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3 ?s re UK citizen living in US

3 ?s re UK citizen living in US

Old Apr 8th 2011, 4:50 pm
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Default 3 ?s re UK citizen living in US

Hello All,
I am new here, and have 3 big questions:
1) I am a USC living in the US, marrying a UK citizen who will move to the US. Will his UK pension be taxed both in the UK and the US? Will it need to be claimed as income for US income tax purposes?
2) What is the best way to access money? It appears that his pension can only be deposited into a UK bank and then he could either write out a check and deposit it into a US account, or perhaps the easiest would be just to draw it out from an ATM?
3) He plans to apply for a green card, but as a retiree, he doesn't plan to work. He is interested in purchasing a house with me. If I die first, how will the US estate tax laws affect him? Should he become a US citizen to avoid an unnecessary tax burden? If he dies first, would there be any repercussions (tax laws) that would affect me other than the US estate laws?
Thank you in advance for any advice you can provide.
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Old Apr 8th 2011, 5:04 pm
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Default Re: 3 ?s re UK citizen living in US

Welcome to BE

1 - depends on the pension, but there is a dual tax treaty so that most income won't be taxed twice.

2 - Use a currency exchange service such as xe.com

3 - He's got to be a LPR for a few years based on marriage before getting US citizenship. He'll be better off as a USC if you kick the bucket first, won't make any difference to you...but there's a large threshold before it makes any difference.

You can search out threads covering in more details all those questions, the first two are probably even on this first or second page as they've been discussed with the last few days.
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Old Apr 8th 2011, 5:15 pm
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Default Re: 3 ?s re UK citizen living in US

Originally Posted by Bob View Post
Welcome to BE

1 - depends on the pension, but there is a dual tax treaty so that most income won't be taxed twice.

2 - Use a currency exchange service such as xe.com

3 - He's got to be a LPR for a few years based on marriage before getting US citizenship. He'll be better off as a USC if you kick the bucket first, won't make any difference to you...but there's a large threshold before it makes any difference.

You can search out threads covering in more details all those questions, the first two are probably even on this first or second page as they've been discussed with the last few days.
Thanks for the welcome and the advice, Bob.

BTW, love your Gracie Allen quote.... ;-)
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Old Apr 8th 2011, 5:16 pm
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Default Re: 3 ?s re UK citizen living in US

Originally Posted by greenid1 View Post

2) What is the best way to access money? It appears that his pension can only be deposited into a UK bank
Is this a state pension? If so, he can arrange for it to be wired directly to a bank in the US.
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Old Apr 8th 2011, 5:32 pm
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Default Re: 3 ?s re UK citizen living in US

Originally Posted by greenid1 View Post
3) He is interested in purchasing a house with me. If I die first, how will the US estate tax laws affect him? Should he become a US citizen to avoid an unnecessary tax burden? If he dies first, would there be any repercussions (tax laws) that would affect me other than the US estate laws?
Thank you in advance for any advice you can provide.
This might depend on what state you are in. There are variations from state to state under what form a deed can be written. "Community property with right of survivorship" is often considered the best tax/probate wise though isn't always available in all states. Discuss with a lawyer who is familiar with property and estate laws in your state.
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Old Apr 8th 2011, 5:42 pm
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Default Re: 3 ?s re UK citizen living in US

Originally Posted by Nutmegger View Post
Is this a state pension? If so, he can arrange for it to be wired directly to a bank in the US.
Nutmegger, no, he worked in private industry in the UK, so while it's a UK pension, it is not from his government.
Thank you!
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Old Apr 8th 2011, 5:47 pm
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Default Re: 3 ?s re UK citizen living in US

Originally Posted by sir_eccles View Post
This might depend on what state you are in. There are variations from state to state under what form a deed can be written. "Community property with right of survivorship" is often considered the best tax/probate wise though isn't always available in all states. Discuss with a lawyer who is familiar with property and estate laws in your state.
Thank you, Sir Eccles. I think the wisest thing to do is have a pre-nup before we marry and talk to a tax attorney familiar with US/UK tax laws. I had read online earlier that as a non-USC, he would be taxed on anything over $60K, at an exorbitant rate.
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Old Apr 8th 2011, 6:02 pm
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Default Re: 3 ?s re UK citizen living in US

Originally Posted by greenid1 View Post
Nutmegger, no, he worked in private industry in the UK, so while it's a UK pension, it is not from his government.
Thank you!
Then that would be declared as income on US tax forms but any taxes paid in the UK can be used as tax credits to offset US taxes owed.

