Is this a useful thing to consider, or a crazy way of thinking? [Estate planning]

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steve321
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Is this a useful thing to consider, or a crazy way of thinking? [Estate planning]

Post by steve321 »

One of our children is going to have to decide where to work and live and at the moment she is undecided between two countries. I think it's probably 50/50 as there are advantages and disadvantages in both possibilities.
I'll keep it general, just in case she reads this forum :D
I am preparing for estate planning - I am not very old but one never knows and I have recently had some serious medical issues. So regarding inheritance taxes, if she lived in country A when I die, she would have to pay a lot more taxes than if she lived in country B (because in country A taxes are based on the residence status of the inheritor and tax rates are very high).
So do you think that this parameter should enter at all in the decision of where to live? In a sense it would be weird if she stayed in country A and then have to pay more in inheritance taxes than what she'll have earnt from her job for years. On the other hand perhaps these decisions should just be just based simply on what she likes to do, without planning for all eventualities. So should I mention this issue? Should this be take into account when making the decision? Any advice will be welcome.
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milktoast
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by milktoast »

Are you planning to die in the next four years? If not, I don't think it matters. People end up changing jobs and locations often in their lives.
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by leeks »

No, I would not expect her to take that into account. She should pursue whatever she thinks brings her the best quality of life.

And she might move again (or many more times) during your lifetime.

I don't think anyone should make plans based on expectations of inheritance from their parents. You may end up using all your own money in your lifetime. Or you may end up not wanting to leave her much for some reason.
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by steve321 »

milktoast wrote: Thu Jun 10, 2021 11:40 am Are you planning to die in the next four years? If not, I don't think it matters. People end up changing jobs and locations often in their lives.
good question :D I hope it will be in the next 40, not 4 years, but as I said I had some health issues so one never knows :(
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by RickBoglehead »

You should not mention this issue to your child. Let her make a decision that is best for her. To do anything else would be very selfish.
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by steve321 »

leeks wrote: Thu Jun 10, 2021 11:41 am No, I would not expect her to take that into account. She should pursue whatever she thinks brings her the best quality of life.

And she might move again (or many more times) during your lifetime.

I don't think anyone should make plans based on expectations of inheritance from their parents. You may end up using all your own money in your lifetime. Or you may end up not wanting to leave her much for some reason.
I see your point on basing one's decisions on the best quality of life, thank you. Still she's also taking into account things like the salary. That's why I thought it would be a bit absurd if what she earnt in salary in the end was dwarfed by taxes.
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by steve321 »

RickBoglehead wrote: Thu Jun 10, 2021 11:54 am You should not mention this issue to your child. Let her make a decision that is best for her. To do anything else would be very selfish.
But would it not be better for her to end up with more wealth?
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by RickBoglehead »

steve321 wrote: Thu Jun 10, 2021 11:56 am
RickBoglehead wrote: Thu Jun 10, 2021 11:54 am You should not mention this issue to your child. Let her make a decision that is best for her. To do anything else would be very selfish.
But would it not be better for her to end up with more wealth?
1) Your child should not be planning her future based on what she might inherit from you. Many would argue you should not even give her a hint of the size of a possible inheritance.

2) You are not old (you said so). Therefore, she should definitely not be deciding where to relocate based on an expectation of your demise. Or do you want her calling ever week and saying "Hey Dad, any chance you're going to kick the bucket next week, I could use the cash." If you were 85 and in very poor health, maybe.

3) We've told our children to expect nada, nothing, zip, zilch. We tell them we hope to spend every last penny. We've provided for college for grandchildren, and we're paying for a family vacation next week (one driving, one flying). We do not write them big checks or anything similar, and have no plans to.
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by Candor »

Unless there is a high likelihood of your imminent demise I would choose option 2. ("crazy way of thinking"). It does not sound like this is the case so I would not take your recent health issues into account in your daughters decision of where to live.

Here's hoping you see another 40 years. :beer
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by NiceUnparticularMan »

I'm a pretty open book on these sorts of things, so I would probably mention it, but then also suggest it is the sort of consideration that could easily be trumped by other issues, including for the reasons already articulated here (like that locational decisions are not permanent anyway, and so forth).

I guess my point is by the time my kids are that age, I would hope we could talk about such things in a way that they would not overreact and would be wise enough to put it in an appropriate context with minimal prompting from me.
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by firebirdparts »

I would ignore the whole issue, but life sure is complicated. I never know what random people are going to regret, right?

I suppose if you die she might want to flee that country, and maybe she needs to know that, but if I'm her and you, I'd rather not think about it.
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by aristotelian »

How old are you and are you in good health? Unless you are terminally ill or over 80 I would not encourage her to consider your estate issues.

