Life insurance can help serve as a financial safety net for your family or beneficiaries in the event of your death, and it's a common financial planning tool both in the U.S. and the UK. However, for UK-connected individuals residing in the U.S., the life insurance landscape can be quite different. While UK life insurance policies may pay out a lump sum tax-free, the U.S. tax treatment of foreign life insurance proceeds can be complex. There's also the issue of whether your UK policy will cover events that occur while you're residing in another country. It's advisable to consult a financial planner who understands both U.S. and UK regulations to help ensure that you choose a policy that offers the coverage you need without unintended tax consequences.
Annuities can offer a stream of income in retirement, providing financial stability and reducing exposure to market volatility. In the U.S., various types of annuities exist, from immediate to deferred and fixed to variable. However, the U.S. tax treatment of annuities, especially those purchased in the UK, may not be straightforward. The U.S.-UK Tax Treaty provides some guidance but does not cover all possible scenarios. For instance, annuity payments might be subject to withholding taxes in the UK, even if you are a U.S. tax resident, creating the need for strategic tax planning to avoid double taxation.
Given the complexities of managing life insurance and annuities across two different financial systems, specialized advice is crucial. Tax laws, treaty benefits, and even product features can differ between the U.S. and the UK. Therefore, it’s recommended to work with advisors who have experience in cross-border financial planning. Additionally, US insurance products should only be discussed with a professional who is insurance licensed. They can guide you in making informed decisions, from selecting the appropriate type and amount of life insurance coverage to integrating annuities into your retirement plan in a tax-efficient manner.
Tax and legal advice is not provided by Amerity Wealth Management, LLC or its advisory representatives. Legal, tax and accounting advice must be obtained through legal and/or accounting professionals. Insurance products and services are offered through licensed insurance agents through Amerity Financial, LLC. Certain Amerity Wealth Management advisory representatives are licensed insurance agents.
