Thun Financial Expat Research Articles
Common Mistakes in Cross-Border Investing
Top Ten Investment Mistakes Made By Americans Abroad – A concise review of the most common investment mistakes made by Americans abroad. We drew on the firm’s great depth in cross-border investing to come up with this list to point out several mistakes commonly seen.
PFICs and Foreign Investments
Americans in the UK Need to Avoid this Catch-22 Investment Trap – The U.S. Passive Foreign Investment Company (PFIC) tax regime raises high hurdles for Americans in the United Kingdom to invest wisely and tax efficiently. This is because the United Kingdom has a parallel system of punitive taxation of non-UK funds. This investment “Catch-22” can be successfully navigated by investing in efficient U.S. exchange traded funds that are also so-called UK “reporting funds.” Most importantly, the new U.S. FATCA legislation makes this once easily ignored tax issue critical for all American investors living in the United Kingdom.
Why American Expats Should Never Own Non-US Investment Funds – If you are a U.S. citizen or a U.S. permanent resident who has been living and working outside the U.S. and investing your savings through a non-US financial institution, you need to learn what a Passive Foreign Investment Company (PFIC) is very quickly. Why? Because the passage of the Foreign Account Tax Compliance Act (FATCA) in 2010 is ushering in a new era of dramatically heightened enforcement by the U.S. of laws regarding taxation of and reporting on investments held outside the U.S. by U.S. Citizens or U.S. permanent residents.
FATCA and Its Effects
The US FATCA (Foreign Account Tax Compliance Act) Law: What US Expats Need to know – This expat research article examines the FATCA law (Foreign Account Tax Compliance Act) and explains the impact it has on Americans abroad. It details how the legislation forces foreign financial institutions to directly report to the IRS on assets held by Americans and why this makes compliance with many old and new reporting requirements much more critical than has been the case previously. Practical implications for Americans abroad of these big changes are discussed and recommended actions are suggested to avoid being caught unaware as the FACTA rules raise the difficulty of compliance and risks of non-compliance.
2013 U.S. Tax Changes and Investment Strategy for Americans Abroad – 2013 ushers in a series of substantial tax increases for all American taxpayers. These changes alter the landscape for efficient investment management and financial planning. Investors seeking to maximize long-term investment returns must factor these changes into their wealth management strategies. This is particularly true for Americans abroad because the 2013 tax changes coincide with other significant tax and compliance changes related to FATCA. In this note, we review the major changes taking effect on January 1st 2013. Next, we identify aspects of the changes that uniquely affect Americans living abroad. We then discuss a range of possible investment planning strategies that can be applied to mitigate the impact of the new, higher tax environment faced by U.S. taxpayers living abroad.
Reasons that U.S. Brokerage Accounts of American Expats are Being Closed – It is widely reported that U.S. banks and brokerage firms are closing American expat accounts with increased frequency and also restricting mutual fund sales. This Thun Research article briefly discusses reasons behind brokerage account restrictions and proposes solutions for frustrated U.S. expat investors.
Financial Planning and Retirement Accounts
Special Financial Planning Considerations for Mixed (U.S./Non-U.S.) Nationality Couples– (NEW) This article focuses on important financial planning issues facing mixed nationality families where one spouse or partner is a U.S. tax resident (citizen or green card holder) and the other spouse is a non-U.S. tax resident. It analyzes tax filing options, details financial account types, and identifies additional strategies for handling estate and income tax liabilities.
Gifting Appreciated Assets to Non-resident Spouses – (NEW) A companion to our piece on financial planning for non-resident spouses, this piece examines how gifting of appreciated assets (in particular real estate and stock) can be used to mitigate an expat Americans exposure to U.S. Income and Estate Taxes while ensuring long-term wealth accumulation.
American Expat Social Security and Retirement Abroad – American expats working and retiring abroad may receive U.S. Social Security benefits if they are eligible. However, there are several special issues that American expats must first consider such as bilateral social security agreements and foreign pension plans that can impact the total amount of benefits received. This note addresses common expat issues and strategies to maximize wealth accumulation.
IRAs, Roth IRAs and the Conversion Decision for Expat Americans (Updated for 2016) – This article helps Americans abroad sort through the complexities of retirement planning by 1) reviewing the difference between traditional and Roth IRAs 2) reviewing special IRA consideration for American expats and 3) providing a framework to analyze whether or not an American abroad should convert a traditional IRA to Roth.
Cross-Border Philanthropic Strategies – An introduction to developing a cross-border philanthropic strategy to maximize charitable donations after the various tax and compliance issues facing Americans Abroad.
Why State Taxes Make Roth Conversion a Huge Opportunity for Americans Abroad – This note analyzes how the exemption from state income taxation enjoyed by most Americans abroad significantly alters the calculation that determines whether or not Roth contributions and/or Roth conversion make financial sense. It concludes that the exemption from state taxes makes Roth conversion an especially attractive financial opportunity for Americans abroad that should be capitalized on while they are still living outside the U.S.
American Expats and Foreign Pension Plans – This expat financial research article briefly summarizes common issues related to foreign pension plans and demonstrates how to integrate foreign pension plans into a comprehensive cross-border retirement plan.
U.S. Expat Tax Term Glossary – This glossary provides a brief overview of some of the common American expat tax issues that affect investment decisions.
Saving for College
Saving For College as an American Expat Parent – This Thun Research article discusses 529 college savings plans, Coverdell ESAs, and other tax-efficient investing techniques that Americans living abroad can utilize to successfully save for their children’s education. We also focus on some of the unique obstacles faced by U.S. expats in taking advantage of these special opportunities.
Currency and Investment Strategy
Managing Currency Risk: As an American Abroad, In What Currency Should I Save and Invest? – Currency issues are often one of the most vexing and least well understood issues for investors. This is especially true for Americans abroad whose salaries and other income sources are often denominated in currencies other than U.S. Dollars (USD). The good news is that understanding how to properly incorporate currency considerations into a sound, long-term investment strategy is much easier than commonly understood. In this note we pull back the opaque veil of “currency risk” that clouds investment and financial planning decisions for Americans abroad.
How Diversification Beat the Bear Market 2000-2009 – At Thun Financial Advisors we like to emphasize that proper diversification is the single most important principle of successful investing. Nevertheless, it is actually quite rare to find an investor who has a fully diversified investment portfolio. Many investors who believe they are diversified are at best only partially diversified. Frequently, we find investors who are not just under-diversified, but who are thoroughly un-diversified. Under-diversification typically takes the form of too much cash; over concentration in stocks; over-concentration in US stocks; no exposure to commodities, small cap stocks, emerging markets or real estate. In some cases, an investor has all their money invested in just a few stocks and/or bonds, often times in the same country and industry sector.
Six Reasons American Expats Should Keep Their Money on Shore and In the U.S. – Americans living abroad often end up moving their investment accounts to non-US financial institutions. Whether they employ a large global investment bank headquartered in Switzerland or the UK or find themselves enticed into the world of “off-shore” banking in places like Lichtenstein or Panama, they are making a mistake. The very high costs of investment services outside the US, the lack of proper tax advice, and the risks engendered in weak regulatory regimes constitute serious impediments to successful long-term wealth accumulation. This article explains the six most important reasons that Americans living abroad should keep their money at US based financial institutions and seek out the advice of an experienced financial advisor who understands the special circumstances of Americans living abroad.
Behavior and Returns – This .pdf file presents a chart of returns for the common investor and compares and analyzes those returns versus those for the market as a whole.
Please see the Americans Living Abroad page for more information about the investment management and financial planning services that Thun provides for American expatriates.