I want my US-based son to inherit his father's UK family home: How can I ensure this happens?

Daily Mail​

04-05-2025

Our four-year-old son is autistic. We want to ensure he gets the family house in the future, but do not have the cash flow to pay for the inheritance tax bill.
The house is worth around £1.3million, and the estate also includes a storefront with a flat above it worth £1.1million, and two flats worth £1million combined.
I live with my son in the United States, but he is both a UK and a US citizen.
His father lives in the UK, and the estate is in his mother's name. She is 85 and is currently changing her estate planning.
The shop and flat above it is under a limited company fully owned by my ex's mother.
Does the UK have protections for the disabled in estate planning, so that my son's benefits are safeguarded and that he is properly looked after? The US does, but I'm not sure about the UK.
If I were to die, my son's guardians would be my extended family in the US rather than his father. S.K
Harvey Dorset, of This is Money, replies: As you'll see in the replies below, this is far from being a simple case.
As Geraint Davies discusses, the very fact that two countries are involved, with multiple 'checkpoints', means that there is no clear answer.
On top of this, your son is disabled an therefore needs certain care.
But there are of course options open to you.
Jessica Cook, of AES International, explores how a Vulnerable Person's Trust could be helpful to you to ensuring that your son is looked after in the long term.
This is Money spoke to two financial advisers to find out what your best option is.
Their responses are below, but what is ultimately clear is that it may be difficult to find your way around this without seeking expert advice.
Jessica Cook, private client adviser at AES International, replies: 'It's wonderful to see such careful and forward-looking planning for your son's future.
The UK offers important protections for vulnerable individuals through what's known as a Vulnerable Person's Trust. These trusts are specially designed to protect assets, preserve entitlement to means-tested benefits, and offer favourable inheritance tax (IHT) treatment - all while supporting your child's long-term needs.
A Vulnerable Person's Trust, If structured correctly, avoids the heavy tax charges that usually apply to discretionary trusts. It is also not subject to 10-year anniversary or exit charges. The key is ensuring your son's circumstances meet His Majesty's Revenue and Customs' criteria for special tax treatment.
A person is considered vulnerable if they have a mental health condition under the Mental Health Act 1983 or would qualify for UK benefits such as Personal Independence Payment (PIP), Disability Living Allowance (DLA), or Child Disability Allowance.
You mentioned that your son receives occupational and speech therapy, structured learning activities, and additional support. Although he lives in California and cannot claim UK benefits, this does not automatically rule him out.
Under HMRC guidance, a non-resident can still be treated as vulnerable if they can show they would have qualified had they been living in the UK. Based on the support he receives, and with medical and therapy evidence, it's likely HMRC would accept his eligibility.
There are important tax benefits to setting up a Vulnerable Person's Trust:
• Gifts into the trust are treated as Potentially Exempt Transfers (PETs), avoiding the immediate 20 per cent lifetime tax charge.
• Depending on the amount settled, available nil-rate band, and survival period, there is potential for no IHT to arise, although it's not guaranteed, and taper relief may apply over time.
• As long as the trust mainly benefits your son (with small amounts permitted for others), it keeps its special status.
• On the beneficiary's death, assets in the trust are treated as part of their estate and may attract IHT.
Given your son's dual UK-US citizenship, it's crucial the trust is structured carefully to avoid unexpected US tax or reporting issues. Specialist cross-border advice will be essential.
You also mentioned that part of the estate — the shop and flat above — is held through a limited company.
If the company is actively trading (rather than mainly holding property investments), the shares may qualify for business relief, potentially removing their value from IHT calculations.
However, the family home and additional flats will always remain within the UK IHT net as UK-situs assets. It may be more tax-efficient to place a qualifying business asset into a Vulnerable Person's Trust than the family home, and it would be prudent to seek advice in this area.
If no significant lifetime gifts have recently been made, and unused nil-rate bands from the grandfather's estate are available, these could also significantly reduce the final inheritance tax bill.
Given the estate's size, and the international aspects, I strongly recommend working with a UK solicitor or adviser who specialises in trusts for vulnerable beneficiaries and cross-border planning. Careful steps now can help secure your son's future for life.
Geraint Davies, managing director and financial adviser at Montfort International, replies:
Einstein reputedly said: 'Make things simple, not simpler'. In other words, don't bypass the complex to make it simpler.
Please take professional advice, as the trusts and beneficiaries being based in different countries could create complexity.
There also six known players. A US-based single mother, governed by the tax and financial planning rules and laws of that country; a child of hers (aged under five) who has autism; grandparent of the vulnerable child; his father; the UK-based company which owns some of the property assets; and the family based outside the UK who would be the child's guardian if the mother were to die.
You say estate planning is under way for the grandmother. How co-ordinated are these plans with the overall strategy, and are these plans factoring in the rules of the country where the child and mother live?
For some time now we have used the term 'Fisics' to classify a case like this, standing for 'Financially impacted by some international checkpoints'.
It's clear there are checkpoints everywhere, so you must have all everyone involved on the same page.
Help with financial advice and planning
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> Inheritance tax planning - what you need to know to protect your wealth
If not, then you run the risk of uncoordinated decision-making that could well lead to disastrous consequences.
My first recommendation is a family meeting to discuss what you all want to achieve. This is a priority, especially as the grandmother is currently modifying her estate planning.
You mention you want your only child to get the family home, but don't have the cash flow to pay the inheritance tax bill. You need a strategy - for example, in the UK you can pay over time in annual installments.
There are double taxation treaties between the UK and the US, which may help you avoid having to pay tax in both jurisdictions - but again, advice is essential.
You also asked if the UK has protections for the disabled within estate planning. There are trust options, but that doesn't necessarily mean you are protected from benefits means-testing where applicable. What might well tick the boxes in one country, won't get the same result in the other.
If your son inherited shares in his grandmother's property holding company, it is unclear how these would be treated in the US for tax purposes.
It also depends how willing are all parties are to put their cards on the table. Anyone giving advice on this would need access to the accounts of the company, and other details. This could prove difficult as the parents of the child are no longer together and in different countries.
You must take advice as soon as possible, before the ink dries on the grandmother's estate planning revisions.
All parties must be prepared to modify their wish list based upon the prevailing rules and options, and as circumstances change.