|||| Vol. V Issue 2
FEATURE ARTICLE
American Expat Investing: What you need to know
EXPAT INTERVIEW
Kathleen Simon of FAWCO
PRODUCT SPOTLIGHT
International Art & Property Insurance
DID YOU KNOW
Expat Youth Scholarship Deadline
Foreign Service Youth Foundation Awards
Employee Profile: Meet Porche Sidbury
EXPATRIATE RESOURCES
Web Sites about Expat Wealth and Financial Management
ON A GOOD NOTE
A word from our clients
American Expat Investing : What you need to know
By Andrew Fisher, President, Maxim Global Wealth Advisors
Living a multinational lifestyle has many wonderful benefits, but it also brings unique challenges. The complexity of managing financial wealth certainly tops the list of these challenges. This article touches on some of the most critical financial considerations for American expatriates, including banking, investment management, taxes, and real estate.
Managing cash and banking needs while living abroad can be difficult. To make things easier and less costly, expats should maintain two bank accounts. The first should be a U.S.-based account with offerings like credit and debit cards, and convenient web features like online bill-pay and money transfers. The second should be at a local bank in the resident country to be used for day-to-day living expenses– this account should hold a minimum reserve of 3-6 months of living expenses. Some foreign banks offer U.S. dollar-denominated accounts, a terrific option for expats as they can simplify and lower the cost of foreign currency exchange.
As with banking and cash management, many American expats find that managing their investments while living abroad is a difficult and time-consuming burden. Just finding a suitable brokerage firm willing to hold their assets can be a challenge. For expats seeking financial advice, it is nearly impossible to find a qualified advisor, as few financial advisors understand the unique tax and investment implications American expats face. The best choice is to find an advisor who specializes in advice for expats. Fee-only investment advisors who operate in the U.S. as Registered Investment Advisors (RIA’s) are a wise choice, as RIA’s fees are not tied to product commissions.
Another common investment-related concern for wealthy American expats is how to structure their investment portfolios given that they may not know their ultimate retirement destination and currency. By investing in global stocks and bonds, you will gain a broader level of diversification and have access to more attractive investment opportunities. It is also important to consider matters like currencies, regional exposure, and taxes.
Taxation is one more area with extra layers of complexity for American expatriates. There is often a misconception that expats do not need to file taxes if their income is below the “Foreign Earned Income Exclusion” amount ($87,600 for 2008). However, this is incorrect. All U.S. citizens are required to file an income tax return every year, regardless of their country of residence. Many expats are concerned that this means they will be double-taxed on their income – once by the U.S. and again by their host country. However, there is a system of exclusions and credits in place to avoid double taxation. The four pillars of this system are: the Foreign Earned Income Exclusion, the Foreign Housing Exclusion, the Foreign Tax Credit (General Limitation) and the Foreign Tax Credit (Passive). Since individual circumstances are unique and regulatory, and tax regulations vary substantially by country, it is wise to seek the advice of an expatriate tax specialist even if you do not have substantial income or assets.
When it comes to real estate investing, the conventional wisdom that owning a home is better than renting is not necessarily true for expats. While there is often a tax advantage to home ownership through mortgage-interest deductions when abroad (similar to the U.S.), expats can often also deduct certain rental housing expenses. This benefit may diminish the appeal of foreign homeownership. Further lessening the appeal of ownership is a higher likelihood of mobility among expats, and expensive sales and transfer costs. American expats may also face a significant tax risk derived from exchange rate fluctuations when owning real estate abroad, especially if the purchase is financed with a foreign mortgage. It is possible to incur a significant tax liability due to either a capital gain on the sale of a home or a currency gain on the retirement of a foreign mortgage. These outcomes can occur even if there is a loss on the sale of the home. Finally, investors should not expect significant returns on real estate after expenses and foreign property can create complicated estate tax problems. Because of these added risks, Americans considering the purchase of foreign property should proceed with caution.
Managing personal wealth as an American expatriate can be complex and hard to handle alone. This article was written with excerpts from American Expat Investing: The 4 Keys to Success, by the professionals at Maxim Global Wealth Advisors, a premier wealth advisor to American expatriates and multinationals. Maxim specializes in investment management, tax strategies, and retirement planning. For more information, visit maximadvisors.com.
Click here to return to the table of contents.
 |
Expatriate Question & Answer |
|
Where do you currently reside? How many years have you lived there?
I moved one year ago to Bougy-Villars in Switzerland, between Geneva and Lausanne.
