The Cross–Border Family Wealth Guide: Advice on Taxes, Investing, Real Estate, and Retirement for Global Families in the U.S. and Abroad

"Andrew Fisher′s The Cross–Border Family Wealth Guide comes to the rescue of those who may not even realize that they need to grapple with tax, financial, and investment requirements and opportunities that are extraordinarily complex The Cross–Border Family Wealth Guide reveals proven pathways out."
From the Foreword by Tim Kochis, JD, MBA, CFP®

THE AUTHORITATIVE PERSONAL FINANCE GUIDE FOR EXPATS

The Cross–Border Family Wealth Guide is the financial guidebook cross–border families have been waiting for to clarify and streamline the complexities of global wealth management. For Americans living abroad and foreigners living in the U.S., this helpful resource details how to navigate the ever–changing rules and regulations which complicate saving and investing, and planning for retirement. Insightful case studies from the real world will prepare you to implement this accessible advice from an accomplished financial advisor specializing in cross–border wealth management. The easiest way to ensure your family′s financial security is through careful planning based on proven results, and by starting here you can:

Gain a firm grasp on all the nuances of international taxation and how to avoid costly pitfalls Manage your assets and plan for your future with the confidence that comes with guidance aimed at your specific circumstances Design a retirement strategy that will protect and grow the assets you worked hard to earn and save

The Cross–Border Family Wealth Guide is the expat′s road map to long–term financial security.

Foreword by Tim Kochis, JD, MBA, CFP®

Preface

Part I The Financial Challenges of a Cross–Border Life

Chapter 1 Who Are These Cross–Border Families?

The Growing Need for a Definitive Guide

Who s Who: Who This Guide Is Meant to Serve

Examples of Who Might Benefit From This Book

Diagramming a Cross–border Person: Residency and U.S. Income Tax Status

How Many Cross–border Professionals and Families Are There?

Unique Challenges Faced by Cross–border Families Connected to the United States

Chapter 2 Unique Challenges and the Regulatory Landscape

The Unequal Nature of Tax Regimes and Reach

The Unique Worldwide Reach of the U.S. Tax System

Complexity in Taxation and Other Regulations

Scarcity of Professional Help and Information

A Changing Legal, Financial, and Regulatory Landscape

The Far Reach of the Foreign Account Tax Compliance Act (FATCA)

Recommending against Secretive Offshore Wealth Strategies

Part II Saving and Investing: Building Your Personal Net Worth

Chapter 3 Building a Strong Foundation

Retirement Destination Unknown: Invest Globally

Spreading It Around

Wealth Creation and Accumulation

Saving From Earnings

Real Estate Ownership

Stock–Based Compensation

Entrepreneurs and Businesses Ownership

Investment Gains and Reinvestment

Inheritance

Diversification: Protecting and Growing Wealth

Considering Your Entire Balance Sheet

The Meaning of Diversification versus Asset Allocation

Spreading Things Around

Asset Allocation in Investment Portfolios

A Well–Allocated Portfolio Can Still Lack Diversification

Allocating Your Net Worth: A Balance Sheet Approach

Six Primary Asset Categories

Three Additional Items of Importance

Cash and Cash Equivalents

Personal Residences

Income Property

Publicly Traded Securities: Stocks and Bonds

Bonds and Bond Funds (Fixed Income)

Stocks and Stock Funds (Equities)

Downsides of Owning Stocks

Concentrated Business Ownership

Personal Debt

Collectibles and Other Hard Assets

Other Private Investment Vehicles

Conclusion

Chapter 4 Investing in the Markets: Stocks and Bonds

Three Important Attributes

Easy Diversification

No Active Involvement

Source of Growth and Risk Control

Stocks and Bonds Work Better Together

Setting A Risk Objective

Managing Emotions While Focusing On The Long–Term

Stock Picking Maybe Not

Investment Advice To Live By

Avoiding the Herd Mentality

Staying Calm in Times of Change

Determining Investment Goals and Objectives

Four Common Investor Objectives Defined

Fundamental Investment Guidelines

Low–Cost Passive Investing

Tax Efficiency Is Huge

Global Diversification For All

Risk Control through Asset Allocation

Regular Rebalancing Adds Value: Don t Invest and Forget

Strategic vs. Tactical Asset Allocation

Strategic Asset Allocation (SAA)

Tactical Asset Allocation (TAA)

Take It Slow

A Jurisdictional Review: Where to Hold Investments?

