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Specialism: Financial Advisory & UHNW Services Family Wealth Advisory
Company: MASECO Private Wealth
Location: London, England
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Average client size: Under £5 million
Fixed fee offering: Yes
Number of offices globally: 1-5
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Advising US citizens living in London
I was introduced to a couple by an accountant who also specialises in helping US citizens resident in the UK.
Their circumstances: Late 50s, Married, Residents in the UK for 13 years. Had built up significant savings both in the US and the UK. Two children in their early 20s
Their assets: UK taxable account, UK ISAs, UK pensions, US taxable account, US IRA, US 401k
Their goals: Become UK and US tax compliant, Make sure their retirement is fully funded, Inheritance tax planning
Our solutions: To become UK and US tax streamlined: The UK and US taxable accounts were invested in funds, which were taxed at punitive rates in the opposite jurisdiction. The accounts were liquidated and moved to a joint taxable account in the US where we invested in US mutual funds with UK reporting status, which meant less tax in both the US and the UK. The ISAs are “look through” vehicles from a US tax standpoint, which means that the underlying investments are taxed as if the ISA does not exist. The underlying funds were high in tax, so they were liquidated and the proceeds transferred into the above mentioned account. Part of the 401k was funded while they lived in the UK, so this portion was transferred to a ‘Roth IRA’ (similar to an ISA) and the US tax settled with “Foreign Tax Credit”, which would have otherwise lapsed saving a lot of tax for the clients since the money moved from ‘pre-tax’ to ‘post tax’ accounts with no cash paid. The UK pensions were moved to a SIPP which held the investments with a US custodian reducing their annual reporting burden.
To make sure their retirement is fully funded: We modelled out their financial future and stress tested for several scenarios including: higher inflation, higher expenditure, lower investment return, market corrections and unforeseen lump sum expenditure and could confirm that they were in very good financial shape. Once we had confirmed that their required rate of return to meet their primary goals was low (and knew their time scale and propensity for risk) we could have a productive talk about the asset allocation for their different portfolios and talk about volatility risk vs. inflation risk.
Inheritance tax planning: They confirmed that they planned to remain in the UK, so we established an Excluded Property Trust for them to protect their liquid and offshore assets against UK inheritance taxes without restricting the clients’ access to the funds. For their house in London we bought a last to die life insurance equivalent to the current inheritance tax liability as this is a good way to protect assets that cannot be gifted, or protected through a trust or other legal entity. Even though their combined assets were below US$22 million, and they did not have a US inheritance tax liability at the moment, we moved part of the assets to a trust that qualified as a completed gift in case the high inheritance tax/ ‘lifetime gifting’ allowance in the US is reduced in the future.