How many years have you lived away from your home country?
34 years
What other countries have you lived in?
Briefly Zambia and France, and England for 33 years.
How do you stay in touch with other expatriates?
I keep in touch through FAWCO. It is really a world player and enriches the experience of all of us living overseas, as well as our host communities.
What helped you decide to work and move abroad?
I came to study at University College London and met an Englishman!
What do you like most about living abroad? Least?
Most of my 34 years have been in the UK, and I love the diversity of people and cultures in London in particular. It is such an exciting city. The least – is the uninformed attitude towards Americans and how we’re all lumped together.
What was the biggest adjustment you had to make?
People want you to be like them wherever you go, so I worked hard to maintain my own identity and have now been accepted for that, but you do take on the mantle of your new culture, which I adore.
What aspect of life remains constant no matter where you have lived?
My family life
What advice would you give someone who is moving abroad?
Open your doors to new experiences, find one friend with whom you can talk about home and who will help you adapt, and just go out and join organizations - join your local women’s club and discover FAWCO!
Where would you like to go next?
I hope to stay in Switzerland, walking and skiing!
Click here to return to the table of contents.
International Auto and Property Insurance Jewelry, watches, art, computer equipment; Have you ever lost anything valuable to you? As a professional, you work hard for your personal items. Are these items safe when you move to a foreign country? Professionals moving abroad take a risk when they relocate and transport their possessions. If you are a professional traveling or working outside of your home country, there are some things you should know. Depending on the country where you relocate, there may be limits on the amount of coverage available to you. There may also be gaps in coverage when purchasing separate polices. ProfessionalsAbroad® eliminates any gaps by combining personal property, personal liability, health and automobile insurance. Personal property includes transit and destination coverage, and the auto policy provides comprehensive, collision and liability coverage for your automobile while overseas. ProfessionalsAbroad® is complete protection for you and your items as they travel with you around the world. For more information, please contact us or visit professionalsabroad.clements.com. |
|
Click here to return to the table of contents.
American Expat Investing: The 4 Keys to Success
Download the full report by Maxim Advisors
Maxim Advisors Knowledge Library
Find a wealth of information on a range of important financial matters
ExpatExchange.com
Expatriate Resource Guide: International Personal Banking, International Mortgages and Offshore Banking
Click here to return to the table of contents.
|
||||
Clements Partners with FSYF to Recognize Outstanding Youth
Clements is a proud sponsor of the Foreign Service Youth Foundation’s Community Service Awards. The awards honor outstanding U.S. Foreign Service youth who have served their community either at home or abroad while tackling the challenges of growing up all over the world.
The contest is open to all U.S. Foreign Service youth and teens, and the winners will be honored at an awards ceremony hosted by the Foreign Liaison Office in Washington, DC in July 2009. Two first place winners will each receive a $1,500 savings bond. The deadline for entries is April 24, 2009.
For more information about the FSYF Community Service Awards or to download application materials, visit www.fsyf.org.
Employee Profile: Meet Porche Sidbury
 |
Porche is a supervisor in the Commercial Insurance department and has worked at Clements for over three years. She oversees operations in the department, including customer relations, processing client requests and renewal retention. Her primary focus is ensuring that daily processing and customer handling are executed in a timely, efficient and professional manner. After previous work experiences at GEICO, USAA and Marsh Affinity Group Services, Porche arrived at Clements eager to learn more about commercial insurance, which involves a broader variety of international clients and insurance products. |
Porche has never lived abroad, but has visited Jamaica and Guyana. Her international travels have given her valuable perspective in her position at Clements.
“I can empathize and appreciate our clients’ sense of vulnerability when living in a country that lacks certain services and amenities,” she said. “This drives me to provide our clients with both impeccable and unforgettable service.”
In her spare time, Porche enjoys cooking, gardening and running. She is also working on a Business Management degree from University of Maryland University College.
Click here to return to the table of contents.
Here is what our clients have to say...
I was treated exceptionally well by your folks. I received my claim payment in a timely manner once the repairs were complete. The follow-up and ownership your staff showed was very impressive. You have truly excellent customer service. I will definitely recommend your firm to my expat friends.
-Account Manager, P&G
I recommend Clements to EVERYONE I meet that will be traveling or living abroad. I have been a Clements customer since I first joined the Foreign Service and look forward to using Clements during the rest of my career.
-Foreign Service Officer, Mexico
Click here to return to the table of contents.