You might speak with an estate attorney. Perhaps there is a trust you can set up so she would only get taxed on income as she receives it. Or come up with an emergency plan should something happen, like she comes back or moves to other country for a year before cashing any check from your estate.
Last edited by aristotelian on Thu Jun 10, 2021 12:10 pm, edited 1 time in total.
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by steve321 »

firebirdparts wrote: Thu Jun 10, 2021 12:06 pm

I suppose if you die she might want to flee that country, and maybe she needs to know that,
lol that would be too late I think. You need to avoid being a resident there the year it happens.
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by GT99 »

Looking at it with simplistic logic, consider the amount of the inheritance, the difference in tax rates, and your likelihood of death in the relative near term (4 or 5 years).

So if it's a $1M (or probably pounds since it looks like you're in the UK :D ), and the tax difference is 20%, and the perceived likelihood of you dying near term is 10%, that's a $20k expected value (1M x 0.2 x 0.1). I would not make a where to live decision based on that.

It's obviously simplistic, but I think looking at it this way gives some perspective.

For me, it would have to be pretty extreme circumstances to make a decision on where to live based on something with 10% or less likelihood - something like a $5M inheritance and 40% tax difference.
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by NiceUnparticularMan »

RickBoglehead wrote: Thu Jun 10, 2021 12:02 pm
steve321 wrote: Thu Jun 10, 2021 11:56 am
RickBoglehead wrote: Thu Jun 10, 2021 11:54 am You should not mention this issue to your child. Let her make a decision that is best for her. To do anything else would be very selfish.
But would it not be better for her to end up with more wealth?
1) Your child should not be planning her future based on what she might inherit from you. Many would argue you should not even give her a hint of the size of a possible inheritance.

2) You are not old (you said so). Therefore, she should definitely not be deciding where to relocate based on an expectation of your demise. Or do you want her calling ever week and saying "Hey Dad, any chance you're going to kick the bucket next week, I could use the cash." If you were 85 and in very poor health, maybe.

3) We've told our children to expect nada, nothing, zip, zilch. We tell them we hope to spend every last penny. We've provided for college for grandchildren, and we're paying for a family vacation next week (one driving, one flying). We do not write them big checks or anything similar, and have no plans to.
So this is more parenting theory than investing theory, but my two cents is I hope I can just have open, honest discussions with my kids about this sort of thing.

And part of that is informed by my own experiences, and experiences of others. Without getting into details, sooner or later many of us have gotten information about our parent's finances (such as when one parent passes and we are helping the other parent deal with the consequences, or when a parent starts experiencing cognitive issues, and so on), which at the minimum allow for some informed speculation (and sometimes there are trusts and such which are actually obligated to disclose information to future beneficiaries).

So personally, I'd rather at least be having general and honest discussions with my kids all along, so that if they ever do get information in those sorts of circumstances, we will have at least been doing what we can to help them handle it productively.

Again, I'm not going to insist that is the only right way to approach these issues. But those are my feelings on the subject.
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by steve321 »

GT99 wrote: Thu Jun 10, 2021 12:10 pm Looking at it with simplistic logic, consider the amount of the inheritance, the difference in tax rates, and your likelihood of death in the relative near term (4 or 5 years).

So if it's a $1M (or probably pounds since it looks like you're in the UK :D ), and the tax difference is 20%, and the perceived likelihood of you dying near term is 10%, that's a $20k expected value (1M x 0.2 x 0.1). I would not make a where to live decision based on that.

It's obviously simplistic, but I think looking at it this way gives some perspective.

For me, it would have to be pretty extreme circumstances to make a decision on where to live based on something with 10% or less likelihood - something like a $5M inheritance and 40% tax difference.
to be honest, I had actually made a similar calculation!! It's just that I didn't know whether it was too crazy to share here.
Last edited by steve321 on Thu Jun 10, 2021 12:31 pm, edited 1 time in total.
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by Gaston »

I agree with a few other posters, that it depends on your daughter’s expected duration of stay in the other country. If short-term, say 3-5 years, I wouldn’t bother with any special arrangements.

If long-term, the impact on your daughter’s inheritance could be significant, and I’d definitely suggest you speak with a tax professional. Unfortunately, this won’t come cheap. 99% of tax professionals will know about their own country, but will know nothing about tax laws in a foreign country. You need to find someone who knows the tax landscape of both countries, A and B, and the interaction between the two landscapes. People with this knowledge charge USD 500 per hour and up.

