If you don’t know what to do with an inheritance, this guide is for you.
We’ll discuss how investing an inheritance as an expat works, what are the processes involved, the levies, as well as the advantages and disadvantages.
If you are looking to invest as an expat or high-net-worth individual, which is what I specialize in, you can email me (advice@adamfayed.com) or WhatsApp (+44-7393-450-837).
This includes if you are looking for alternatives or a second opinion.
Some of the facts might change from the time of writing, and nothing written here is formal inheritance investment advice.
For updated guidance, please contact me.
What is inheritance?
The wealth and possessions that are passed on to people after a person passes away are referred to as inheritances. This might comprise a variety of things, including bank account funds, properties, jewelry, and investments like mutual funds.
Investing an Inheritance
If inheritance investing is done with consideration for the tax consequences, there can be major financial benefits. Capital gains taxes may apply, so it’s important to plan ahead and employ various techniques.
Investment Inheritance Tax
Since many countries have different tax regulations, it’s important to comprehend them so as to handle your inheritance and estate.
To make sure you’re in compliance and find ways to cut down your tax burden, it would be helpful that you speak with a tax expert who specializes in expat matters.
Redistributing and holding assets through trusts can save taxes and shield your holdings from future ex-spouses or creditors.
Moreover, since many nations provide annual gift tax exemptions, giving gifts over the course of a lifetime can be tax-efficient.
By backing organizations you care about, charitable giving can lower the tax liability of your estate.
Putting inheritance into tax-advantaged vehicles such as offshore investment bonds or offshore trusts can help you preserve more of your money by reducing taxes paid on investment revenue and capital gains.
How to Invest an Inheritance
Below are certain strategies for investing as well as smart ways to manage an inheritance:
Make sure the inheritance aligns with your objectives by first reviewing your finances. Make sure you have three to six months’ worth of spending set aside for emergencies before you invest. Clear all high-interest debts, such as loans and credit card balances.
Set specific targets. Diversify your investments by including equities and real estate, for instance, to lessen risks. Contribute to retirement funds such as IRAs or 401(k) too if you can.
Determine if it makes more sense to sell or keep any property you inherit, based on your needs.
Review your investments on a regular basis to keep track of your basket.
Consult with a financial advisor to help with your decisions.
Pros and cons of Investing an Inheritance as an Expat
Benefits of Inheritance Investing
- Investing your inheritance allows you to expand your wealth gradually by using market appreciation and compound interest as a leverage.
- When assets are passed down, their market value is usually modified at the time of succession. If you dispose the inherited property soon after, this adjustment might reduce capital gains taxes.
- By distributing your investments over different asset classes, you may ease the risks and increase the stability and security of your portfolio.
- It might help your retirement plan and savings, education finance, or succession planning.
Disadvantages of Inheritance Investment
- It is never guaranteed that your assets will appreciate. Naturally, there is some risk involved. You could end up losing all the money you inherited because the market can be very erratic.
- When you’re first starting out in investing, navigating the market can be challenging. Making well-informed judgments involves information, study, and expert advice.
- Choosing wisely when making investments could be challenging due to an emotional link to the inherited money. It is critical to distinguish between strategy and sentiment.
- Depending on your circumstances, there can still be tax implications.
Other Investment Options for Expats
International Stocks and Shares
You may diversify your portfolio and possibly increase returns by investing in foreign equities.
Gaining more flexibility in managing your international interests and receiving tax benefits are two advantages of these accounts.
Offshore Bonds
You can contribute on a regular basis or in one big payment, offering a tax-efficient method of gradually increasing your money.
Pension Plans
Because legislation in different countries may impact your retirement strategy, think about moving or combining your pension accounts.
Real Estate
Many foreign nationals decide to make real estate investments, either by buying rental property in their new country or by holding onto their family home.
Pained by financial indecision?
Adam is an internationally recognised author on financial matters with over 830million answer views on Quora, a widely sold book on Amazon, and a contributor on Forbes.
