. Notoriased can be found at https://www.facultyoffice.org.uk/notaries/find-a-notary/.
How are withdrawals from IRA taxed in the UK?
The key point about HMRC taxation relates to whether it’s a lump sum or regular withdrawal.
- Regular withdrawals from an Inherited IRA (anything with a pattern in it), including RMD’s are considered by HMRC are UK taxable income. The UK taxman has the primary right to charge taxes. You can get a US foreign tax credit for anything paid in the UK under Article 24 of the US-UK tax treaty. To meet US tax year timelines and pay HMRC before 31 December in the appropriate tax. This is critical, because once the filing is done because excess foreign tax credit can be used for the previous year in the USA. A self-assessment return will be needed as this income is not taxed through PAYE so will need to declared and with HMRC by 31 January, related to the tax year ending the previous April.
- Lump Sum (Irregular) Withdrawals: There is no legislative definition of a Lump Sum, but HMRC rules say these are any non-periodic pension payment. That is, any non-regular payment that decreases the value of the remaining pension pot after such payment is made. The IRS regards lump sum as the whole (ie100%) of the amount. Article 17(2) of the UK/USA DTA provides the US with the exclusive right to tax any Lump Sum payment made from a US sourced pension scheme (including IRAs) and not the UK tax authorities. There is a saving directive clause, which allows the resident tax authority to override another treaty clause, in the Double Taxation Agreement, but this is not usually applied by HMRC as the treaty overrides domestic taxation law.
- Declare interest in the UK Self Assessment form: Any interest you earn inside the IRA should be reported on self-assessment. Report the interest (converted to sterling) as foreign interest on the SA106 foreign page. If filing online, answer yes to having foreign income and enter the amount in the further boxes that are shown, entering it under interest.
What is a W8BEN form in the UK? Do I need one as a UK Person?
If you are in the UK and need a Medallion Guarantee for a transaction involving U.S. or Canadian securities, you may need to:
- Contact the U.S. or Canadian financial institution involved in the transaction to see if they have specific instructions or alternative requirements for UK residents.
- Travel to a U.S. or Canadian bank that offers the Medallion Guarantee service.
- Consult with a UK financial advisor or legal professional who specializes in international transactions for guidance on how to proceed.
US Taxes and W8 BEN form
W-8 BEN is used when requested by the withholding agent or payer whether or not you are claiming a reduced rate of, or exemption from, withholding tax. The W-8BEN is an Internal Revenue Service (IRS) mandated form to collect correct Nonresident Alien (NRA) taxpayer information for individuals for reporting purposes and to document their status for tax reporting purposes. Individuals complete W8 BEN. Entities (or non-natural persons) must use Form W-8BEN-E.
The W-8BEN form lets you benefit from the US Internal Revenue Service (IRS) treaty rate with the UK. This lowers the withholding tax for qualifying dividends and interest from US shares from 30% to 15%.
The form can be downloaded from https://www.irs.gov/pub/irs-pdf/fw8ben.pdf and https://www.irs.gov/pub/irs-pdf/fw8bene.pdf.
Financial advice on what to do with an inheritance from the USA
An inheritance from the USA can be life-changing, give financial security, or be a pleasant surprise. It raises many important questions. Where should the money go? How should the money be invested? Some questions cry for the help of the professionals. Are you aware of all of the complexities that inheriting funds from the USA entails? We are very good at helping our clients understand all of the details. It would be best if you had the benefit of knowing what to do with the funds, and Edale can assist you in accomplishing your goals for your inherited money. We will help you get the funds and invest to achieve your financial goals. Call us to have a US inheritance conversation and learn how you can go about achieving the most for your inherited funds.