Observed trends and general considerations
In recent years, we have observed a trend of US high net worth (HNW) and ultra high net worth individuals (UHNW) seeking greater geographical diversification of their assets. Political and economic instability in the US has compounded this trend, and we're seeing an uptick in demand for advice on holding or relocating assets to the UK and other non-US jurisdictions. This is often combined with US individuals seeking advice on becoming resident in the UK or elsewhere.
US individuals who want to diversify and hold a portion of their assets outside the US will want to consider not just continuing US tax on those assets but also factors like the optimal jurisdiction in which to hold non-US assets and the interplay between US and non-US tax rules (also pursuant to any relevant double tax treaty (DTT)). Certain jurisdictions will generally have more favourable DTTs with the US, but it will also be important to review these with the individual's circumstances and specific underlying assets in mind.
A further cross-section of US individuals might also want to not only diversify their assets geographically but also explore their non-US visa and citizenship options. We have seen an increase in US clients looking to obtain visas for EU jurisdictions and Dubai, as well as the UK (notwithstanding recent tax rule changes in the latter case).
In these situations, it is a good idea to take the opportunity to carry out a wider review of the nature and location of assets and asset holding structures, as well as how a change of the individual's tax residence might impact existing trusts and companies (including any interests in US LLCs).
UK-specific considerations
The UK remains a popular jurisdiction for many wealthy Americans. This is due to its robust political system, its adherence to the rule of law, its high-quality educational institutions, and London's continuing attraction from a cultural and quality of life perspective.
A key topic for US individuals considering a move to the UK will be how the UK's new four-year foreign income and gains (FIG) regime would apply to personally held assets or asset holding structures such as US trusts or LLCs.
Further factors for individuals to consider include:
- If the FIG regime is not available, how can the tax profile of their assets be optimised with the US-UK DTT in mind.
- If longer-term UK residence is being considered, what planning might be recommended in anticipation of continued residence after the initial four-year period, eg the conversion of existing US or offshore structures to dual US-UK resident structures to ensure alignment of the taxing regimes. Also, whether the creation of trust structures might be advisable ahead of the individual becoming a 'long-term resident' for UK inheritance tax purposes.
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US individuals will often enjoy a form of preferred status from a UK inheritance tax perspective due to the provisions of the US-UK estate tax treaty. It is always advisable for US individuals who may be looking to remain in the UK longer term to consider how the treaty applies to their circumstances and whether it may offer opportunities to carry out US estate tax/UK inheritance tax planning with, for example, the creation of trust structures.
Given US individuals' continued exposure to tax in the US, regardless of where they are resident, it is always advisable that individuals looking to move to a non-US jurisdiction obtain expert advice on the impact of this on their asset holding structures and personal tax position.
As a European-based firm with a strong international Private Client practice, we are ideally placed to not only advise on the most suitable jurisdictions for relocation or asset holding but to also assist with the selection of appropriate intermediaries and foreign advisers.
We have a significant existing US client base, and our team are very familiar with the complexities of the US tax system alongside non-US aspects. Furthermore, our experience in reviewing and setting up complex cross-border wealth-holding structures means that should circumstances and needs change further down the line, we are well equipped to provide support.
