Financial Planning Considerations
for Americans Moving Abroad

Tom Zachystal of International Asset Management and Shane Clark of EuroAmerican Financial Advisors.

Moving abroad can be an exciting adventure, but it also comes with a host of financial considerations that Americans need to plan for carefully. Whether you’re relocating for work, retirement, or simply seeking a change of scenery, understanding the financial implications of living abroad is necessary for a smooth transition and long-term financial well-being.

Tax implications

One of the most critical aspects of financial planning for expats is understanding the tax implications of living abroad. Americans are subject to US tax laws regardless of where they reside, which means US citizens and green card holders must continue to file US tax returns and may even be liable for US taxes on their foreign income. However, there are tax benefits available, such as the Foreign Earned Income Exclusion(FEIE) and the Foreign Tax Credit, which can help reduce the tax burden on foreign-earned income. There are also tax treaties between the US and many foreign nations to prevent double taxation. Beyond this, there are additional reporting requirements for US citizens who meet a certain threshold of income held by foreign financial institutions.

Currency exchange

Moving abroad often involves dealing with different currencies and banking systems. Consider how you will manage your finances in your new country, including opening local bank accounts, understanding currency exchange rates, and transferring funds between accounts. It’s also important to assess the fees associated with international transactions and explore options for minimizing costs like online money transfer options or currency brokers who can often secure better exchange rates.

US and international banking and brokerage firms

Numerous US banks and brokerage firms have opted to either restrict or limit services for non-US residents in various countries.

Before relocating abroad, it’s important to reach out to your US financial institutions. Inquire about the implications of your move, including whether they permit you to retain your accounts and if they facilitate communication and online access to your accounts from overseas.

Accessing financial services overseas can also pose challenges for Americans due to foreign financial institution’s obligation to share account details of American clients with the IRS. While many foreign banks comply with these regulations, some avoid the reporting burden by not accepting US clients altogether.

Retirement planning

For Americans moving abroad, retirement planning takes on added complexity. It’s important to consider how your move will impact retirement savings accounts such as IRAs and 401(k)s, as well as any pension benefits you may have accrued. For both US residents and nonresident aliens, the rules for early retirement account withdrawals remain the same. , although note that tax benefits may not be recognized in other countries, depending on the details of a tax treaty between the US and your country of residence.

Cross-border estate planning

Estate planning needs special consideration when assets are held in multiple countries. Establishing international wills and trusts to ensure the smooth transfer of assets across borders is a wise move, as some foreign nations may not recognize US wills and may impose higher taxes and in some cases, hereditary laws in your country of residence may override your wishes. Furthermore, it’s necessary to be aware of foreign estate or inheritance taxes.

Investment strategy

When moving abroad, review your investment portfolios and consider how your new residency status may impact your investment strategy. Factors such as currency movements, US and foreign tax implications, tax treaties, limitations to investing abroad due to US reporting requirements or to investing in the US due to EU MiFID II rules, and access to investment opportunities may all impact the way you invest going forward. On the positive side, living and investing abroad can bring new opportunities and better diversification.
pension payments abroad and how to comply with IRS reporting requirements.

Real Estate Considerations

Understanding the legal and regulatory framework governing real estate transactions in your new country is essential when jumping into a new market. Familiarize yourself with property ownership laws, residency requirements for property ownership, and any restrictions on foreign ownership. It’s also essential, in common with all aspects of financial planning for expats, to work with qualified legal professionals who can guide you through the purchasing or renting process and ensure compliance with local laws as well as advise on US and local tax implications..

If you’re planning to sell a property in the US to finance the purchase of a new home abroad, it can be advisable to finalize the sale before relocating. This is because, once you become a resident of another country, you might become subject to local capital gains tax liabilities.

In conclusion, financial planning for Americans moving abroad requires careful consideration of a wide range of factors. By taking the time to understand these considerations and plan accordingly, you can set yourself up for financial success and enjoy a rewarding experience living and working in a new country. Consulting with financial advisors and other professionals who specialize in expatriate finances can provide valuable guidance and support throughout the process.

For inquiries about moving to Europe, visit https://eurousafa.com/
For inquiries about moving to all other countries, visit https://iamadvisors.com/