Key Lessons in Cross Border Wealth Management – Multi-National Citizen

As part of our article series on issues in Cross Border Wealth Management, the following is an illustration of some of the key implementation strategies we come across in helping cross border professionals manage their complex financial affairs.

An interesting case study that can help advisors become more familiar with these issues is one we faced earlier this year. “Upon first arriving in the U.S., we had no idea how different personal finances would be here,” said the client when we first sat down with them.

The client is a French national, with a wife who is dual South African and British citizen. The husband worked for 10 years in London for a large American multinational in the technology sector, before he was offered an opportunity to move his family to the U.S. headquarters of the firm for a 3-year work assignment, with an agreement that he would have an opportunity for promotion to VP at the end of this time.

His initial assignment was tax-equalized, which included special allowances for housing and children’s private school expenses, and he would be working on a temporary visa. He did eventually receive the promotion to VP, which required that he transition to a local hire in the U.S., and accept his company’s help in securing permanent U.S. residency (green card).

“We needed help with everything related to personal finance when we arrived – taking full advantage of my company’s benefits and the 401k were the first order of business,” the client said.

Since that time, the clients have thrived. The husband has flourished in the new VP position at his employer. Also, the entire family has thrived here in the U.S. They’ve grown to love life in the U.S., and their kids, having arrived just before the start of high school, are at this point very much regular American teenagers (except that they’ve traveled extensively and speak multiple foreign languages).

At this point, after living in the U.S. for approximately 6 years, the couple are actively pursuing U.S. citizenship for themselves and their children. The kids are planning for college here in the U.S., and the family expects to be U.S.-based for the rest of their lives, albeit with a vacation home in perhaps London or Paris – or both?

In the time that we have worked with this client, we successfully guided them through many unique planning decisions, including the following:

The decision to move foreign investment accounts to the U.S., improving returns and also obtaining more favorable tax treatment. In fact, we even discovered that they held some investment assets in an offshore account, which had not been previously disclosed to any tax authority. We helped them to transition these funds, which were not significant in amount, back into fully disclosed status.

A review of foreign qualified accounts, which could not be moved to the U.S. and had been performing poorly due to the insurance structure of the plan (very common in Europe). We were able to reallocate the holdings into a more aggressive and lower cost program.

Review of foreign real estate holdings, which included a family vacation home as well as a former residence that had been converted to a rental. We explained to them the unique tax shelter properties of income property in the U.S. due to depreciation, which they had not seen before. In doing this, we discovered that one of their foreign properties was not being reported to the IRS. However, because of foreign tax credits generated abroad, reporting this asset on their U.S. tax return did not generate any additional tax liabilities.

Review of new employer benefits available upon localizing in the U.S., including options, deferred compensation, 401(k), ESPP, disability and life insurance, etc. The client was concerned about giving up a generous defined benefit pension that existed in the multinational employer’s foreign subsidiary, and therefore was very hesitant to localize into the U.S. and give up his foreign benefits. However, we were able to show him that the U.S. benefits, especially the executive level benefits that came with the promotion to VP, were actually superior to what he was giving up

Navigating the death of a parent and inheritance of foreign assets.

Review the decision to seek U.S. citizenship after being in the country for more than 5yrs

General planning for a retirement future likely to include partial residency in multiple countries.

“From the start, they looked at our entire worldwide picture when making decisions, rather than just focusing on our U.S. assets in isolation,” the client mentioned and was a key theme that helped us solidify our relationship with the client.

If you as an advisor have any questions about cross-border financial planning and wealth management approaches, please feel free to contact us.