Moving abroad: How to navigate wealth planning as an expat

This podcast is intended for informational purposes only, and is a communication on behalf of J.P. Morgan Securities LLC, a member of FINRA and SIPC. J.P. Morgan and its affiliates and employees do not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transactions.

Views may not be suitable for all investors and are not intended as personal investment advice or as a solicitation or recommendation. Outlooks and Past Performance are never guarantees of future results. This is not investment research. Please read the important information section.

HK: Welcome to our wealth advisory series, where we discuss topics related to Life and Legacy.  In this podcast, we are going to talk about global mobility. My name is Hannamari Koivikko , and I am here with my colleague, Megan Worrell.  We are wealth advisors with the International Private Bank. 

MW: Hello everyone.  It is a pleasure to join Hannamari for this podcast. We here at J.P.Morgan private bank have noticed that it is increasingly common for family members to live in different jurisdictions, and to move several times during their life time across states, countries and even continents.

HK: Absolutely, and as  JPMorgan has presence across the globe, this is one of those topics where we wealth advisors often get to work together. Whether moving from one country to another for a short time, or establishing longer-term residencies, or even just purchasing assets in other jurisdictions, it is important to consider not just the rules of the new country, but how they interact with the way wealth is held.

MW: There are so many moving parts, and some things you might not even consider until you have landed in your new home. Thus, when working with clients, we often start by sharing a checklist that covers all of the main topics of such a move – such as checking the visa and citizenship options and requirements, searching for schools, doing a financial review including tax, insurance and investments, as well as a health check on your succession planning, including wills or testaments and marital agreements.  And Hannamari, let’s not forget our furry family members!  Many countries are quite strict on accepting animals, and it may come as a surprise that your pet might not be able to travel with you that easily!

HK: As a European citizen it is easy to forget how complicated it can be to enter a new country. One of my clients, who had lived in several EU countries, had quite a shock when he was looking to move to Japan. Inside the EU, he had been completely free to establish his residency wherever he wished, as he had means to support himself. As a European residency card holder, also known as Schengen Visa, there aren’t any other entry requirements. The amount of paperwork needed to become resident in Japan was something quite different.

Organizing the investments took a bit more work too. The family wealth had been pooled in  a holding company, and though there had been some questions on how to correctly report the taxes over the years, the planning had been fairly simple as all the family members lived in the European Union. All of a sudden he needed to rethink everything! For example, he was no longer able to have active role in his company’s investment decisions while residing in Japan. Japan is a strongly regulated jurisdiction, and he was advised to take a passive shareholder role. In the end, he gave transferred the control and decision-making fully to his sister. Fortunately, the sister had recently decided to wind down her activities and did have time for the family company.

MW: Yes, indeed, becoming a resident or tax resident, which are two different things by the way, can create all sorts of surprises. Also, global mobility is not always intentional, and people can be surprised to learn that they have triggered reporting or tax requirements in another country. In the US, we do meet clients who are what we call “accidental Americans”.  You may know that if you are born in the US you are a US citizen, and subject to worldwide tax regardless of whether you actually live in the US – we see a number of children who were born in the US while their parents were working there, but then the family moved away – these children are our Accidental Americans and are caught in the US tax net even though they no longer live in the US. 

But there is another group of Accidental Americans - most people do not realize that you could be a US citizen without even stepping on US soil!  If mom or dad was a US citizen and lived in the US for a certain amount of time before your birth, then you also have automatic citizenship and the benefits and burdens that come along with that designation. 

Often clients who intend to move or work in another country focus on the immigration and visa complexities, but they don’t pay enough attention to the tax issues that may follow the move until after the fact.  It is important to plan ahead for these issues if possible. We also see clients across the globe who trigger tax residency by spending too many days in certain countries. This happened quite often during the height of Covid. Becoming a resident or visa holder in a country doesn’t always mean that you also become tax resident in that same country, but it is very important to understand what requirements your particular immigration status will require and whether meeting those requirements will trigger tax implications.  For example, does your visa require you to spend a certain amount of time in the country?  Do you need to purchase a home or have a permanent residence in the other country?  Will these ties trigger a tax or reporting obligation?

HK: I think that term accidental American is such a good example on how you may end up tangled in these rules without noticing. Many of our clients are searching typically some particular regime that suits their family’s purposes, and this has not gone unnoticed by the governments laying out these rules. In Europe, in addition to longstanding programs such as Switzerland, Spain and Portugal, the  latest additions are Italy and Greece, adding several different residency options.  Most popular amongst our clients are the regimes where you pay a flat tax for a certain amount of years on your foreign income. Of course, as those regimes typically offer significant tax benefits, it is important to carefully orchestrate your exit from your country of last residence, and fully understand the potential exit taxation, continued tail of taxation, restrictions on returning, and other complex issues relating to the residency and nationality of family members and location of the wealth.

Interestingly, we are currently seeing a second wave of relocation.  For example, Latin Americans who originally chose to benefit from the Spanish regime are now at the end of the time line the said regime runs. These families are now realizing that certain non-taxable holding companies in low tax jurisdictions will become fully fiscally see-through companies unless they either change their jurisdiction before becoming fully taxable in Spain or restructure the company to a taxable, preferably European entity.

We also worked with a family who had several members with dual nationality, both US and Sweden, who found themselves subject to tax in both jurisdictions as they met the residency rules for each country.  France also tried to tax these individuals arguing that France was their true home even though they only spent few months a year there.  Ultimately, through the use of treaties and supporting evidence as to their true residency, the family was able to mitigate the double tax scenario, but the complexity in navigating these issues shows how important it is to plan ahead before you move to or buy assets in another country.

MW: Hannamari, we have been talking about tax complexities quite a bit, but you and I have partnered on a number of situations where investment restrictions were the main concern.  One example that comes to mind is a US citizen living in Denmark who was unable to invest in certain European opportunities because of his status as an American tax resident and he was unable to invest in typical US investment products because as they were not suitable for a Danish resident investor. The tax and securities laws don’t always align, which can limit the investment palette for clients.  The investment complexity is a situation that our wealth advisory and investment teams often help navigate with our clients before they change residencies.

HK: Absolutely –.  Another complexity that we often explore with clients is succession planning. Certain estate planning vehicles, such as trusts, may not work in all jurisdictions.  Sometimes it is helpful to use separate wills for each jurisdiction where you own property, and often the marital property regime applicable in one country does not apply overseas.  

To use once more Europe as an example, the recognition of will as has been harmonized in majority of EU countries with a directive, but in practice It still can be more practical to have local last will or at least leave an official, translated copy at the local notary. It is also important to keep a track of all of these copies. One death estate, where the deceased had lived in Morocco, Spain, Canada and Sweden ended up in quite a chaos as the lawyers had to chase documents, attestations and certificates across continents. When most of the originals were missing, it took finally five years to close the death estate.

A move to a new jurisdiction often brings competing emotions – you are both excited about new opportunities and new experiences, and stressed at the same time!  Some family members may be more open to change than others.  Maybe your company is requiring you to move, or maybe you can’t wait to explore new places, meet new friends, and challenge yourself professionally in a new environment.  Whatever the situation, Megan and I hope that this podcast alerted you to some of the issues that you need to consider before you make a move to a new jurisdiction, and we welcome the opportunity to share more of the JPM collective experience with you and your family.