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

259 Pages·2017·2.39 MB·English
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TrimSize:6inx9in (cid:2) Fisher ffirs.tex V2-12/14/2016 4:09pm Pagei The Cross-Border Family Wealth Guide (cid:2) (cid:2) (cid:2) TrimSize:6inx9in (cid:2) Fisher ffirs.tex V2-12/14/2016 4:09pm Pageiii The Cross-Border Family Wealth Guide ADVICEONTAXES,INVESTING,REALESTATE,ANDRETIREMENTFOR GLOBALFAMILIESINTHEU.S.ANDABROAD (cid:2) (cid:2) Andrew Fisher (cid:2) TrimSize:6inx9in (cid:2) Fisher ffirs.tex V2-12/14/2016 4:09pm Pageiv Copyright©2017byAndrewFisher.Allrightsreserved. PublishedbyJohnWiley&Sons,Inc.,Hoboken,NewJersey. PublishedsimultaneouslyinCanada. Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,ortransmittedin anyformorbyanymeans,electronic,mechanical,photocopying,recording,scanning,or otherwise,exceptaspermittedunderSection107or108ofthe1976UnitedStatesCopyright Act,withouteitherthepriorwrittenpermissionofthePublisher,orauthorizationthrough paymentoftheappropriateper-copyfeetotheCopyrightClearanceCenter,Inc.,222 RosewoodDrive,Danvers,MA01923,(978)750-8400,fax(978)646-8600,orontheWebat www.copyright.com.RequeststothePublisherforpermissionshouldbeaddressedtothe PermissionsDepartment,JohnWiley&Sons,Inc.,111RiverStreet,Hoboken,NJ07030, (201)748-6011,fax(201)748-6008,oronlineathttp://www.wiley.com/go/permissions. LimitofLiability/DisclaimerofWarranty:Whilethepublisherandauthorhaveusedtheir besteffortsinpreparingthisbook,theymakenorepresentationsorwarrantieswithrespect totheaccuracyorcompletenessofthecontentsofthisbookandspecificallydisclaimany impliedwarrantiesofmerchantabilityorfitnessforaparticularpurpose.Nowarrantymaybe createdorextendedbysalesrepresentativesorwrittensalesmaterials.Theadviceand strategiescontainedhereinmaynotbesuitableforyoursituation.Youshouldconsultwitha professionalwhereappropriate.Neitherthepublishernorauthorshallbeliableforanyloss ofprofitoranyothercommercialdamages,includingbutnotlimitedtospecial,incidental, consequential,orotherdamages. (cid:2) Forgeneralinformationonourotherproductsandservicesorfortechnicalsupport,please (cid:2) contactourCustomerCareDepartmentwithintheUnitedStatesat(800)762-2974,outside theUnitedStatesat(317)572-3993orfax(317)572-4002. Wileypublishesinavarietyofprintandelectronicformatsandbyprint-on-demand.Some materialincludedwithstandardprintversionsofthisbookmaynotbeincludedine-booksor inprint-on-demand.IfthisbookreferstomediasuchasaCDorDVDthatisnotincludedin theversionyoupurchased,youmaydownloadthismaterialathttp://booksupport.wiley.com. FormoreinformationaboutWileyproducts,visitwww.wiley.com. LibraryofCongressCataloging-in-PublicationData: Names:Fisher,Andrew,1971–author. Title:Thecross-borderfamilywealthguide:adviceontaxes,investing,realestate,and retirementforglobalfamiliesintheU.S.andabroad/AndrewFisher. Description:Hoboken,NewJersey:JohnWiley&Sons,Inc.,[2017]|Includesindex. Identifiers:LCCN2016039868|ISBN9781119234272(hardcover)| ISBN9781119234296(ePDF)|ISBN9781119234289(epub) Subjects:LCSH:Americans—Foreigncountries—Finance,Personal.