I did NOT liquidate my 529 before I moved, and I should have. I'm here for the long run, and mine was also in Vanguard, in HMRC non-reporting funds. I also didn't have the foresight to reset the cost basis tax-free while still in the US, which would at least have saved me some money with HMRC.
Once I realised the situation, I did liquidate the 529, while a UK resident, so paid UK income (not capital gains) tax on the gains, plus the US 10% penalty. The 529 wasn't huge, and this was the only significant miss in my pre-move planning, so I'm not going to beat myself up about it, but it was unnecessary tax for sure.
With the proceeds, whether you do separate accounts and put a mental sticky note on which kid each one is for, or you commingle in one account and just split it out in Excel, the net effect is the same. Paperwork slightly less in one account. Of course, you run into all the usual fun of what and how to invest in as a US citizen in the UK: https://www.bogleheads.org/wiki/Investi ... _residents You gave me the push I needed to add a section on investing for kids![:)]( "Smile")
Caveat would be if you/your kids expect to return to the US for education. There's no pain in holding non-reporting funds, only in selling (you would want to report any dividends, but they're taxed like any other dividend). Probably it's prudent to reset the basis before you move, just in case (change the investments - and if you want to, wait 30 days and change back).
Note there is also an open question about whether the 529 is a trust and how HMRC taxes that. I decided to ignore that possibility and HMRC never questioned it, but I've seen it raised a couple of places.
To add to Valuethinker's sidebars:
- Child Benefit isn't all bad - even if you earn too much, if you have a non-working spouse, they can get National Insurance credit for their state pension, just by registering. I've not seen a penny of child benefit since moving, but my wife has gotten 6 years of NI credits and counting, for "free".
- We wound up going with independent (private) schools after trying the state system for three years. We were at a good state school, but it was good for mainstream, middle-of-the-road kids. My kids are both autistic and very bright - if they aren't challenged, they get bored easily and can become disruptive. Equally, they are easily overwhelmed by lots of people and loud noises. To the credit of the state school teachers (who were generally very good), the best teacher in the world could not keep a classroom of 30 young children quiet enough for my kids to be successful. Special needs provision is in crisis and nothing that a state school could do would have helped, even if funding was available - they need smaller classes and patience, not a 1:1 helper or a specialist school. Their independent school has been brilliant, but is sadly closing at the end of this year, so we've been forced to find another one - a casualty of several recent policies that have had very challenging impacts on independent school finances (adding 20% VAT to fees, ending business rates relief, and increased National Insurance rates).
- That's not to say that UK state schools are any worse than US ones - on the whole, they're probably better, although there's certainly plenty of examples on either end in both countries. I do think their old state school was perfectly good, but only for "normal" kids.
Happy to elaborate on schools if you're interested!
Once I realised the situation, I did liquidate the 529, while a UK resident, so paid UK income (not capital gains) tax on the gains, plus the US 10% penalty. The 529 wasn't huge, and this was the only significant miss in my pre-move planning, so I'm not going to beat myself up about it, but it was unnecessary tax for sure.
With the proceeds, whether you do separate accounts and put a mental sticky note on which kid each one is for, or you commingle in one account and just split it out in Excel, the net effect is the same. Paperwork slightly less in one account. Of course, you run into all the usual fun of what and how to invest in as a US citizen in the UK: https://www.bogleheads.org/wiki/Investi ... _residents You gave me the push I needed to add a section on investing for kids
Caveat would be if you/your kids expect to return to the US for education. There's no pain in holding non-reporting funds, only in selling (you would want to report any dividends, but they're taxed like any other dividend). Probably it's prudent to reset the basis before you move, just in case (change the investments - and if you want to, wait 30 days and change back).
Note there is also an open question about whether the 529 is a trust and how HMRC taxes that. I decided to ignore that possibility and HMRC never questioned it, but I've seen it raised a couple of places.
To add to Valuethinker's sidebars:
- Child Benefit isn't all bad - even if you earn too much, if you have a non-working spouse, they can get National Insurance credit for their state pension, just by registering. I've not seen a penny of child benefit since moving, but my wife has gotten 6 years of NI credits and counting, for "free".
- We wound up going with independent (private) schools after trying the state system for three years. We were at a good state school, but it was good for mainstream, middle-of-the-road kids. My kids are both autistic and very bright - if they aren't challenged, they get bored easily and can become disruptive. Equally, they are easily overwhelmed by lots of people and loud noises. To the credit of the state school teachers (who were generally very good), the best teacher in the world could not keep a classroom of 30 young children quiet enough for my kids to be successful. Special needs provision is in crisis and nothing that a state school could do would have helped, even if funding was available - they need smaller classes and patience, not a 1:1 helper or a specialist school. Their independent school has been brilliant, but is sadly closing at the end of this year, so we've been forced to find another one - a casualty of several recent policies that have had very challenging impacts on independent school finances (adding 20% VAT to fees, ending business rates relief, and increased National Insurance rates).
- That's not to say that UK state schools are any worse than US ones - on the whole, they're probably better, although there's certainly plenty of examples on either end in both countries. I do think their old state school was perfectly good, but only for "normal" kids.
Happy to elaborate on schools if you're interested!
Statistics: Posted by tubaleiter — Sun Feb 23, 2025 1:53 am — Replies 3 — Views 294