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Foreign Investment Holding Considerations When Living Abroad

Just as expatriates who journey across the globe diversify foreign countries, investing internationally in today's global market can add diversity to investment portfolios. But it can also be complicated with fluctuations in the foreign exchange market. Before making any decisions, expatriates should considerthe following tips to maintain a robust investment portfolio that is compliant with tax laws but still minimizes risk against currency value fluctuation.  

Open Bank Accounts Before Leaving U.S.

Before saying sayonara to the U.S. for a life abroad, American expatriates should consider opening U.S.-based investment accounts. According to Andrew Fisher, CFA, CPA and president of Maxim Global Wealth Advisors, an independent wealth management firm based in Portland, Ore., it's easier to change the address on an existing brokerage account to a foreign address than it is to open an account with a foreign address. Since many U.S. brokerage firms require proof of a U.S. address, individuals who wait until living abroad can limit their foreign investment options.

And if an expatriate's new country of residence is on the U.S. Department of the Treasury's Office of Foreign Asset Control (OFAC) country restriction list, their options can be further limited. The OFAC enforces economic and trade sanctions against certain foreign countries including Cuba, Libya and North Korea.

“With technology today, it’s much easier to maintain your account from anywhere, and it’s easier to obtain research on investment strategy and portfolio managers through U.S.-based accounts.”

— Shomari Hearn, CFP, vice president of Palisades Hudson Financial Group

Consider Tax Laws

Americans holding assets outside of the U.S. that collectively equal $10,000 or more must report that account to the Internal Revenue Service (IRS) through a Report of Foreign Bank and Financial Accounts. This is because the IRS wants to know about the investor's worldwide assets in order to properly assess taxes and ensure they're paying them, Fisher says. Accounts held abroad don't generally offer 1099, or tax reporting documents, to the IRS, like U.S. firms are required to do. "By filing the FBAR form, the U.S. taxpayer would have to pay tax on any income the account has earned," Fisher says.

Invest in Home Country, Manage From Abroad

One option is for expatriates to invest in their home country and then manage the investments from abroad.

For example, an expatriate who moves from the U.S. to Argentina can invest in a Latin American mutual fund or bond from the U.S. In this case, the expat could sign up for email market-rate alerts through a trusted online foreign exchange service.

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"With technology today, it's much easier to maintain your account from anywhere, and it's easier to obtain research on investment strategy and portfolio managers through U.S.-based accounts," says Shomari Hearn, CFP, vice president of Palisades Hudson Financial Group, a financial advisory firm in Fort Lauderdale, Fla. Keeping investment dollars in the U.S. also reassures expats that assets are secure and lowers the chance that they might lose access to funds, Hearn says.

Find a Global Financial Advisor

Expats living abroad should consider working with a financial advisor who can navigate the tax laws of both countries, including restrictions, regulations and tax-filing laws.

"Most financial advisors don't understand the unique [financial situation] of an American living abroad," Fisher says. "You need to be careful to seek out an advisor that understands cross-border issues."

When sending money overseas, individuals should consider using a trusted online foreign exchange provider that offers tools like a free online currency converter and convenient bank-to-bank payments via laptop, tablet or smartphone. Plus, with 24/7 customer service, help is only a phone call away when questions arise.

Live Cross Rates

USD 69.3440 1.3139 0.7857 53.2670 1.0000 0.8780
CAD 52.7470 1.0000 0.5978 40.5230 0.7604 0.6680
AUD 50.4280 0.9555 0.5715 38.7410 0.7268 0.6386
EUR 78.9250 1.4956 0.8945 60.6340 1.1377 1.0000
GBP 88.1960 1.6713 1.0000 67.7560 1.2713 1.1169

Example: 1USD = xx INR

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