If he was single, generally the taxes paid in the UK would normally be larger than the US taxes owed so there would normally not be any tax due but since you will be married and likely filing jointly, it may depend on your income as to whether any US taxes will be owed.
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Old Apr 8th 2011, 6:10 pm
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Default Re: 3 ?s re UK citizen living in US

Originally Posted by greenid1 View Post
Thank you, Sir Eccles. I think the wisest thing to do is have a pre-nup before we marry and talk to a tax attorney familiar with US/UK tax laws. I had read online earlier that as a non-USC, he would be taxed on anything over $60K, at an exorbitant rate.
I haven't of any such law. Can you point to the link.

Current US law taxes the estate after a $5 million exclusion at 35%. Most states do not have estate taxes but about 7 states do typically taxing estates after about $1 million.

Recipients are never taxed.
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Old Apr 8th 2011, 7:01 pm
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Default Re: 3 ?s re UK citizen living in US

Originally Posted by Michael View Post
I haven't of any such law. Can you point to the link.

Current US law taxes the estate after a $5 million exclusion at 35%. Most states do not have estate taxes but about 7 states do typically taxing estates after about $1 million.

Recipients are never taxed.
Michael, the person pointed me to the IRS website (see below), and after reading it, I see that it applies to nonresidents living abroad and holding property in the US. My fiance will apply for a green card, will be a resident, and will be living in the US, so this will not in fact apply to him.

What is the Nonresident Alien Estate Tax?

The nonresident alien estate tax is a tax on the right of certain individuals to transfer property within the U.S. at death. The tax, reported on Form 706-NA, United States Estate Tax Return - Estate of Nonresident Not a Citizen of the United States, is applied to estates of non-U.S. citizens residing abroad who owned at least $60,000 worth of property within the U.S. at time of death. The estates of U.S. citizens and residents are subject to the laws of the regular Federal estate tax.

Thank you for your response.
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Old Apr 8th 2011, 7:26 pm
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Default Re: 3 ?s re UK citizen living in US

Originally Posted by greenid1 View Post
Michael, the person pointed me to the IRS website (see below), and after reading it, I see that it applies to nonresidents living abroad and holding property in the US. My fiance will apply for a green card, will be a resident, and will be living in the US, so this will not in fact apply to him.

What is the Nonresident Alien Estate Tax?

The nonresident alien estate tax is a tax on the right of certain individuals to transfer property within the U.S. at death. The tax, reported on Form 706-NA, United States Estate Tax Return - Estate of Nonresident Not a Citizen of the United States, is applied to estates of non-U.S. citizens residing abroad who owned at least $60,000 worth of property within the U.S. at time of death. The estates of U.S. citizens and residents are subject to the laws of the regular Federal estate tax.

Thank you for your response.
Yes that is a similar law that applies to all non residents living abroad that have a withholding tax of 30% on the sale of property in the US. This will make sure that federal income taxes are paid but the non resident can apply for a refund if too much tax is withheld. There are also exclusions from the law if there is no gain on the sale or was the primary residence while the non resident lived in the US, he/she lived in the home for 2 of the past 5 years, and the gain is under the $250,000 or $500,000 exclusion.