I don’t know what your countries A and B are, but if they are USA and UK, or USA and Switzerland, I can point you to a name or two to get you started. If interested, private message me.
Last edited by Gaston on Thu Jun 10, 2021 12:26 pm, edited 1 time in total.
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by RickBoglehead »

NiceUnparticularMan wrote: Thu Jun 10, 2021 12:16 pm
RickBoglehead wrote: Thu Jun 10, 2021 12:02 pm
steve321 wrote: Thu Jun 10, 2021 11:56 am
RickBoglehead wrote: Thu Jun 10, 2021 11:54 am You should not mention this issue to your child. Let her make a decision that is best for her. To do anything else would be very selfish.
But would it not be better for her to end up with more wealth?
1) Your child should not be planning her future based on what she might inherit from you. Many would argue you should not even give her a hint of the size of a possible inheritance.

2) You are not old (you said so). Therefore, she should definitely not be deciding where to relocate based on an expectation of your demise. Or do you want her calling ever week and saying "Hey Dad, any chance you're going to kick the bucket next week, I could use the cash." If you were 85 and in very poor health, maybe.

3) We've told our children to expect nada, nothing, zip, zilch. We tell them we hope to spend every last penny. We've provided for college for grandchildren, and we're paying for a family vacation next week (one driving, one flying). We do not write them big checks or anything similar, and have no plans to.
So this is more parenting theory than investing theory, but my two cents is I hope I can just have open, honest discussions with my kids about this sort of thing.

And part of that is informed by my own experiences, and experiences of others. Without getting into details, sooner or later many of us have gotten information about our parent's finances (such as when one parent passes and we are helping the other parent deal with the consequences, or when a parent starts experiencing cognitive issues, and so on), which at the minimum allow for some informed speculation (and sometimes there are trusts and such which are actually obligated to disclose information to future beneficiaries).

So personally, I'd rather at least be having general and honest discussions with my kids all along, so that if they ever do get information in those sorts of circumstances, we will have at least been doing what we can to help them handle it productively.

Again, I'm not going to insist that is the only right way to approach these issues. But those are my feelings on the subject.
As you said, it's parenting theory, and there's multiple "right" ways. IMO, most people would alter their way of living if they knew there was a huge payout coming down the pike. They'd save less, they'd spend more, they'd anticipate the payout. It's simply human nature. If there is a safety net, you act in a more risky manner.
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by steve321 »

RickBoglehead wrote: Thu Jun 10, 2021 12:26 pm
NiceUnparticularMan wrote: Thu Jun 10, 2021 12:16 pm
RickBoglehead wrote: Thu Jun 10, 2021 12:02 pm
steve321 wrote: Thu Jun 10, 2021 11:56 am
RickBoglehead wrote: Thu Jun 10, 2021 11:54 am You should not mention this issue to your child. Let her make a decision that is best for her. To do anything else would be very selfish.
But would it not be better for her to end up with more wealth?
1) Your child should not be planning her future based on what she might inherit from you. Many would argue you should not even give her a hint of the size of a possible inheritance.

2) You are not old (you said so). Therefore, she should definitely not be deciding where to relocate based on an expectation of your demise. Or do you want her calling ever week and saying "Hey Dad, any chance you're going to kick the bucket next week, I could use the cash." If you were 85 and in very poor health, maybe.

3) We've told our children to expect nada, nothing, zip, zilch. We tell them we hope to spend every last penny. We've provided for college for grandchildren, and we're paying for a family vacation next week (one driving, one flying). We do not write them big checks or anything similar, and have no plans to.
So this is more parenting theory than investing theory, but my two cents is I hope I can just have open, honest discussions with my kids about this sort of thing.

And part of that is informed by my own experiences, and experiences of others. Without getting into details, sooner or later many of us have gotten information about our parent's finances (such as when one parent passes and we are helping the other parent deal with the consequences, or when a parent starts experiencing cognitive issues, and so on), which at the minimum allow for some informed speculation (and sometimes there are trusts and such which are actually obligated to disclose information to future beneficiaries).

So personally, I'd rather at least be having general and honest discussions with my kids all along, so that if they ever do get information in those sorts of circumstances, we will have at least been doing what we can to help them handle it productively.

Again, I'm not going to insist that is the only right way to approach these issues. But those are my feelings on the subject.
As you said, it's parenting theory, and there's multiple "right" ways. IMO, most people would alter their way of living if they knew there was a huge payout coming down the pike. They'd save less, they'd spend more, they'd anticipate the payout. It's simply human nature. If there is a safety net, you act in a more risky manner.
In the case of my daughter, she has an idea of the size of our assets and she always known that she'll inherit some, Yet she's always been frugal - probably a combination of upbringing and temperament. So, since she's always very careful with money, I am thinking that it would be really bad if when I die she had to pay a huge amount in taxes, which she could have just avoided if she had been resident in the country.
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by sureshoe »

Without knowing the amount of money we're talking about, it's really hard to give good advice.

