Principles of Investing for American Citizens Living in the UK: Principle One – Create a Financial Plan

Written by Kyle McClellan & Ollie Cutting

“Someone is sitting in the shade today because someone planted a tree a long time ago” ~ Warren Buffett

The first and one of the most important “principles” within this series is devoted to financial planning, which should be considered a universal principle for investors of all creeds. Irrespective of citizenship or residency, identifying your financial goals and quantifying what is required to achieve them can lay the foundations for a successful investment experience. The basics of an effective financial plan should provide you with a roadmap for achieving your goals that account for the idiosyncrasies of your personal circumstances.

Common financial planning goals may include:

1. Purchasing your first property in the UK
2. Retiring at age 50 with an investable asset base that can sustain £100k of spending per annum in retirement  
3. Funding a child or grandchild’s college tuition 
4. Charitable giving to support specific causes or leave a legacy 
5. Shielding offshore investments from inheritance tax in the UK

Although many goals may feel out of reach to begin planning for, they should be identified as soon as possible and woven into the thread of your financial plan to maximise the probability of success. A lack of a goal or moving goal posts almost guarantees failure. To encourage adherence to the plan, long-term goals should be distilled into actionable short-term goals, such as targets for savings and/or investment returns, that can be reviewed and adjusted as your circumstances change over time. This helps to provide an investment strategy with quantifiable targets and helps to determine success by framing performance with an objective benchmark. At MASECO, we distil those short-term goals into a roadmap using a specialist cash flow planning tool, which helps to initially set a portfolio’s direction and monitor its progress over time.

As American citizens in the UK maintain a foothold on both sides of the Atlantic, financial planning opportunities may be available to them that are not available to non-US citizens, which can provide a rare silver lining for transatlantic families. Ensuring your financial plan considers the interplay of those opportunities or the ramifications of decisions in both jurisdictions is, therefore, a crucial determinant of success. Important questions to answer during the financial planning process for Americans may include:

1. Are my taxable assets invested in a location, ownership structure, and strategy that promote optimal tax-efficiency?
2. Have you maximised US Social Security and UK State Pension entitlement?
3. Are allowable pension contributions being maximized in both the US and UK? 
4. Are excess foreign tax credits being used effectively? 
5. Are US education (529) plans structured appropriately for UK residents?
6. For couples with multiple nationalities, are assets being structured in a way to take advantage of opportunities available in both tax jurisdictions?

All of these questions are designed to highlight gaps or inefficiencies in the structure of your investments and can form a basis for addressing issues that improve your bottom line. Although some of these issues may appear intimidating to the untrained eye, they can be solved with thoughtful planning and advice from a financial planner – the most important but challenging part of the planning process is taking the first step. However, it’s a decision your future self will thank you for.

If you would like to discuss your cross-border financial planning needs further, please feel free to reach out to Kyle McClellan or Ollie Cutting from our Private Wealth team.

Please email masecocommunications@masecopw.com to receive a copy of our Principles of Investing whitepaper in advance.

The Legal Stuff

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The views expressed herein do not necessarily reflect the views of MASECO as a whole or any part thereof. All investments involve risk and may lose value. The value of your investment can go down depending upon market conditions and you may not get back the original amount invested. Your capital is always at risk. Information about potential tax benefits is based on our understanding of current tax law and practice and may be subject to change. The levels and bases of, and reliefs from, taxation is subject to change. The tax treatment depends on the individual circumstances of each person and may be subject to change in the future. MASECO Private Wealth is not a tax specialist. We recommend that anyone considering investing seeks their own tax advice.

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