US Federal Estate Tax 2026: The Sunset Cliff
US federal estate tax applies to the worldwide estate of US citizens and US domiciliaries. 2026 exemption: $13,610,000 per individual (approximately). Rate above exemption: 40% flat rate. Portability: a surviving spouse can 'port' the deceased spouse's unused exemption, effectively giving married couples a combined exemption of ~$27.22M. CRITICAL 2026 issue — Sunset provision: the doubled exemption introduced by the Tax Cuts and Jobs Act (TCJA) of 2017 was always set to expire after 31 December 2025. Without Congressional action, the exemption would revert to approximately $6–7M (inflation-adjusted from the pre-TCJA $5M base) from 1 January 2026. As of April 2026: the TCJA sunset has been the subject of major legislative debate. Monitor for any extension or modification. If the exemption falls to ~$6M: significantly more estates become taxable in the US, and the urgency of estate planning increases dramatically. Non-resident aliens (NRAs) in the US: if you are not a US citizen or US domiciliary but own US-sited assets, a much lower $60,000 exemption applies. US real estate, US stocks, and US bank accounts held by NRAs are subject to US estate tax above this threshold. Estate tax treaties: the US has estate tax treaties with only ~15 countries (including UK, France, Germany, Australia, Japan, Canada, Netherlands) — these treaties may prevent double taxation and increase the NRA exemption.
UK Inheritance Tax 2026: Nil-Rate Band, RNRB, and Non-Dom Reform
UK Inheritance Tax (IHT) applies to the worldwide estate of UK-domiciled individuals and to UK-sited assets of non-domiciled individuals. Key rates and bands (2026): Nil-Rate Band (NRB): £325,000 — no IHT on estate up to this amount. Rate above NRB: 40%. Residence Nil-Rate Band (RNRB): additional £175,000 exemption for estates where the family home passes to direct descendants (children, grandchildren). Combined max exemption: £500,000 per person (NRB + RNRB). For married couples: up to £1,000,000 combined (with full portability). Reduced rate of 36%: if 10%+ of the estate (net of exemptions) is left to charity. Business Property Relief (BPR): 100% exemption for qualifying business property (AIM-listed shares, unquoted businesses, business assets used in trade). Agricultural Property Relief (APR): 100% exemption for qualifying agricultural property in use for agriculture. APR reform from April 2026: the 100% APR and BPR relief is capped at £1M combined per estate from April 2026 — a major change affecting agricultural landowners and business owners. UK non-dom IHT reform from April 2025 (see non-dom guide): long-term residents (10+ of prior 20 years) are now 'long-term residents' subject to worldwide IHT. Pre-April 2025 excluded property trusts: grandfathered — trust assets retain excluded property status even after the settlor becomes an LTR.
Countries with No Inheritance Tax: The Zero-IHT World
A growing list of developed economies have abolished inheritance or estate taxes — often citing double taxation concerns and capital flight. Countries with no IHT (as of 2026): Australia: abolished federal estate duty in 1979; no state-level inheritance taxes. Canada: no federal or provincial inheritance tax; estates pay capital gains tax at death (deemed disposition) but no separate death duty. Sweden: abolished Arvsskatt in 2005. Norway: abolished Arveavgift in 2014. Singapore: abolished estate duty in 2008. Hong Kong: abolished estate duty in 2006. New Zealand: no estate or gift duty. UAE: no inheritance tax (assets may be subject to Islamic succession rules under UAE law for Muslims). Portugal: no IHT between direct family members (spouses, children, parents) — Imposto do Selo 10% applies only to non-family beneficiaries. Most Middle Eastern countries: no inheritance tax on personal assets. Why this matters for estate planning: many wealthy individuals deliberately choose to be domiciled in zero-IHT jurisdictions at death (Australia, Canada, UAE, Singapore). For a UK domiciliary with a £10M estate: UK IHT at 40% = £3.7M on the amount above £1M. Changing domicile to Australia or Singapore eliminates this liability — but requires genuine domicile change (a complex legal concept distinct from tax residency).
European IHT: France, Germany, and Japan's High Rates
France (Droits de Succession): France has one of the world's most progressive inheritance tax systems based on the relationship between deceased and beneficiary. Between spouses / PACS partners: fully exempt (since 2007). Children and grandchildren: progressive rates — 5% (up to €8,072) to 45% (above €1,805,677) with a €100,000 per-child tax-free allowance per parent. Siblings: 35%/45% above a small exemption. Non-relatives: 60% flat rate (with minimal €1,594 exemption). Germany (Erbschaftsteuer): similar structure. Between spouses: €500,000 exemption; then 7%–30% progressive. Children: €400,000 exemption each; then 7%–30% progressive. Non-family: €20,000 exemption; 30%–50% rate. Business exemptions: 85% or 100% relief for qualifying business property transferred on death (Betriebsvermögen exemption) — subject to wage floor conditions maintained for 5 years. Japan (Sozoku-zei): Japan has one of the world's highest inheritance tax rates: top rate 55% on amounts above ¥600M (~$4M). Basic deduction: ¥30M + (¥6M × number of legal heirs). Spousal deduction: up to ¥160M or half the estate. Japan's IHT applies to worldwide assets of Japanese domiciliaries and to Japanese-sited assets of non-residents. Non-residents receive a lower exemption. The Japan exit from residency IHT tail: if you have been a Japanese resident for 10 of the prior 15 years, Japanese IHT applies to your worldwide assets for 3 years after leaving Japan.
Cross-Border Estate Planning: Double Taxation and Domicile
When a deceased person has assets in multiple countries, multiple countries may claim the right to tax the estate. Example: a UK citizen domiciled in the UK with US real estate and French bank accounts: UK IHT: applies to worldwide estate (UK domicile → worldwide scope). US estate tax: applies to US-sited assets (US real property, US stocks). France: may apply to French-sited assets. Without treaty protection: the same assets could be taxed by multiple countries simultaneously. Prevention: Estate tax treaties: the US has bilateral estate tax treaties with ~15 countries. The UK-US estate tax treaty provides relief through the credit method — whichever country taxes first gets the primary right; the other gives a credit. UK-France: no bilateral estate tax treaty — potential double taxation on French assets in a UK estate. Domicile planning: domicile (the legal concept of 'permanent home intention') determines which country has worldwide succession tax rights. Changing domicile is harder than changing tax residency — you must genuinely intend to remain in the new country permanently. Proper legal advice (a probate solicitor in both countries) is required for cross-border estates. EU Succession Regulation (Brussels IV): allows EU residents to elect their nationality's law to govern their estate succession — not the country of habitual residence. Relevant for estate distribution (who inherits what) but does not determine succession tax — that is still governed by each country's tax law and bilateral treaties.