For example, if we're thinking the inheritance is less than $1M, choosing a country based on that seems like a bad idea. I don't know all the tax laws (or the countries we're talking), so I can't guess the implications - but under $1M, it's just not worth uprooting yourself.

If we're talking several million dollars, I would be consulting an accountant and look at doing some gifts. Again, hard to say without the context.

My basic belief is this: don't spend your life looking at how you can maximize your estate. Spend it now, give it away while you can enjoy it with the recipient. Easy to say when it's not my money, but I'm not focusing on estate size.
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by NiceUnparticularMan »

RickBoglehead wrote: Thu Jun 10, 2021 12:26 pm
NiceUnparticularMan wrote: Thu Jun 10, 2021 12:16 pm
RickBoglehead wrote: Thu Jun 10, 2021 12:02 pm
steve321 wrote: Thu Jun 10, 2021 11:56 am
RickBoglehead wrote: Thu Jun 10, 2021 11:54 am You should not mention this issue to your child. Let her make a decision that is best for her. To do anything else would be very selfish.
But would it not be better for her to end up with more wealth?
1) Your child should not be planning her future based on what she might inherit from you. Many would argue you should not even give her a hint of the size of a possible inheritance.

2) You are not old (you said so). Therefore, she should definitely not be deciding where to relocate based on an expectation of your demise. Or do you want her calling ever week and saying "Hey Dad, any chance you're going to kick the bucket next week, I could use the cash." If you were 85 and in very poor health, maybe.

3) We've told our children to expect nada, nothing, zip, zilch. We tell them we hope to spend every last penny. We've provided for college for grandchildren, and we're paying for a family vacation next week (one driving, one flying). We do not write them big checks or anything similar, and have no plans to.
So this is more parenting theory than investing theory, but my two cents is I hope I can just have open, honest discussions with my kids about this sort of thing.

And part of that is informed by my own experiences, and experiences of others. Without getting into details, sooner or later many of us have gotten information about our parent's finances (such as when one parent passes and we are helping the other parent deal with the consequences, or when a parent starts experiencing cognitive issues, and so on), which at the minimum allow for some informed speculation (and sometimes there are trusts and such which are actually obligated to disclose information to future beneficiaries).

So personally, I'd rather at least be having general and honest discussions with my kids all along, so that if they ever do get information in those sorts of circumstances, we will have at least been doing what we can to help them handle it productively.

Again, I'm not going to insist that is the only right way to approach these issues. But those are my feelings on the subject.
As you said, it's parenting theory, and there's multiple "right" ways. IMO, most people would alter their way of living if they knew there was a huge payout coming down the pike. They'd save less, they'd spend more, they'd anticipate the payout. It's simply human nature. If there is a safety net, you act in a more risky manner.
So in part, my feeling is that may well be fine. Like, if my kid could work less and spend more time with my grandkids before he or she passed away themselves, thanks to me leaving them something, I don't necessarily see that as a bad outcome for anyone. Or maybe they choose a career which is more personally and/or socially rewarding, and might even have a higher upside. And so on.

In other words, I agree my kids might make different decisions, but that doesn't mean what they would decide to do would be worse as a result. And I personally think that is more going to be about the character and wisdom of your kids than the information they get from you at any given point.

Which leads me back to my prior point, which is that keeping things secret from your kids just might not actually be feasible, and therefore getting ahead of the issue might be the best way to manage it.

But again, I am sure it will vary by individual.
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by RickBoglehead »

steve321 wrote: Thu Jun 10, 2021 12:38 pm In the case of my daughter, she has an idea of the size of our assets and she always known that she'll inherit some, Yet she's always been frugal - probably a combination of upbringing and temperament. So, since she's always very careful with money, I am thinking that it would be really bad if when I die she had to pay a huge amount in taxes, which she could have just avoided if she had been resident in the country.
Your call. Myself and several others have advised you to not tell her anything at this point, let her make her own decision. I think you will regret interfering.
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by Hebell »

So what's more important. Picking a country where, in the unlikely event you die, she saves a bit in taxes. Or, should she pick the country where she has the best opportunity for career advancement and an excellent quality of life? I would not even want to color my child's decision on this matter, for fear that she might later be angry or disappointed in me and at herself for influencing her thinking
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by NiceUnparticularMan »

steve321 wrote: Thu Jun 10, 2021 12:38 pm
RickBoglehead wrote: Thu Jun 10, 2021 12:26 pm
NiceUnparticularMan wrote: Thu Jun 10, 2021 12:16 pm
RickBoglehead wrote: Thu Jun 10, 2021 12:02 pm
steve321 wrote: Thu Jun 10, 2021 11:56 am

But would it not be better for her to end up with more wealth?
1) Your child should not be planning her future based on what she might inherit from you. Many would argue you should not even give her a hint of the size of a possible inheritance.