Large Foreign Banks in Europe or Asia

Have You Earned Your Own Private Banker ?

Not World–Class Investments

Not World–Class Advice

Tax Reporting And FATCA

Large Offshore Private Banks

Smaller Offshore Banks and Insurance Companies

U.S. Brokerage Accounts

Problems with Maintaining Accounts in the United States

Foreign Residents with U.S. Accounts

The Best Choice for Many People

Part III 401(k)s, IRAs, and Other Pensions and Savings Plans

Chapter 5 A Global Approach to 401(k)s and IRAs

Investing Your Serious Money

401(k) Plan Basics

Key Benefits of 401(k) Plans

Global Investing for a Global Retirement

The Location of Underlying Assets Is What Matters

401(k) Plans Lack a Global Perspective

Inherent Currency Risks

Target Date Funds: A Lot To Like and Dislike

IRA Rollovers

IRAs Offer Distinct Advantages

Owning Real Estate within an IRA

Leave It Alone and Let It Grow

Chapter 6 Unique Cross–Border 401(k) Issues

A Lack of International Tax Agreement

Do The Benefits of a 401(k) Follow You?

International Tax Law is Unclear

The 401(k) Gets Respect

Benefits May Travel with You, But Your Account Stays Put

Taking It with You

Must I File U.S. Tax Return Because of a 401(k)?

How Are Distributions Taxed?

What If You are Living Abroad When You Draw out Money?

Tax Withholdings on Distributions to Non–Residents

Many U.S. Institutions Will Over–Withhold Tax on Distributions

How Are Foreign Residents Recovering U.S. Withholding Tax?

Unreported Income Isn t Right (Move back to H2)

Contributions to IRA Accounts While Living Abroad Be Careful

Chapter 7 Foreign Retirement Plans, Pensions, and Other Savings Accounts

Foreign Retirement Plans

U.S. Tax Treatment of Foreign Retirement Plans Is Often Unclear

What is Really Happening Now?

Contributions by U.S. Citizens and Residents to Foreign Plans

For U.S. Taxpayers: Foreign Contributions Typically Do Lower Taxes

It Is Likely Not Being Reported to the IRS at All

Best Planning of All Save Now and Save Later

Existing Foreign Retirement Accounts: The Real World

Better International Reporting and Coordination Is Needed

Investing Inside a Foreign Retirement Account

High Fees and Poor Investments: A Headwind against Growth

Roth IRAs and Roth 401(k)s

How to Get Money In

Foreign Implications of Roth IRAs and Roth 401(k)s

Roth Accounts Don t Speak Foreign Languages

Traditional Pension Income

Pensions Paid Across Borders

U.S. Taxpayers Abroad with U.S. Pension Income

Not Reporting to Foreign Authorities Is Risky

U.S. Taxpayers Abroad with Foreign Pension Income

Non–Residents Living Abroad with U.S. Pension Income

Don t Claim to Be a U.S. Tax Resident When You Are Not

Proper Tax Treatment

Educational Savings: 529 Plans

To Maximize Benefit, Start Very Young

Foreign Residents Beware

Finding Good Advice Is a Challenge

Part IV Real Estate

Chapter 8 Renting, Owning, and Investing

Crazy for Real Estate

Real Estate Appreciation Likely to Slow in Future

Primary Residences and Vacation Homes

Advantages to Owning Your Home

Owning a Vacation Home

The Process of Buying a Home in the U.S.

Selling Expenses and Property Taxes

Buy or Rent upon Arrival?