| Aliens—UnitedStates—Finance,Personal.|Families—Finance,Personal.| Estateplanning.|Wealth—Management.|Internationalfinance. Classification:LCCHG179.F533782017|DDC332.0240089/13—dc23 LCrecordavailableathttps://lccn.loc.gov/2016039868 CoverDesign:Wiley CoverImage:©IanMcKinnell/GettyImages,Inc. PrintedintheUnitedStatesofAmerica. 10 9 8 7 6 5 4 3 2 1 (cid:2) TrimSize:6inx9in (cid:2) Fisher ffirs.tex V2-12/14/2016 4:09pm Pagev Thisbookisdedicatedtomythreewonderfulchildren—Ella,Mack, andVivian.Iloveyouguyslikethewholeworld. (cid:2) (cid:2) (cid:2) TrimSize:6inx9in (cid:2) Fisher ftoc.tex V1-12/10/2016 10:54am Pagevii Contents ForewordbyTimKochis,JD,MBA,CFP® xvii Preface xix Acknowledgments xxiii AbouttheAuthor xxv Part I: Financial Challenges of a Cross-Border Life 1 Chapter1 WhoAreTheseCross-BorderFamilies? 3 (cid:2) (cid:2) TheGrowingNeedforaDefinitiveGuide 4 Who’sWho:WhoThisBookIsMeanttoServe 6 ExamplesofWhoMightBenefitfromThisBook 7 DiagrammingaCross-BorderPerson:Residencyand U.S.IncomeTaxStatus 8 HowManyCross-BorderProfessionalsandFamiliesAreThere? 10 UniqueChallengesFacedbyCross-BorderFamiliesConnected totheUnitedStates 11 Chapter2 UniqueChallengesandtheRegulatoryLandscape 12 TheUnequalNatureofTaxRegimesandReach 12 TheUniqueWorldwideReachoftheU.S.TaxSystem 13 ComplexityinTaxationandOtherRegulations 14 ScarcityofProfessionalHelpandInformation 15 AChangingLegal,Financial,andRegulatoryLandscape 17 TheFarReachoftheForeignAccountTaxComplianceAct(FATCA) 19 RecommendingAgainstSecretiveOffshoreWealthStrategies 20 vii (cid:2) TrimSize:6inx9in (cid:2) Fisher ftoc.tex V1-12/10/2016 10:54am Pageviii viii Contents Part II: Saving and Investing: Building Your Personal Net Worth 21 Chapter3 BuildingaStrongFoundation 23 RetirementDestinationUnknown:InvestGlobally 23 SpreadingItAround 24 WealthCreationandAccumulation 25 SavingfromEarnings 25 RealEstateOwnership 26 Stock-BasedCompensation 27 EntrepreneursandBusinessesOwnership 27 InvestmentGainsandReinvestment 28 Inheritance 28 Diversification:ProtectingandGrowingWealth 28 ConsideringYourEntireBalanceSheet 29 TheMeaningof“Diversification”versus“AssetAllocation” 30 SpreadingThingAround 30 AssetAllocationinInvestmentPortfolios 30 (cid:2) (cid:2) AWell-AllocatedPortfolioCanStillLackDiversification 32 AllocatingYourNetWorth:ABalanceSheetApproach 32 SixPrimaryAssetCategories 33 ThreeAdditionalItemsofImportance 33 CashandCashEquivalents 33 PersonalResidences 34 IncomeProperty 35 PubliclyTradedSecurities:StocksandBonds 36 BondsandBondFunds(FixedIncome) 36 StocksandStockFunds(Equities) 37 DownsidesofOwningStocks 38 ConcentratedBusinessOwnership 39 PersonalDebt 40 CollectiblesandOtherHardAssets 41 OtherPrivateInvestmentVehicles 41 Conclusion 42 Chapter4 InvestingintheMarkets:StocksandBonds 43 ThreeImportantAttributes 43 EasyDiversification 43 NoActiveInvolvement 43 (cid:2) TrimSize:6inx9in (cid:2) Fisher ftoc.tex V1-12/10/2016 10:54am Pageix Contents ix