2) You are not old (you said so). Therefore, she should definitely not be deciding where to relocate based on an expectation of your demise. Or do you want her calling ever week and saying "Hey Dad, any chance you're going to kick the bucket next week, I could use the cash." If you were 85 and in very poor health, maybe.

3) We've told our children to expect nada, nothing, zip, zilch. We tell them we hope to spend every last penny. We've provided for college for grandchildren, and we're paying for a family vacation next week (one driving, one flying). We do not write them big checks or anything similar, and have no plans to.
So this is more parenting theory than investing theory, but my two cents is I hope I can just have open, honest discussions with my kids about this sort of thing.

And part of that is informed by my own experiences, and experiences of others. Without getting into details, sooner or later many of us have gotten information about our parent's finances (such as when one parent passes and we are helping the other parent deal with the consequences, or when a parent starts experiencing cognitive issues, and so on), which at the minimum allow for some informed speculation (and sometimes there are trusts and such which are actually obligated to disclose information to future beneficiaries).

So personally, I'd rather at least be having general and honest discussions with my kids all along, so that if they ever do get information in those sorts of circumstances, we will have at least been doing what we can to help them handle it productively.

Again, I'm not going to insist that is the only right way to approach these issues. But those are my feelings on the subject.
As you said, it's parenting theory, and there's multiple "right" ways. IMO, most people would alter their way of living if they knew there was a huge payout coming down the pike. They'd save less, they'd spend more, they'd anticipate the payout. It's simply human nature. If there is a safety net, you act in a more risky manner.
In the case of my daughter, she has an idea of the size of our assets and she always known that she'll inherit some, Yet she's always been frugal - probably a combination of upbringing and temperament. So, since she's always very careful with money, I am thinking that it would be really bad if when I die she had to pay a huge amount in taxes, which she could have just avoided if she had been resident in the country.
Yeah, although I wouldn't suggest this as a hard rule, my own personal observation is that if anything, the kids of parents who tend to be long-term career planners and cautious spenders tend to be more likely to be that way themselves, and vice-versa for the kids of parents who tend not to have steady careers and/or spend-it-as-it-comes.

So, if anything I would guess Boglehead-type parents are more likely to have Boglehead-type kids, even if their kids know how well being Boglehead types has worked out for their parents. Indeed, maybe in part because they can see how it worked out well.

Now, the kids of parents who made it big with get rich quick schemes or such . . . no bets on that.
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by ThankYouJack »

steve321 wrote: Thu Jun 10, 2021 12:25 pm
GT99 wrote: Thu Jun 10, 2021 12:10 pm Looking at it with simplistic logic, consider the amount of the inheritance, the difference in tax rates, and your likelihood of death in the relative near term (4 or 5 years).

So if it's a $1M (or probably pounds since it looks like you're in the UK :D ), and the tax difference is 20%, and the perceived likelihood of you dying near term is 10%, that's a $20k expected value (1M x 0.2 x 0.1). I would not make a where to live decision based on that.

It's obviously simplistic, but I think looking at it this way gives some perspective.

For me, it would have to be pretty extreme circumstances to make a decision on where to live based on something with 10% or less likelihood - something like a $5M inheritance and 40% tax difference.
to be honest, I had actually made a similar calculation!! It's just that I didn't know whether it was too crazy to share here.
So it would only be a ~20,000 pound difference in taxes? No way would I expect my child to live someplace else with the unlikely chance of dying early, especially for that amount.

Do you think you're more concerned about wealth preservation and avoiding taxes than she is? I'll likely leave a lot for my kids, but I'd like to put an emphasis on their ability to generate wealth and more importantly being a positive member to society. Sounds like your daughter will be in great shape regardless of paying a bit extra in taxes.
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by JayDee37 »

Here's another vote for "this should not be one of the heavily weighted factors in your daughter's decision," especially since you are young and healthy. I don't have much of an opinion on whether or not you should share your thoughts on this taxation issue with your daughter; honest conversation about financial situations between parents and children is--generally speaking--a good thing. But I don't think you should advocate for this to be a critical piece of her decision-making process. Her professional opportunities, social networks, well-being, and quality of life over the near to mid term will likely (and in my opinion rightly) take precedence.