When You Should Probably Own

Real Estate as an Investment

Before even Considering an Investment

Benefits (and Some Negatives) to Investing in Real Estate

Property Types: Single Family Homes versus Commercial

Types of Commercial Real Estate Assets

Owning Property: Directly or with Other Investors

Real Estate Partnerships

To Rent Out or Sell a Former Home

Why Turn Your Old Home into a Rental Property?

Do You Like Fixing Toilets?

You Have Three Years to Decide

Cross–border Situations Where a Home Is Left Behind

Americans on the Move

Foreign Nationals with U.S. Residency

Foreigners Might Sell Before Becoming a U.S. Tax Resident

Selling Before Entering the U.S., When Gains are Very Large

Sale and Lease Back

Chapter 9 Real Estate Taxation and Other Considerations

Basic Tax Treatment of Real Estate

Taxation of Primary Residences

Tax–Free Gain on Sale of a Primary Residence

The Treatment of Vacation Homes

Taxation of Rentals and Other Investment Property

Reducing Income Tax A Shelter From The Tax Man

Selling Investment Property Calculating Taxable Gains

Tax Basis And Accumulated Depreciation Shifting Income Down

Foreign Properties Often Not Reported to the IRS

Go Ahead, It Won t Hurt Too Much

It s Not Really Forever But It Might Be

Global Transparency Is Coming

Foreign Property Gifted by Family Members

Owning Property Inside of an IRA

Rules To Be Carefully Followed

Be Careful to Read the Fine Print

Other Cross–Border Considerations

Tax–Free Exchange of Investment Property Doesn t Travel Well

Sorry, This Only Works For U.S. Properties

Avoid Owning Foreign Real Estate Through A Foreign Corporation

Unique Currency Risk When Owning Property Abroad

Strange Gains and Losses on the Retirement of Debt on Personal Residence

Non–Resident Aliens: Investing in the U.S. and the EB–5 Program

Non–Resident Aliens Investing in U.S. Real Estate

Becoming a U.S. Resident EB–5 Visas

Estate Taxes On U.S. Property Owned By Non–Residents

Risk of Estate Taxes with Foreign Property

Part V Cross–Border Taxation

Chapter 10 Understanding the Three Types Cross–Border Families

The Unique Complexities of Cross–border Taxation

Tax Profiles: Three Types of Cross–border Families

Type 1: Foreign Nationals in the U.S.

Learning the U.S. Tax System

Type 2: American Citizens and Permanent Residents Living Abroad

Foreign Citizens Leaving the U.S. for Short–Term Assignments

Expatriate Assignments and Tax–Equalized Employment Packages

Localized Employment Contracts in Another Country

Reducing U.S. Tax for Taxpayers Living Abroad

Foreign Earned Income Exclusion

Foreign Housing Exclusion

Foreign Tax Credits

Revoking the Foreign Earned Income Exclusion

Likely U.S. Tax Liabilities For U.S. Taxpayers Abroad

Type 3: Foreign Nationals with Assets in the United States

Taxation by the IRS On Passive U.S. Investments

Interest Income, Dividends, and Capital Gains

Rental Real Estate Property In the U.S.

Over–Withholding Tax on Bond Interest Inside a Fund

Estate Tax Exemptions For Non–Residents

Becoming a U.S. Resident For Tax Purposes

Two Tests to Determine U.S. Residency

Lawful Permanent Resident Test (the Green Card Test)