SourceofGrowthandRiskControl 44 StocksandBondsWorkBetterTogether 44 SettingaRiskObjective 45 ManagingEmotionsWhileFocusingontheLongTerm 45 StockPicking—MaybeNot 46 InvestmentAdvicetoLiveBy 47 AvoidingtheHerdMentality 48 StayingCalminTimesofChange 49 DeterminingInvestmentGoalsandObjectives 49 FourCommonInvestorObjectivesDefined 50 FundamentalInvestmentGuidelines 51 Low-CostPassiveInvesting 52 TaxEfficiencyIsHuge 53 GlobalDiversificationforAll 53 RiskControlThroughAssetAllocation 54 RegularRebalancingAddsValue:Don’tInvestandForget 54 StrategicVersusTacticalAssetAllocation 55 StrategicAssetAllocation(SAA) 55 (cid:2) (cid:2) TacticalAssetAllocation(TAA) 55 TakeItSlow 56 AJurisdictionalReview:WheretoHoldInvestments? 57 LargeForeignBanksinEuropeorAsia 58 HaveYouEarnedYourOwnPrivateBanker? 58 NotWorld-ClassInvestments 58 NotWorld-ClassAdvice 59 TaxReportingandFATCA 59 LargeOffshorePrivateBanks 60 SmallerOffshoreBanksandInsuranceCompanies 61 U.S.BrokerageAccounts 62 ProblemswithMaintainingAccountsintheUnitedStates 63 ForeignResidentswithU.S.Accounts 64 TheBestChoiceforManyPeople 65 Part III: 401(k)s, IRAs, and Other Pensions and Savings Plans 67 Chapter5 AGlobalApproachto401(k)sandIRAs 69 InvestingYourSeriousMoney 69 401(k)PlanBasics 70 (cid:2) TrimSize:6inx9in (cid:2) Fisher ftoc.tex V1-12/10/2016 10:54am Pagex x Contents KeyBenefitsof401(k)Plans 70 GlobalInvestingforaGlobalRetirement 72 TheLocationofUnderlyingAssetsIsWhatMatters 72 401(k)PlansLackaGlobalPerspective 74 InherentCurrencyRisks 74 TargetDateFunds:ALottoLikeandDislike 76 IRARollovers 76 IRAsOfferDistinctAdvantages 77 OwningRealEstateWithinanIRA 78 LeaveItAloneandLetItGrow 78 Chapter6 UniqueCross-Border401(k)Issues 80 ALackofInternationalTaxAgreement 81 DotheBenefitsofa401(k)FollowYou? 82 InternationalTaxLawIsUnclear 82 The401(k)GetsRespect 82 BenefitsMayTravelwithYou,butYourAccountStaysPut 83 TakingItwithYou 84 (cid:2) (cid:2) MustIFileaU.S.TaxReturnBecauseofa401(k)? 84 HowAreDistributionsTaxed? 85 WhatIfYouAreLivingAbroadWhenYouDrawOutMoney? 85 TaxWithholdingsonDistributionstoNonresidents 87 ManyU.S.InstitutionsWillOverwithholdTaxonDistributions 87 HowAreForeignResidentsRecoveringU.S.WithholdingTax? 87 UnreportedIncomeIsn’tRight 88 ContributionstoIRAAccountsWhileLivingAbroad—BeCareful 89 Chapter7 ForeignRetirementPlans,Pensions,andOtherSavings Accounts 91 ForeignRetirementPlans 91 U.S.TaxTreatmentofForeignRetirementPlansIsOftenUnclear 92 WhatIsReallyHappeningNow? 92 ContributionsbyU.S.CitizensandResidentstoForeignPlans 93 ForU.S.Taxpayers:ForeignContributionsTypicallyDoLowerTaxes 93 ItIsLikelyNotBeingReportedtotheIRSatAll 94 BestPlanningofAll—SaveNowandSaveLater 94 (cid:2) TrimSize:6inx9in (cid:2) Fisher ftoc.tex V1-12/10/2016 10:54am Pagexi Contents xi ExistingForeignRetirementAccounts:TheRealWorld 95 BetterInternationalReportingandCoordinationIsNeeded 96 InvestingInsideaForeignRetirementAccount 96 HighFeesandPoorInvestments:AHeadwindAgainstGrowth 96 RothIRAsandRoth401(k)s 97 HowtoGetMoneyIn 98 