If your daughter were the one writing in and asking this board for advice on whether to consider taxation of some possible future inheritance in her decision, I would tell her not to in most cases (possible exception being the inheritance is likely within the next few years and she has serious concerns about her ability to adequately fund her own retirement or her kids' university education without it).

Good luck to your daughter in making this exciting decision!
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by Walkure »

ThankYouJack wrote: Thu Jun 10, 2021 1:16 pm
steve321 wrote: Thu Jun 10, 2021 12:25 pm
GT99 wrote: Thu Jun 10, 2021 12:10 pm Looking at it with simplistic logic, consider the amount of the inheritance, the difference in tax rates, and your likelihood of death in the relative near term (4 or 5 years).

So if it's a $1M (or probably pounds since it looks like you're in the UK :D ), and the tax difference is 20%, and the perceived likelihood of you dying near term is 10%, that's a $20k expected value (1M x 0.2 x 0.1). I would not make a where to live decision based on that.

It's obviously simplistic, but I think looking at it this way gives some perspective.

For me, it would have to be pretty extreme circumstances to make a decision on where to live based on something with 10% or less likelihood - something like a $5M inheritance and 40% tax difference.
to be honest, I had actually made a similar calculation!! It's just that I didn't know whether it was too crazy to share here.
So it would only be a ~20,000 pound difference in taxes? No way would I expect my child to live someplace else with the unlikely chance of dying early, especially for that amount.

Do you think you're more concerned about wealth preservation and avoiding taxes than she is? I'll likely leave a lot for my kids, but I'd like to put an emphasis on their ability to generate wealth and more importantly being a positive member to society. Sounds like your daughter will be in great shape regardless of paying a bit extra in taxes.
It's not a 20k pound difference in taxes. It's a 20k pound difference in "expected value." In this (totally arbitrary hypothetical scenario) the difference in taxes should OP's demise come in the next few years would be 200k pounds.
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Re: Is this a useful thing to consider, or a crazy way of thinking? [Estate planning]

Post by LadyGeek »

This thread is now in the Personal Finance (Not Investing) forum (estate planning). I also retitled the thread for clarity.
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by steve321 »

ThankYouJack wrote: Thu Jun 10, 2021 1:16 pm
steve321 wrote: Thu Jun 10, 2021 12:25 pm
GT99 wrote: Thu Jun 10, 2021 12:10 pm Looking at it with simplistic logic, consider the amount of the inheritance, the difference in tax rates, and your likelihood of death in the relative near term (4 or 5 years).

So if it's a $1M (or probably pounds since it looks like you're in the UK :D ), and the tax difference is 20%, and the perceived likelihood of you dying near term is 10%, that's a $20k expected value (1M x 0.2 x 0.1). I would not make a where to live decision based on that.

It's obviously simplistic, but I think looking at it this way gives some perspective.

For me, it would have to be pretty extreme circumstances to make a decision on where to live based on something with 10% or less likelihood - something like a $5M inheritance and 40% tax difference.
to be honest, I had actually made a similar calculation!! It's just that I didn't know whether it was too crazy to share here.
So it would only be a ~20,000 pound difference in taxes? No way would I expect my child to live someplace else with the unlikely chance of dying early, especially for that amount.

Do you think you're more concerned about wealth preservation and avoiding taxes than she is? I'll likely leave a lot for my kids, but I'd like to put an emphasis on their ability to generate wealth and more importantly being a positive member to society. Sounds like your daughter will be in great shape regardless of paying a bit extra in taxes.
No sorry, the calculation was similar in the sense that I used that method, and calculated the expected value. Roughly, it would be over 500K. But I am also not sure whether that is a good way to think about it. Imagine that things turn out badly and she's in the wrong country and she has to end up paying all that money. Sure, she would have worked and earned her own money in the mean time, but the idea that she's spent years working in that country and then she has to pay hight taxes (just for being resident in it) is pretty sad, when she could live elsewhere and probably have a similarly fulfilling life (difficult to know in advance, as I both possibilites have advantages and disadvantages of their own).
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by GAAP »

At this point in her life, potential inheritance issues will only complicate her decision making, and likely lead to regrets no matter what she decides. If you bring it up, she may decide to stay home, simply because she worries you'll be gone soon.

