Tuesday, June 22, 2010

Financial Planning Issues for Expats Moving to the USA

There are numerous issues that need to be addressed when moving to a new country and it seems the more “developed” your new country of residence, the more important it is to understand and follow regulations.

sipp ira 401k qrops us investment portfolio management.jpg Individual Asset Management provides financial planning services to non-US citizens living and preparing to live in the United States, and I have identified seven topics that anyone moving to the US should consider:

1. Visa / citizenship issues
2. Reporting and taxation of non-US financial accounts
3. Obtaining loans / credit history
4. Pension transfer
5. Investment management
6. Estate tax
7. Education and retirement savings plans

We cannot delve into any great detail on these topics here – my purpose in this article is to highlight why each issue is important so that the reader can decide whether his or her specific situation warrants seeking further counsel.

1. Visa/citizenship issues: Entire books have been written on this topic and there are many legal firms in the US that specialize in the business of obtaining work visas, permanent residency (Green Card), and citizenship.

There are a number of avenues through which it is possible to obtain permission to live and work in the United States. Broadly speaking, it is possible to obtain a work visa, and ultimately permanent residency, through employer sponsorship, by completing a course of studies at a US institution of higher learning, or by investing in a business or an economic-development zone. There are also paths to residency for certain groups of individuals such as asylum-seekers, family-sponsored individuals, people with exceptional talents, and Diversity Lottery winners.

The bottom line is that if you have substantial funds to invest in the US or a valid business idea, are willing to study at an American university, have an exceptional and recognized talent, have family connections, or fall into certain specialized categories; then a good immigration attorney can likely find you a path to working and living in the United States.

2. Reporting and taxation of non-US financial accounts: Many non-US citizens, especially if they have been working outside their country of citizenship for some time, have acquired investment accounts in offshore jurisdictions. It is important to understand that, while you are allowed to have non-US financial accounts while living in the United States, you need to report these accounts to the US Treasury department every year if the total of the accounts amounts to more than $10,000. The form used for this is Treasury Department form TDF 90-22.1 – if you do a web search for this it will come up with links to the form and instructions. The penalties for not completing this form can be steep so I highly recommend looking into this and reporting all your financial accounts, including certain non-US pension accounts.

A further issue of great importance is the taxation of non-US accounts while you are a US tax payer. The US tax code is ridiculously complex and there are numerous gray areas so you should seek the assistance of a US tax professional familiar with expatriate tax matters – most US tax advisors are not knowledgeable in this specialized area.

If you do have offshore investment accounts, I would highly recommend that you do some tax planning several months before you move to the US. For example, it may be to your great advantage to establish a higher tax basis for your offshore investments before moving to the US since you may be liable for tax on any distributions you take from these accounts while a US resident based on the total gain of the underlying investments – not the gain from the time you entered the US – the total gain from inception. Furthermore, it is possible that you may be liable for US tax on the growth in your non-US accounts, even if you don’t take distributions. A little tax planning can go a long way in such a situation...

Read more at http://www.expatfocus.com/financial-planning-for-expats-moving-to-the-usa

1 comment:

Financial Planning said...

This is not to say that you shouldn’t participate in US retirement plans that allow considerable tax benefits. Especially since, if you withdraw the money from your retirement accounts after you leave the US, you might reap further tax benefits as a result of the fact that you might be in a very low US tax bracket – or perhaps not even subject to US tax as a result of tax treaty benefits.