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Planning for your UK to USA Big Leap

1. Pensions and retirement plans

Your UK and EU-based pensions and retirement plans are important; however, you need to be aware of how these will be treated in the US as they can attract considerable tax.

Pension transfers and retirement planning are perhaps the most difficult and important considerations for UK expats in the US. Financial advice from a specialist is essential in this regard.

2. Review your financial products

Your mortgage, insurance and other financial products may become invalidated if you move to the US without informing your providers. Check that you are not bound by any residency conditions and research new options when necessary – it may be easier to buy certain products in the US following your move.

3. Review and report your cross-border assets

If your US and UK bank accounts are not properly structured they can be difficult to maintain and may even become a burden when it comes to tax reporting. Cross-border banking accounts can be a convenience if you move regularly between the UK and the USA.

If you have no immediate need of UK banking services, consider consolidating your accounts to ensure you meet all FBAR (Foreign Bank Account Report) reporting requirements. British expats in the US should be aware that failure to report foreign assets above the required threshold can attract stiff penalties. If the value of your foreign assets is more than $50,000 at the end of the financial year or $75,000 during any time of the year (double this for married couples) you must report these via Form 8938.

4. Are your investments USA-friendly?

Not all UK investments will stand up to scrutiny when making the switch to the US. For example, the IRS views ISAs as Passive Foreign Investment Companies (PFICs) and subjects them to the highest possible level of tax. You should also consider whether your UK investments meet the stringent IRS reporting requirements.

It is possible to retain assets in the UK, but you should take financial advice as to which will not be treated as PFICs and how you could better use position your wealth for investment purposes.

5. Consider your Will

Estate and Inheritance Tax planning are the heart of many wealth management strategies, but it can be a particularly confusing process when it is attempted across borders for estates with assets in multiple jurisdictions.. The power of attorney (POA) and probate legal systems of the US and UK work very differently, so it’s important that your Will or Wills recognise these differences and do not contradict or invalidate each other. You should take advice in this regard in order to protect the interests of your family and beneficiaries.

Likewise, estate taxes and inheritance tax differ, and in the US this may also be complicated by the various state treatments. You should examine your residency and domicile status and your estate’s possible qualification for the nil-rate and nil-rate residency bands. Thankfully the UK/US DTT (double tax treaty) means that double taxation is generally avoided, but it pays to check and if you are uncertain you should seek international financial advice on estate planning.

6. Review your trusts

Make sure you fully understand the IRS reporting requirements and tax treatment of any UK trust of which you are a trustee or beneficiary. Failure to take heed of the rules could result in considerable fines and penalties. There are ways to structure trusts appropriately, however, if you are a trustee of a UK trust you may have to resign your position before moving to the US.

7. Your non-US property

It is understandable that you might want to retain an interest in your UK or other non-US property around the world and you may choose to receive an income from your property by renting it out. However, you will need to pay tax to HMRC on UK rental income as well as declaring the income on your US tax return (the US/UK DTT allows you to claim foreign tax credits to prevent you from paying tax twice). You must also be prepared to pay capital gains on any non-US property you sell while residing in the US.

Blacktower, for cross-border financial advice in the US

Blacktower Financial Management (US) LLC can help you negotiate all the important questions so that your financial and cross-border tax planning is optimised towards your goals.

We are a US-based financial advice firm with a distinctly British edge and specialise in helping cross-border clients structure their finances in the most beneficial way. Talk to us today.

This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.

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