The estate tax for non residents just enforces the above law if a person dies since the government can't tax income of a dead person.
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Old Apr 8th 2011, 7:31 pm
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Default Re: 3 ?s re UK citizen living in US

Originally Posted by Michael View Post
Yes that is a similar law that applies to all non residents living abroad that have a withholding tax of 30% on the sale of property in the US. This will make sure that federal income taxes are paid but the non resident can apply for a refund if too much tax is withheld. There are also exclusions from the law if there is no gain on the sale or was the primary residence while the non resident lived in the US, he/she lived in the home for 2 of the past 5 years, and the gain is under the $250,000 or $500,000 exclusion.

The estate tax for non residents just enforces the above law if a person dies since the government can't tax income of a dead person.
Michael,
Again, thank you for your input. I've always believed that it's better to be informed, rather than surprised. ;-)
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Old Apr 8th 2011, 7:44 pm
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Default Re: 3 ?s re UK citizen living in US

Originally Posted by Michael View Post
I haven't of any such law. Can you point to the link.

Current US law taxes the estate after a $5 million exclusion at 35%. Most states do not have estate taxes but about 7 states do typically taxing estates after about $1 million.

Recipients are never taxed.
keeping this simple and high level....

Although the numbers are all wrong, the semi-truth probably arises from the fact that while there's an unlimited allowance for an estate left to a spouse, if the surviving spouse is not a US citizen then that unlimited allowance does not apply. So the fact that a surviving spouse is a non-citizen can have a dramatic effect on estate planning, depending on the value of the estate.

As you say, some states have estate tax and the exemption levels are usually much lower than the federal level. In our case our wills are carefully drawn up so that, should my USC wife die, the estate does not get hammered by the tax man. As and when I get citizenship her will can be revised. Estate planning and the implications are, in my view, a big plus factor for gaining citizenship.
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Old Apr 8th 2011, 7:47 pm
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Default Re: 3 ?s re UK citizen living in US

Originally Posted by greenid1 View Post
Hello All,
I am new here, and have 3 big questions:
1) I am a USC living in the US, marrying a UK citizen who will move to the US. Will his UK pension be taxed both in the UK and the US? Will it need to be claimed as income for US income tax purposes?
Your pension questions are covered by the UK/US tax treaty. Article 17 has all the info, but you have to be careful of the savings clause at the beginning of the Treaty.

If that pension is a private UK company pension it will be taxed in the UK. You will have to include it on US taxes, but you can take a credit for any UK taxes paid so you don't get taxed twice, you just end up paying the largest of the UK or US taxes.

Your future husband should make sure he gets his UK state pension paid into his US bank account. As that is a state pension it is exempt form the savings clause and will only be taxable in the US.
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Old Apr 8th 2011, 10:28 pm
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Default Re: 3 ?s re UK citizen living in US

Originally Posted by greenid1 View Post
Hello All,
I am new here, and have 3 big questions:
1) I am a USC living in the US, marrying a UK citizen who will move to the US. Will his UK pension be taxed both in the UK and the US? Will it need to be claimed as income for US income tax purposes?
2) What is the best way to access money? It appears that his pension can only be deposited into a UK bank and then he could either write out a check and deposit it into a US account, or perhaps the easiest would be just to draw it out from an ATM?
3) He plans to apply for a green card, but as a retiree, he doesn't plan to work. He is interested in purchasing a house with me. If I die first, how will the US estate tax laws affect him? Should he become a US citizen to avoid an unnecessary tax burden? If he dies first, would there be any repercussions (tax laws) that would affect me other than the US estate laws?
Thank you in advance for any advice you can provide.
I think you have to do that together. I mean you have to apply for the visa for him to come over? Right? It doesn't matter whether he works or not, he still has to have a greencard. Will you apply for a fiance visa and you'll get married here in the US or will you get married and then apply for whatever the visa (sorry we did DCF, so don't know what visas Americans apply for when their spouses come over to the States) I know there are enough threads on this, but always curious on these visas and which one is the correct one. Ok, just looked it up its still the I-130. Boy its sure expensive to file these days. Anyway, you're the one that has to file it, of course.

Sorry can't help about the other stuff.
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