Planning to move to the US? Here are your 3 Financial Planning Priorities

In 1999, a multi-million-dollar mission to Mars failed spectacularly after a mix up between NASA’s navigation team and the manufacturers threw it off course. NASA had used the metric system for its calculations, whist the manufacturer, Lockheed Martin, provided crucial data in feet and inches.

This failed mission shows how costly it can be to embark on an important endeavour based on incorrect assumptions and misconstrued data – and highlights the importance of robust processes and planning to ensure that nothing is lost in translation.

British expats moving to the United States face an array of complex tax rules and requirements from the IRS in respect of their ISAs and investments, and their pensions and other assets, so it’s crucial that no assumptions are made, and nothing is lost in translation if they are to successfully navigate their new financial landscape and tax regime.

We’ve been helping clients achieve their financial goals worldwide since 2004, and whilst there are specific challenges for British expatriates moving to any new country abroad, the US presents some of the most testing. We help clients manage these challenges as our dual UK-and-US qualifications mean that we understand the specific requirements on both sides of the Atlantic.

We often find that when people move to the US for work or to retire, by and large they believe things will work the same as they do in the UK. This is a dangerous and incorrect assumption – so we’ve highlighted below three key financial priorities to focus on before you move to the US or as soon after you arrive as possible.

1. Review and optimise your UK pensions >>

2. Avoid costly PFIC (Passive Foreign Investment Company) pitfalls >>

3. Meeting FATCA and FBAR obligations >>

Another critical area to address is the management of Passive Foreign Investment Company (PFICs). While tax-efficient in the UK, non-US-based investments such as UK ISAs are often classified as PFICs under US tax law, leading to punitive taxation and complex reporting.

There are different methods of taxing PFICs, but the default method, which considers excess distributions, could see you charged the highest federal rate of income tax regardless of your individual tax bracket (37% for the current financial year). In addition, reporting your investment in a PFIC is a lengthy process with each foreign fund in the account requiring a separate declaration. The IRS estimates the reporting form can take more than 40 hours to complete.

Your Challenge

• Tax implications: PFICs can result in high tax rates and complicated reporting requirements. The lack of ongoing advice from UK-based financial advisors may exacerbate the situation, leaving you with investments that could incur substantial penalties if not managed correctly.
• Compliance issues: Failure to comply with reporting obligations accurately if you hold a PFIC as a US resident, can lead to significant penalties and interest charges from the IRS.

Priority Action

• Review and restructure: Analyse your investment portfolio to minimise or eliminate PFIC exposure. With the help of a dual-qualified advisor, transition towards US-compliant investment vehicles to reduce your tax liability and your reporting requirements.

My dual qualifications and dual licence allow me to navigate the complexities of both UK and US financial planning, providing tailored advice that addresses the unique challenges faced by British executive expats living and working in the US; from optimising the value of your pensions and retirement assets to managing currency risks and ensuring that you don’t fall foul of potentially costly mistakes leaving you exposed to unnecessary taxes and punitive penalties.

I work closely with my clients to navigate the complexities of transatlantic financial planning, optimising their pensions and investments. My comprehensive approach ensures that all aspects of your financial landscape are considered, allowing for integrated and effective planning across both the UK and US jurisdictions.

If you’d like to schedule an initial consultation with me to discuss your financial planning, wealth management or pensions please get in touch today.

Claire Taylor ALIBF CPFA
UK Chartered International Financial Planner
As a dual-qualified and dual-licenced Chartered Financial Planner, I offer tailored financial planning services to US-connected private clients. I help them understand their options, optimise their UK pensions and investments, and create a robust financial plan for their future lives. If you want to discuss your financial planning needs, please contact me or schedule an initial, no-obligation meeting through my online calendar.
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This communication is for information purposes only and does not constitute financial, legal, or tax advice. Please schedule a meeting to receive advice on financial planning, wealth management, and pension solutions.