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Leaving US retirement money to UK relatives

Leaving US retirement money to UK relatives

Old Oct 7th 2023, 3:31 am
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Default Leaving US retirement money to UK relatives

I have a few conventional IRA (Individual Retirement Account) accounts (not ROTH IRA) in my name in the US, held at mainstream US institutions (Schwab, Fidelity, etc). I want to name a relative in the UK (UK citizen) as my primary beneficiary on the account so that, in the event of my death, they will 'inherit' the account. This relative does not have any US accounts or other presence / activity in the US.

By way of comparison, if I were to designate a US resident as my beneficiary, the situation (as I understand it) is relatively simple; they would open an IRA in their own name (if they didn't have one already) and then the assets of my IRA would be transferred to their IRA account (without any taxation issues), and then they would have 10 years to draw down the account. And if they were smart, they would likely take 10% of the value out each year over the 10 year period to minimize the deferred income tax that is charged on such withdrawals each year.

But - since they are UK residents, and they don't have a US bank account, would they be allowed to open an IRA account in the US just for the purpose of receiving the assets of this account (and keeping the account for 10 years)? What I'm trying to avoid is, them having to 'cash out' (liquidate) the entire account value in one go, which would incur huge tax consequences (the numbers are substantial enough that the marginal income tax rates across state and federal could be in the 50% range).

I'm slowly converting my conventional IRA accounts over to ROTH IRA accounts, but I'm only just starting and it will take many years to complete. Of course, this 'inheritance' doesn't kick in until I die, and hopefully it won't happen for many years!

Last edited by Steerpike; Oct 7th 2023 at 4:16 am.
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