Being a US Expat By Kristopher Heck
eing an expat (wherever you are in the world and whichever country you are from) can be both rewarding and challenging in equal measure. In our experience that is precisely why many individuals decide to make such a move. Being a US expat comes with its own challenges. Aside from representing the largest free market economy and democracy in the world, as a US citizen you necessarily have to pay more attention to your personal financial situation. Why is this? The United States is one of the few countries in the world that operates a citizenship-based taxation system. This means that wherever you live in the world as a US expat you must report income and gains on your global assets. This is counterâ€“intuitive to most other expats who only pay tax in the country they live (we have all heard stories about the lifestyle of expats in Singapore or Dubai who pay very little income tax for example). US expats on the other hand need to pay attention and understand how this global taxation affects not just how they are paid by employers but the financial decisions they take in their country of residence.
In our experience US expats typically make the three same mistakes. Firstly, they will continue to work
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with their US CPA back home who most likely does not understand the local tax system where they live. It is not unusual for them also to engage with a local tax advisor who similarly does not understand US taxes. This leads to duplicated compliance costs and honest mistakes sometimes leading to expats paying tax twice or simply paying too much tax. Secondly, many US expats will have a US will. This is probably an important item on their predeparture check list as they head of for a foreign posting. What is often forgotten or neglected is the potential scenario for them to pass away whilst living abroad. It is therefore important that they understand the estate planning rules in their new country of residence and, if necessary, seek specialist help to prepare a will that covers both jurisdictions. Thirdly, many US expats quite rightly maintain a relationship with their financial advisor back home. Many also engage with local advisors as they seek to make plans in their new country of residence. As with the tax and legal examples cited above this can often lead to genuine and unintended mistakes. Providing financial advice to US expats involves understanding the tax regimes of both the US and the new country of residence, taking into consideration foreign exchange
rates and most importantly in our minds being thoughtful about what investment products to invest in to ensure that the expat is not disadvantaged by unnecessary tax charges or costly structures that are simply not appropriate for a US citizen. Considering these points alongside a proper financial plan means that providing financial advice to US expats is a specialized role requiring deep knowledge and experience. Many expats we have spoken to over the years (and this includes me and my colleagues as we too are US expats) have explained that financial peace of mind allows them to simply enjoy being abroad, probably with their families, enjoying the experience.
Kristopher Heck is Managing Partner and Chief Investment Officer at Tanager Wealth Management LLP. He established Tanager Wealth Management with fellow US expat Jeff Hedges in November 2012 as a direct result of his own frustrations at not being able to find a financial advisor who understood what it meant to be a US Expat in the UK. Tanager Wealth Management is staffed by US expat financial advisors who understand what it means live and plan with crossborder tax issues. 020 7871 8440 email@example.com Tanager Wealth Management LLP is authorised and regulated by the Financial Conduct Authority and is an SEC Registered Investment Adviser.