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

259 Pages·2017·2.386 MB·English

by  Andrew Fisher, Tim Kochis

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The Cross-Border
Family Wealth Guide
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The Cross-Border
Family Wealth Guide
ADVICEONTAXES,INVESTING,REALESTATE,ANDRETIREMENTFOR
GLOBALFAMILIESINTHEU.S.ANDABROAD
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Andrew Fisher
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Copyright©2017byAndrewFisher.Allrightsreserved.
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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.
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Thisbookisdedicatedtomythreewonderfulchildren—Ella,Mack,
andVivian.Iloveyouguyslikethewholeworld.
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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