Retiring And Living Abroad (Podcast)

Shomari Hearn
Hi, Amy. Thanks for having me on the podcast again.

Amy Laburda 00:35
And I'm also welcoming ReKeithen Miller, a senior client service manager with our firm.

ReKeithen Miller
Hi, Amy. Thank you for having me. I'm glad to be here.

Amy Laburda
All right. So today's topic is a fun one, because we're all retiring in the Tuscan countryside, right?

Shomari Hearn
Well, not exactly. But sure. I think a large part of this conversation will be more geared toward the financial implications of making such a move.

Amy Laburda
All right. That is bringing it back to earth a little bit. But,

01:02
besides the sunshine, the wine and the cheese — although not to discount any of those things — why might someone consider retiring abroad?

ReKeithen Miller
Yeah, I mean, for the most part, I think the biggest consideration is that some countries just offer a lower cost of living, right? Your money can go a lot further in maybe a Belize or Barcelona than a Boston. So that's going to be a bigger consideration for some people. And then, after you consider the initial cost of moving,

01:31
sometimes your retirement funds are going to be… go a little bit further in another country. And then you’ve got to think about people that are retiring, maybe your medical costs are going up. So looking at what the health care situation is outside of the U.S., where we have… more geared towards private. Although once you get into Medicare, there's a government-run, but you know, health care costs can be a little bit more inexpensive outside of the country. You hear stories about people

01:57
going across the Canadian border to get health care, or even to Mexico to get health care, and sometimes outside of the U.S. So those are considerations. And then, just bringing it back to the practical point, you talked about Tuscany. Some people just want to travel and get out and explore the world. And I think that's also helped by the fact that technology, to some extent, has shrunk the world, right? And so retiring abroad, you can still see family via video chat and things like that. Or international travel is just much easier than it was

02:27
40 or 50 years ago, which gives people the opportunity to go see friends and family a little bit easier, and it makes that hurdle of retiring abroad a little bit less high.

Amy Laburda
So if you have a client that is considering the move abroad, either because they're excited to travel, or for the cost reasons, or some combination of these, if you're sitting down and starting to think, OK, practically, what do we need to think about if you're going to make such a move? Where do you start with those sorts of conversations?

Shomari Hearn 02:56
I think one of the first things to consider is whether or not you want to, or you would be comfortable, living that far away from family. You know, especially if you have children and grandchildren, or elderly parents, being that far away from home may be difficult. One of the other things to consider is, whether or not when you move, will you buy or rent your home? Because this is such a life-changing event or

03:23
a major life experience, you may want to rent for, say, the first year or so just to get a lay of the land. Also to figure out whether or not retiring abroad suits you well. And then in the meantime, you get to explore a bit, you get to look around, explore some of the area to figure out where, if this does suit you well, where would you like to live most within that country or that city?

03:50
I think then from there, you also need to consider whether or not you plan to split your time between the U.S. and the Tuscan countryside, for example, or you plan to live in Tuscany year-round. And then that may play into whether or not you decide if you're going to maintain your home here in the U.S., or the property you have here in the U.S., or if you're going to sell it.

04:16
I think those are some of the first few major considerations. And then from there, you can consider, “All right, well, now I need to think about the logistics of getting my belongings from the U.S. to the Tuscan countryside,” right? So it may be a little more complicated than, say, moving from New York to California,

04:36
for example.

ReKeithen Miller
And another thing comes to mind for me, at least, beyond just those things that Shomari talked about, is if you're going to a country that speaks another language besides English, right? I mean, a lot of the world typically accommodates us Americans when we go out. You know, English is the language of commerce and business, right? And so a lot of people in a lot of countries do, but depending on if you're retiring in a small town or something, they may not speak English. Or understanding

05:02
the different cultural dynamics of living in a new place, and how that's going to interact with you, and whether you're going to be able to align with the people that you — because you're in their country, right? So are you going to be able to align with their cultural practices and things like that? And just understanding that the conveniences that we have here in the U.S., where there's a 7-Eleven or a gas station on pretty much any corner, right? If you're talking about near big cities or suburbs,

05:28
those conveniences may not be in your new country, and how that may impact your life when you're moving. So these are things to think about, as well, on a practical standpoint.

