Living in another country is an enriching experience, except when it comes to your bank accounts.
Fortunately, as a JAG Captain stationed in Germany, my situation was much simpler financially under Status of Forces Agreement.
On the other hand, Gretchen worked for the Frankfurt office of an international accounting firm during that time, so I saw how expatriate taxation worked up close.
Now, my eldest daughter, a PhD student in German and Polish history, has been conducting archival research over there this past year ... and would like to live at least a portion of her life abroad.
Like you, she would need to plan her financial situation carefully as an expatriate.
According to an article by Nasdaq, titled “Money Crossing Borders Requires Special Planning,” factors you must consider include currency fluctuations, political instability, immigration, labor, real estate, securities and tax rules.
When would this cross-border planning be particularly important?
- You have financial interests outside of the U.S.
- You live abroad.
- You have dual citizenship.
- You are a foreign citizen moving to the U.S.
- You are the foreign children or spouse of an American citizens. Laws between nations vary greatly and change constantly.
Issues you could face?
By failing to pay taxes, you would incur heavy penalties.
Financial institutions in one country may refuse to transfer money to an account in another nation.
What should you do to enjoy your international dreams while maximizing your money?
Disclose accounts.
As a U.S. citizen, failing to disclose an account on an annual Report of Foreign Bank and Financial Accounts form could cost you $10,000 or more in penalty fees.
Keep up on exchange rates.
The value of the dollar compared to other currency changes based on a variety of economic factors. Know how far your money will go in the country in which you choose to live.
Pay your income taxes.
Even if you live and work abroad, you still have to pay income taxes to the U.S.
Make sure you also have the money set aside to pay any taxes required by your host nation.
Plan ahead for retirement.
Investigate and know the tax laws regarding retirement income in both countries.
You do not want to be hit with large penalties or neglect potential government retirement benefits.
Please plan ahead.
Get the right estate planning.
In the U.S., your estate plan may or may not transfer well from state to state.
This is an even greater concern from country to country.
Work with estate planning attorneys who can help you transfer your wealth and plan for your passing whether here or abroad.
Invest wisely.
Be sure to understand regulations for the transfer of investments or investment incomes across borders.
Shop for the right insurance policies.
The purpose of insurance is to get the most of your money while protecting and providing for yourself and your loved ones.
Not all health insurance policies will pay for treatment abroad.
You will need this.
Also, life insurance policies from the U.S. may incur high tax penalties when paid to an individual living out of the United States.
Obviously, there is a lot to consider.
Working with an experienced estate planning attorney will certainly help.
Careful planning can save you money.
Still, the opportunity to experience a different culture and meet new people is priceless.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
Reference: Nasdaq (July 27, 2016) “Money Crossing Borders Requires Special Planning”