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TOP TIPS – Inheritance and Estate Planning Issues in the US

Never make inheritance the bedrock of your retirement strategy

A Natixis global investor survey carried out in 2017 revealed that 60% of millennials (born between 1980 and 2000) believe part of their retirement income will come from inheritance. **

However, it’s important to remember that when Benjamin Franklin named the two certainties in life (death and taxes) there’s a reason he didn’t mention inheritance and this is why you should never base your financial retirement strategy on the prospect of an inheritance.

If you are relying on parental wealth as a boost to your retirement savings, you would be wise to remember that there are many ways for a family fortune to be wiped out, not least of these being increased life-expectancy, increasing cost of medical and care bills for the elderly and, in some cases, a “let’s spend it all” mentality. Plus, one or indeed both of your parents could remarry late in life and this changes the whole vista for succession.

It is far better idea to plan for your own financial future and retirement by saving early and seeking expert financial advice, but if you must factor inheritance into your long-term strategy, it is advisable to make only a conservative estimate of your future inheritance income.

Consider the cross-border consequences of inheritance

If you are a UK national living in the US you risk falling within both the US estate tax and UK inheritance tax regimes, the same is true if you are a US national living in the UK.

For those resident in the US, UK tax rules can make it extremely problematic to set up a substantial lifetime trust without immediately attracting UK inheritance tax. UK Living Trusts can be similarly problematic from a US tax perspective. It is essential to discuss these important questions with a knowledgeable financial adviser or tax specialist.

When planning to leave an inheritance, prepare early

If financial advice could be boiled down to just one phrase, it might well be this: plan, plan early, then plan some more.

This is true for all stages of adult life. For any person who has assets – and particularly for those in complex cross-border situations and/or with stepchildren or a second spouse – it is even more important to begin the process early to ensure your wealth passes forward as you would like it to.

For anyone who wishes to leave a financial legacy, the first thing to do is to write a legally valid Will that takes into account any pertinent issues such as remarriage; a simple Will is unlikely to last a lifetime in light of divorce and/or remarriage, and the prevalence in modern society of blended and step families.

Whether you are a non-resident alien or resident alien in the US, you should check that your UK-drafted Will is enforceable in the US as there could be complications with how the state rules on distribution if you die while living in the US.

Blacktower in the US

Blacktower (US) LLC works to protect, grow and manage the finances of some of the 1.3 million British expats in the US. Our clients include high net worth workers in the finance, oil, gas and insurance industries and retirees wishing to spend their golden years “across the pond”.

For more information about ensuring your cross-border, wealth, retirement, estate planning, contact us today.

Disclaimer: The provision of information in this communication is not based on your individual circumstances and does not constitute advice.

* Accessed 14-02-20

** Accessed 14-02-20

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