If the topic comes up -- from her -- then I would simply note the differences in general, and let her decide if that matters. I don't think most people would really understand the impacts until they've had a chance to actually live with the results of a variety of financial choices.
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Re: Is this a useful thing to consider, or a crazy way of thinking? [Estate planning]

Post by Hebell »

My advice is not based on the money. My advice is based on my own lived experience, where I wish like hell my father had not given me his good counsel.

I completed my graduate school as a General electric Fellow (though I am female) in electrical engineering in robotics, after a sterling academic record in EE (signal processing) as an undergraduate. The world was my oyster then with those straight A grades, and mathematical specialties.

My father meant so well. He wanted the best for me. In 1983, He encouraged me to go with a larger company, when my heart longed to go to California or take a few risks. He did not know me as well as he thought, and I did not yet know myself.

In following his counsel , I made a lucrative decision, being extraordinarily well compensated by a large defense contractor. Who will also give me a pension in my old age.

But 20 years in, I had to quit, because I've always had the temperament of an entrepreneur and small business person, but I did not know it when I was young. I was technically outstanding in my job, but the last 10 years were constant headache. To this day I wish my father had kept his mouth shut.

I started my small business 20 years later than I should have. Did my story end well?. Yes it did, but I forever regret the path not taken.

This is why Dads should stay out of their daughter's decisions. I think daughters perhaps can be a bit more deferential than sons, though maybe I am wrong. I respected my father's opinion so much, but I should have totally ignored it. Not everything is about money.
Last edited by Hebell on Thu Jun 10, 2021 2:17 pm, edited 2 times in total.
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by mrspock »

RickBoglehead wrote: Thu Jun 10, 2021 11:54 am You should not mention this issue to your child. Let her make a decision that is best for her. To do anything else would be very selfish.
This. I wouldn’t go quite as far as saying selfish, as I don’t think that’s your motivation here — you are just thinking too much like a Boglehead. Let her make the call, and when the time comes, the money is hers along with whatever tax consequences.

Your only other play would be to make a dynasty trust or something and have the trust taxed in South Dakota or something, it would then dole out monies monthly or yearly as a stipend. But that’s probably way over thinking it unless we are talking tens of millions.
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Re: Is this a useful thing to consider, or a crazy way of thinking? [Estate planning]

Post by mrspock »

Hebell wrote: Thu Jun 10, 2021 2:07 pm My advice is not based on the money. My advice is based on my own lived experience, where I wish like hell my father had not given me his good counsel.

I completed my graduate school as a General electric Fellow (though I am female) in electrical engineering in robotics, after a sterling academic record in EE (signal processing) as an undergraduate. The world was my oyster then with those straight A grades, and mathematical specialties.

My father meant so well. He wanted the best for me. He encouraged me to go with a larger company, when my heart longed to go to California or take a few risks. He did not know me as well as he thought, and I did not yet know myself.

In following his counsel , I made a lucrative decision, being extraordinarily well compensated by a large defense contractor. Who will also give me a pension in my old age.

But 20 years in, I had to quit, because I've always had the temperament of an entrepreneur and small business person, but I did not know it when I was young. I was technically outstanding in my job, but the last 10 years were constant headache. To this day I wish my father had kept his mouth shut.

I started my small business 20 years later than I should have. Did my story end well?. Yes it did, but I forever regret the path not taken.

This is why Dads should stay out of their daughter's decisions. I think daughters perhaps can be a bit more deferential than sons, though maybe I am wrong. I respected my father's opinion so much, but I should have totally ignored it. Not everything is about money.
+1000 to this but I'd expand this to career decisions for all children. If you aren't "wired for risk", please don't get in the way of your children who are, you will only setup a situation where they may resent you, or have regrets. 20s and 30s are for taking risks, leaving the nest, the city and the country potentially.

My father wanted me to stay close to home working for a financial company in their IT department. Instead a flew the nest and ran off to Silicon Valley -- to his immense disappointment. In the end, I wound up making more money than either of them could have dreamed possible, and have had an immensely fulfilling & rewarding career. Traveling the world, you name it.
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Re: Is this a useful thing to consider, or a crazy way of thinking? [Estate planning]

Post by opus360 »

If she picks country A on a short-term basis (under 5 years), can you buy a life insurance policy at a reasonable cost with payout equal to the taxes?
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Re: Is this a useful thing to consider, or a crazy way of thinking? [Estate planning]

Post by steve321 »

opus360 wrote: Thu Jun 10, 2021 2:31 pm If she picks country A on a short-term basis (under 5 years), can you buy a life insurance policy at a reasonable cost with payout equal to the taxes?
That's an interesting idea! But I doubt it because of medical history. Anyway something to look into, thanks.
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Re: Is this a useful thing to consider, or a crazy way of thinking? [Estate planning]

Post by steve321 »

Hebell wrote: Thu Jun 10, 2021 2:07 pm My advice is not based on the money. My advice is based on my own lived experience, where I wish like hell my father had not given me his good counsel.