Substantial Presence Test

Situations When Taxed Only on U.S. Sourced Income

Tax Treaty Basics

Chapter 11 U.S. Tax Overview: Federal and State

Taxing Worldwide Income: The IRS Is Different

Filing Deadlines

Income Tax Overview

Gross Income

Deductions from Gross Income

Itemized or Standard Deductions from AGI

Personal Exemptions

Final Taxable Income

Understanding Marginal Tax Rates

Lower Tax Rates on Capital Gains and Dividends

Real Estate Rental Income

Stock–Based Compensation: Options

Stock–Based Compensation: Stock Grants and RSUs

Exchange Rate Issues When Taxing Foreign Income

State Income Taxes

State Tax Returns Often Based on Federal Returns

Different Treatments of Long–Term Capital Gains and Qualified Dividends

State Tax Residency: Requirements and Termination

When States Come Looking for You

U.S. Tax Residents Living Abroad with State Tax Liabilities

Avoiding Unnecessarily Becoming a State Resident in the First Place

Chapter 12 Additional Tax–Planning Considerations

Investing Outside of the U.S. Avoiding PFIC Rules

Passive Foreign Investment Corporations (PFICs) Explained

Complex Reporting and Punitive Tax Treatment

Advice on Foreign Accounts and PFIC

Three PFIC Scenarios to Consider

Scenario #1

Scenario #2

Scenario #3

Foreign Asset Reporting & Tax Evasion

Foreign Bank Account Reporting (FBAR) Requirements

FBAR Penalties

Other Foreign Asset Reporting: Form 8938

Form 8938 Filing Requirements

Form 8938 Penalties

Additional Foreign Asset Reporting (s/b H2 I think, like Other Foreign Asset )

Voluntary Offshore Disclosure Programs (OVPD)

Other Forms of Taxation in the U.S.

Social Security Taxes

Social Security Tax Calculation

Totalization Agreements

Special Taxes on High–Earners

Additional Medicare Taxes on Ordinary Income

Net Investment Income Tax (NIIT)

Gift and Estate Taxes

Gift Taxes

Estate Taxes

Estate Taxes for Non–Residents

Expatriation Tax (Exit Tax)

Pre–Arrival Planning

Accelerate Gift Planning

Accelerate Income When Possible

Distribute Deferred Income When Possible

Consider Realizing Gains Before Moving Here

Review Existing Asset Structures Before Arriving

Review Immigration and Visa Alternatives

Part VI Retirement Planning

Chapter 13 Planning for a Global Retirement

Where to Retire? A Common Dilemma

Being Near Family Is Most Important

Plan to Retire Anywhere, to Maximize Flexibility

Worldwide Planning is also Inherently More Complex

Investing for Retirement

Having Enough Money to Retire

How Much Money Will You Need?

First Question: What Will You Need to Live On?

Second Question: What Are Your Sources of Ongoing Retirement Income?

Third Question: Will Your Retirement Savings Make Up the Difference?

Safe Withdrawal Rates: The 4% Rule

What Is A Successful Retirement?

The Important Role of Financial Planning

Longevity Risk is Alive and Well

Inheritances: Plan for It, But Don t Count on It

Organizing and Optimizing Worldwide Income and Assets

Assessing Sources of Income in Retirement

Organizing Your Assets

Cash and Cash Equivalents

Qualified Accounts: 401(k)s, IRAs, & Other U.S. & Foreign Retirement Accounts

Non–Qualified Investment Accounts Generally Holding Stocks and Bonds

Concentrated Stock and Stock Options

Real Estate

Alternative Investments

Currency Exposure: A Real Retirement Risk

Chapter 14 Considerations for Cross–Border Retirees

Tax Planning for Retirement

Taxes on Pension and Social Security Income

Taxes on Investment Income and Gains

Taxes on Distributions from Qualified Accounts

Taking Retirement Accounts with You

Cash Management and Account Administration

FATCA Fallout: Harder to Deal With Big International Banks

Accessing Your Money

Foreign Exchange Costs Minimize Translations

Efficient Cross–Border Money Transfers

Social Security and Foreign Pensions

Social Security Benefits Earned Are Usually Yours for Life

Possible Windfall Elimination Reduction to Benefits

Long–Term Viability and Ongoing Changes

Filing for Benefits Early, on Time, or Late?

Foreign Government Pensions

Drawing on Tax–Deferred Accounts

The Ordering Of Withdrawals

Conclusion

An Overview of Key Points

Final Thoughts and Words of Encouragement

Index

ANDREW FISHER is widely regarded as a leading wealth advisor to cross–border families. He frequently writes and speaks to the unique financial planning and investment complexities faced by international families, particularly when an individual is a tax resident of the United States. Andrew holds the CFA and CPA designations, and serves as president and founder of Worldview Wealth Advisors, an independent wealth management firm focused on financial planning and investment advice for cross–border families.