Our clients are routinely on the move—, crossing borders both physically and via their global investments. Here, we outline some important considerations for those journeying across jurisdictions.
Megan Worrell, Senior Wealth Advisor
The world gets increasingly smaller as we traverse the continents—finding new opportunities to work, find love, and enjoy life. Some seek different education options or an escape from political instability, while others may simply be searching for warmer climates. Whatever the reason, JP Morgan recognizes that our clients are routinely on the move, crossing borders both physically and via their global investments.
Whether moving to a new country for a short time, establishing longer-term residencies, or purchasing assets located in other jurisdictions, clients should strive to observe the rules of every country they enter—taking stock of how regulations may impact day-to-day life, as well as balance sheet arrangements. Each and every nation has its own protocols that must be considered. If you participate in managing personal or family assets, you may need to consider whether moving to a new jurisdiction impacts your investment activity. Certain countries have strict regulations affecting what types of securities can be offered to residents. In addition, taking an active role in investments or a family enterprise may trigger taxes on those assets, or income in your new home.
Example 1. A trustee relinquishing his role after moving to the UK
After consulting with counsel, a client moving to the United Kingdom relinquished his role as trustee of a family trust to avoid the trust’s assets being subject to United Kingdom taxes. His active role in the trust potentially opened the structure to tax in the new jurisdiction.
Example 2. Investment choices of a U.S. taxpayer living in the EU
A U.S. citizen client living in Denmark preferred not to invest in certain European opportunities because the investments were tax inefficient for a U.S. taxpayer. He was also restricted from many typical U.S. investment products that were not suitable for a Danish resident investor. The tax and securities laws may not align, which can limit the investment palette for clients. Investment complexity is a situation that our wealth advisory and investment teams often navigate with our clients before they change residencies.
International moves often have tax implications
Often, clients who intend to move or work in another country focus on immigration and visa complexities, foregoing tax planning considerations. Becoming a resident or visa holder of a country doesn’t always mean that you will also become a tax resident—but it is very important to understand what requirements your immigration status will require. 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?
We see many families consider moving to countries with special tax regimes designed to attract new residents, such as offering a flat tax or no tax on income earned outside of the country. In all cases, it is important to carefully orchestrate your exit from your country of last residence. It’s vital to understand the potential exit taxation, continued tail of taxation, restrictions on returning and other complex issues relating to the residency and taxation of family members’ wealth.
A family with several members holding dual nationality in the U.S. and Sweden, 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 the country was their true home because they spent a few months there each year. Ultimately, using treaties and supporting evidence as to their true residency, the family was able to mitigate the double (or triple) tax scenario. The complexity in navigating these issues demonstrates how important it is to plan before you move to—or buy assets in—another country.
Cross-border estate planning
Immigration, tax and securities rules are all important considerations prior to a move. However, one should not ignore succession planning, regardless of age or stage of life. Certain estate planning vehicles, such as trusts or foundations, may not be recognized in all jurisdictions. Sometimes it is helpful to use separate wills for each jurisdiction where you own property. Often the marital property regime applicable in one country does not apply when you move to a new country.
You may also be subject to mandatory succession regimes in certain countries. In turn, these may lead you to adjust the disposition of other assets outside of that jurisdiction, in order to achieve your succession planning goals for your family.
Generally, when real property is held in individual name, it is practical to have a local Will specifically referencing that property. In most European countries, the recognition of a Will has been harmonized with a directive reducing the need to have multiple Wills. However, it may still be more practical to have a local last Will that would be easily accepted by local authorities. It is also important to keep track of all documents, to avoid the need for your heirs to chase paperwork, attestations and certificates across continents.
A move to a new jurisdiction often brings competing emotions—you are simultaneously excited and stressed about new experiences! There are so many moving parts, and some things you might not even consider until you have landed in your new home. Make sure you understand the visa and citizenship options and requirements ahead of your move and be sure to research schools if moving with children.
Work with your advisors to review your tax, insurance and investments. A health check on your succession planning—including wills, testaments and marital agreements—is also fundamental. To help you stay organized, we have included a handy “things to consider” checklist below.
At JP Morgan we view our client relationships as long-term and multi-generational. This is why we have built a truly global institution with global experience that can serve each client and family member wherever they are today, and wherever they may go tomorrow.
All case studies are shown for illustrative purposes only and are hypothetical. Any name referenced is fictional, and may not be representative of other individual experiences. Information is not a guarantee of future results.
JPMorgan Chase & Co., its affiliates, and employees do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for tax, legal and accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transaction.