ForeignImplicationsofRothIRAsandRoth401(k)s 99 RothAccountsDon’tSpeakForeignLanguages 99 TraditionalPensionIncome 100 PensionsPaidAcrossBorders 100 U.S.TaxpayersAbroadwithU.S.PensionIncome 101 NotReportingtoForeignAuthoritiesIsRisky 101 U.S.TaxpayersAbroadwithForeignPensionIncome 102 NonresidentsLivingAbroadwithU.S.PensionIncome 102 Don’tClaimtoBeaU.S.TaxResidentWhenYouAreNot 103 ProperTaxTreatment 103 EducationalSavings:529Plans 104 ToMaximizeBenefit,StartVeryYoung 105 (cid:2) (cid:2) ForeignResidentsBeware 105 FindingGoodAdviceIsaChallenge 106 Part IV: Real Estate 107 Chapter8 Renting,Owning,andInvesting 109 CrazyforRealEstate 109 RealEstateAppreciationLikelytoSlowinFuture 109 PrimaryResidencesandVacationHomes 110 AdvantagestoOwningYourHome 110 OwningaVacationHome 111 TheProcessofBuyingaHomeintheUnitedStates 112 SellingExpensesandPropertyTaxes 113 BuyorRentuponArrival? 113 WhenYouShouldProbablyOwn 115 RealEstateasanInvestment 115 BeforeEvenConsideringanInvestment 115 Benefits(andSomeNegatives)toInvestinginRealEstate 116 (cid:2) TrimSize:6inx9in (cid:2) Fisher ftoc.tex V1-12/10/2016 10:54am Pagexii xii Contents PropertyTypes:Single-FamilyHomesVersusCommercial 117 TypesofCommercialRealEstateAssets 117 OwningProperty:DirectlyorwithOtherInvestors 119 RealEstatePartnerships 119 ToRentOutorSellaFormerHome 120 WhyTurnYourOldHomeintoaRentalProperty? 120 DoYouLikeFixingToilets? 121 YouHaveThreeYearstoDecide 121 Cross-BorderSituationsWhereaHomeIsLeftBehind 122 AmericansontheMove 122 ForeignNationalswithU.S.Residency 122 ForeignersMightSellBeforeBecomingaU.S.TaxResident 123 SellingBeforeEnteringtheUnitedStates,WhenGainsAreVeryLarge 124 SaleandLeaseBack 124 Chapter9 RealEstateTaxationandOtherConsiderations 125 BasicTaxTreatmentofRealEstate 125 (cid:2) TaxationofPrimaryResidences 125 (cid:2) Tax-FreeGainonSaleofaPrimaryResidence 126 TheTreatmentofVacationHomes 127 TaxationofRentalsandOtherInvestmentProperty 127 ReducingIncomeTax—AShelterfromtheTaxMan 128 SellingInvestmentProperty—CalculatingTaxableGains 129 TaxBasisandAccumulatedDepreciation—ShiftingIncomeDown 129 ForeignPropertiesOftenNotReportedtotheIRS 130 GoAhead,ItWon’tHurtTooMuch 131 It’sNotReally“Forever”—ButItMightBe 131 GlobalTransparencyIsComing 132 ForeignPropertyGiftedbyFamilyMembers 132 OwningPropertyInsideofanIRA 133 RulestoBeCarefullyFollowed 133 BeCarefultoReadtheFinePrint 134 OtherCross-BorderConsiderations 135 Tax-FreeExchangeofInvestmentProperty—Doesn’tTravelWell 135 Sorry,ThisOnlyWorksforU.S.Properties 136 AvoidOwningForeignRealEstateThroughaForeignCorporation 136 UniqueCurrencyRiskWhenOwningPropertyAbroad 137 (cid:2)

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Make sense of international personal finance with expat-specific expert advice The Cross-Border Family Wealth Guide is the long-awaited financial handbook for cross border families, with expert insight from a financial advisor who specializes in expat issues. Whether you're an American living abroad
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