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Should I protect my finances ahead of US and UK elections?

Senior Associate Aidan Grant responds to the concern of a Financial Times’ reader about potential tax changes after the 2024 elections in the UK and US, given their dual residency and high-income status.

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Published 31 January 2024

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“Are there any steps that we should take now to protect our assets? My wife and I both fall into the highest income tax band, and while this money is mostly earned in the UK, we own property in the US and have savings accounts and other investments there.”

Americans commonly seek estate planning guidance from US-based attorneys. While the resulting plans may be tax efficient in the US, there may be potential UK tax pitfalls.

Grant advises caution regarding possible double taxation, suggesting careful tax reporting to claim credits in both countries where possible. Simply paying taxes in both countries as they arise is often the best way to maximize credits and minimize future UK tax liabilities on remittances.

Potential tax changes in both countries could result in wealthy couples becoming exposed to higher levels of taxation upon their deaths. However, leaving wealth either outright or in an appropriate will trust for a surviving spouse’s benefit should remain excellent and highly tax-efficient planning that may outweigh the costs and inconvenience of US probate.

Grant also highlights the complexities that arise if one spouse becomes a significant shareholder in a UK business, as US tax and reporting requirements may apply. He suggests considering tax-efficient wills to defer UK inheritance tax and US estate tax until the surviving spouse’s death.

Grant advises against exceeding the UK inheritance tax allowance with lifetime trusts for UK-domiciled individuals, but suggests exploring options if one spouse is not UK-domiciled. He recommends considering whether to create a trust before the UK election to preserve tax efficiency over non-UK assets and, utilising the larger US estate tax allowance. However, he warns of the need for careful planning to avoid double taxation on the trust’s income and gains.

For more information, please visit our US/UK Tax Advice page and check out our UK/USA podcast series.

This article was first published by the Financial Times on 30 January 2024.

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Shorter Reads

Should I protect my finances ahead of US and UK elections?

Senior Associate Aidan Grant responds to the concern of a Financial Times’ reader about potential tax changes after the 2024 elections in the UK and US, given their dual residency and high-income status.

Published 31 January 2024

Associated sectors / services

Authors

“Are there any steps that we should take now to protect our assets? My wife and I both fall into the highest income tax band, and while this money is mostly earned in the UK, we own property in the US and have savings accounts and other investments there.”

Americans commonly seek estate planning guidance from US-based attorneys. While the resulting plans may be tax efficient in the US, there may be potential UK tax pitfalls.

Grant advises caution regarding possible double taxation, suggesting careful tax reporting to claim credits in both countries where possible. Simply paying taxes in both countries as they arise is often the best way to maximize credits and minimize future UK tax liabilities on remittances.

Potential tax changes in both countries could result in wealthy couples becoming exposed to higher levels of taxation upon their deaths. However, leaving wealth either outright or in an appropriate will trust for a surviving spouse’s benefit should remain excellent and highly tax-efficient planning that may outweigh the costs and inconvenience of US probate.

Grant also highlights the complexities that arise if one spouse becomes a significant shareholder in a UK business, as US tax and reporting requirements may apply. He suggests considering tax-efficient wills to defer UK inheritance tax and US estate tax until the surviving spouse’s death.

Grant advises against exceeding the UK inheritance tax allowance with lifetime trusts for UK-domiciled individuals, but suggests exploring options if one spouse is not UK-domiciled. He recommends considering whether to create a trust before the UK election to preserve tax efficiency over non-UK assets and, utilising the larger US estate tax allowance. However, he warns of the need for careful planning to avoid double taxation on the trust’s income and gains.

For more information, please visit our US/UK Tax Advice page and check out our UK/USA podcast series.

This article was first published by the Financial Times on 30 January 2024.

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