I completed my graduate school as a General electric Fellow (though I am female) in electrical engineering in robotics, after a sterling academic record in EE (signal processing) as an undergraduate. The world was my oyster then with those straight A grades, and mathematical specialties.

My father meant so well. He wanted the best for me. In 1983, He encouraged me to go with a larger company, when my heart longed to go to California or take a few risks. He did not know me as well as he thought, and I did not yet know myself.

In following his counsel , I made a lucrative decision, being extraordinarily well compensated by a large defense contractor. Who will also give me a pension in my old age.

But 20 years in, I had to quit, because I've always had the temperament of an entrepreneur and small business person, but I did not know it when I was young. I was technically outstanding in my job, but the last 10 years were constant headache. To this day I wish my father had kept his mouth shut.

I started my small business 20 years later than I should have. Did my story end well?. Yes it did, but I forever regret the path not taken.

This is why Dads should stay out of their daughter's decisions. I think daughters perhaps can be a bit more deferential than sons, though maybe I am wrong. I respected my father's opinion so much, but I should have totally ignored it. Not everything is about money.
Thank you for sharing your experience. I really try not to influence her decisions as far as the type of career is concerned, having made choices early on in life in order to please my own parents, but which were not very good for me. It's just a question on the country where she'd be living, not on the type of work.
Btw when you say that
the last 10 years were constant headache
do you mean it literally? I am asking because I remember suffering from bad headaches myself when I was doing too many things in order to please others, rather than listening to myself.
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by leeks »

RickBoglehead wrote: Thu Jun 10, 2021 12:42 pm
steve321 wrote: Thu Jun 10, 2021 12:38 pm In the case of my daughter, she has an idea of the size of our assets and she always known that she'll inherit some, Yet she's always been frugal - probably a combination of upbringing and temperament. So, since she's always very careful with money, I am thinking that it would be really bad if when I die she had to pay a huge amount in taxes, which she could have just avoided if she had been resident in the country.
Your call. Myself and several others have advised you to not tell her anything at this point, let her make her own decision. I think you will regret interfering.
The suggestion to consult an estate planning professional makes sense though, in case there is some form of trust that could mitigate this concern.
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Re: Is this a useful thing to consider, or a crazy way of thinking?

Post by anon_investor »

leeks wrote: Thu Jun 10, 2021 3:05 pm
RickBoglehead wrote: Thu Jun 10, 2021 12:42 pm
steve321 wrote: Thu Jun 10, 2021 12:38 pm In the case of my daughter, she has an idea of the size of our assets and she always known that she'll inherit some, Yet she's always been frugal - probably a combination of upbringing and temperament. So, since she's always very careful with money, I am thinking that it would be really bad if when I die she had to pay a huge amount in taxes, which she could have just avoided if she had been resident in the country.
Your call. Myself and several others have advised you to not tell her anything at this point, let her make her own decision. I think you will regret interfering.
The suggestion to consult an estate planning professional makes sense though, in case there is some form of trust that could mitigate this concern.
+1.
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Re: Is this a useful thing to consider, or a crazy way of thinking? [Estate planning]

Post by halfnine »

I am not entirely following this. If you are in the UK your estate will already be taxed significantly as the exemption limit is quite low. So the first question is whether Country B has a tax treaty with the UK which could eliminate or mitigate double taxation. The second is whether the country actually taxes foreign inheritances. We have citizenship/residency in four countries and none of them tax foreign inheritances. That isn't to say there aren't outliers in this regard but I am wondering once you take into account UK taxes, tax treaties, and foreign inheritance exemptions whether you actually have anything significant to worry about at all.
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Re: Is this a useful thing to consider, or a crazy way of thinking? [Estate planning]

Post by Broken Man 1999 »

I am doing some things that will benefit both the surviving member of DW and I, and those who might get some inheritance, such as TIRA to Roth conversions.

Beyond that, I won't be doing anything else to maximize legacy or minimize their taxes.

I figure the legacy is their burden, they can always disclaim it.

You could go pretty deep down a rabbit hole to pursue something that might turn into constantly changing optimization target, I am just not going there.

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Re: Is this a useful thing to consider, or a crazy way of thinking? [Estate planning]

Post by Lee_WSP »

How exactly is this foreign law worded?
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