When it comes to planning for a home purchase in the UK, there are many factors and aspects of your financial life to consider. First there are the traditional things to consider:
Clearly defining your personal wealth goals and objectives is the first step towards determining an appropriate investment strategy and asset allocation to suit your needs. The additional value add comes with giving proper consideration as to how to meet your goals in the most tax-efficient and optimal manner. As a US person living in the UK, you want to make sure that you avoid the tax traps that are littered within the investment world to mitigate any overall costs of investing.
Financial planning is often an area that takes a back seat in busy lives. When there is no specific deadline to make a financial decision, it is very easy to say that you will address it in the future when life becomes less hectic. Taking the time to review your financial position, your personal wealth goals and objectives and consider the implications of whether your strategy will appropriately meet those goals can be an important exercise. Ensuring that you have an effective and appropriate strategy will likely afford you future flexibility and peace of mind. Below we discuss the areas that are beneficial to consider and review. A few easy steps can ensure optimal wealth planning strategies.
Many Americans living in the UK are considered to be non-domiciled for UK inheritance tax purposes. Under new rules set to take effect in April this year, a non-domiciled individual becomes deemed domicile for inheritance tax purposes when they have been resident in the UK for more than 15 out of the last 20 years. When an individual is deemed domicile for UK inheritance tax purposes, the UK will generally apply its inheritance tax rules on an individual’s worldwide assets.
As you plan for year-end, one of the important things for US persons living overseas to pay attention to is matching their foreign taxes paid to when the income will be recognised as taxable in the US. This is especially important for those living in the UK as the tax years differ which can result in a timing difference in when taxes are paid. As many already know, the US tax year is based on the calendar year and the UK tax year runs from 6 April to 5 April with taxes due by 31 January of the following year.
Over the last few weeks mutual fund companies have begun publishing their estimates of year end distributions that will be made, mostly in December. As you review income realised to-date throughout the year (either through realised capital gains, dividends or interest), it can be beneficial for a number of reasons to factor in the anticipated distributions for the remainder of the year.
First, if distributions are projected to be quite high and depending on individual circumstances it may make sense to hold off on investing new cash going into a particular fund or to time rebalancing of a portfolio to minimise exposure to the distributions.
The Net Investment Income Tax (NIIT) officially went into effect for the 2013 tax year. So, by now many individuals have had time to become acquainted with it. However, since the statutory threshold amounts by which NIIT applies is not adjusted for inflation, it is likely that with each passing tax year, more and more taxpayers will fall into the NIIT net.
Individual taxpayers are subject to a 3.8% NIIT on the lesser of their net investment income, or the amount by which their Modified Adjusted Gross Income (MAGI) exceeds a certain threshold determined by filing status as outlined below:
Most people are unaware that typically assets held within their Individual Retirement Accounts (IRAs) are protected from creditors, including being shielded from US federal bankruptcy proceedings. Every three years, the level of protection increases with inflation. For 2016, the number is $1,283,02511.
It would be very difficult for the average investor to breach this limit. Why? Because even if the investor has been contributing since IRAs have been available, they would’ve had to maximize funding and had stellar investment performance…both unlikely scenarios. The cap applies not only to IRA, but also to Roth IRA tax-year contributions and earnings on those contributions.
Some never thought the day would arrive, but one of the most contentious presidential elections in history, between Donald Trump and Hillary Clinton, is set to take place tomorrow. Polls indicate a win for Clinton but we will only know the outcome once the votes are cast and results tallied.
Almost everyone worries about money, what the future may hold, and the decisions and choices that they will face along the way; yet few realise that wealth planning is the key to sorting it all out. Everybody needs it, but only a few have unlocked its true value.
For those who have, the equation between the value that they receive from their wealth manager and the fees that they pay needs to make sense. Yet, because the benefits of good advice are often received in the far-off future, it is sometimes easy to miss, or dismiss, the value received along the way. Market noise, emotions and periods of what may seem like inactivity on a wealth manager’s behalf, can also impact on the perception of value. It is often easy to appreciate the value received in the first year, and easy to forget or appreciate the value on an ongoing basis. The wealth planning relationship can be broken down into three key phases of value.