Amy Laburda
So we talked about moving all your things to Toronto or the Tuscan countryside. But today, a lot of things that people have are digital, in the cloud. But if you're thinking about moving things like your banking account, your investment account, your retirement account, how is that going to happen if you're moving to another country?

ReKeithen Miller
Right and that's a great question, right. You know, some people may not

05:57
think about some of the practical standpoints for moving your bank account. So you're moving overseas, right? And a lot of banks have different security features now, two-factor authentication. So you move and one of the requirements is that you're going to need to be able to send it in your — maybe a text message or something to your phone in order to access your account. Well, you may need to go ahead and change that over to maybe an app on your computer or your phone that allows you

06:23
to generate a code instead of getting a text message, if they can't send it to your phone. Other practical things with your financial accounts are whether your custodian is going to still be able to do business with you, because there are certain regulations, whether that's FINRA or the SEC. Some custodians aren't able to do business, or allow people that have accounts to continue to make certain trades in those accounts, or to even open up new accounts. They may have restricted lists. So what I always recommend people do is,

06:52
hey, talk to your custodian if you already have an account, or your bank, to make sure that they're going to still be able to work with you. Because the last thing you want to do is move overseas and they say, “Hey, your investment account — you're really restricted in what you can buy and what you can do.” And when you're moving, you're obviously going to want to have a bank account in the new country that you're going to be in. And if they're not using U.S. dollars, which most people outside the U.S.

07:17
aren't, you’re going to pay in your local currency. You know, there are certain rules. FATCA, for example, is a rule that requires certain foreign banks to report back to the IRS, right? And the governments share information. In some cases, some countries are doing less business with U.S. citizens because of those rules, because they don't want the compliance and things like that. So you're going to want to make sure that you're going to have your bank account set up so that you can pay your rent or pay your mortgage

07:44
when you are overseas, depending on if you want to buy something. Another thing we're talking about, someone retiring abroad. So you may have retirement accounts, right? So your 401(k)s, your IRAs. In a lot of cases, you're going to want to keep those here in the U.S., especially if you're not giving up your U.S. citizenship, because if you take the money out, you're going to pay a high tax, right, on it, particularly how… It may raise your income. So you're going to want to make sure that you can manage those accounts. And then, beyond that, financially

08:14
we talked about health care a little bit earlier. If you're 65 and older, you're on Medicare, right? Well, Medicare is not going to cover a lot of things when you're abroad. And so factoring that cost in, because you're generally not going to want to drop Medicare coverage, because if you decide to come back to the U.S. and you weren't holding Medicare throughout that time when you're away, you're going to pay a penalty if you try to add it back. These are all things that you want to consider before making a leap abroad.

Shomari Hearn
And I would add a little

08:42
bit to what ReKeithen said. I think he touched on all the major points. I'll just give an example of a situation in which a client of ours lives predominantly outside the U.S. However, he has U.S.-based investment accounts. And one of the issues that we encountered is, when we updated his address to reflect that he lived abroad, the custodian informed us, “Well, now these particular types of U.S.-based or domiciled mutual funds

09:11
you can no longer hold or trade within your account.” So what — one of the workarounds that we used was he had a revocable trust, and what he did was he named or appointed his brother who lives in Miami as a co-trustee. And by doing so, because the co-trustee resides in the U.S., he would be able to continue to have access to those securities. So these are some of the things that, even though it's estate planning-related,

09:40
by having set up a trust, it can help facilitate things so that you can maintain your nonretirement accounts here in the U.S. or with a U.S.-based custodian, like what ReKeithen was talking about.

Amy Laburda
And, a side note, if listeners haven't listened to our earlier episode about Social Security, we also talk a little bit about Social Security payments abroad, that sort of thing. Our colleague Eric Meermann really went into a lot of detail, so I won't make you guys tread that ground again, but worth considering. So,

10:09
we've got a lot of complication going on with reporting, with, you know, a lot of moving parts as to what's allowed and what's not allowed in different countries and different cities. But at least if you're not living in the United States, you don't have to pay U.S. taxes anymore?

Shomari Hearn
[laughter] We would wish that to be the case. But unfortunately, no. So the U.S. is pretty unique in that it's one of the few countries in the world that taxes its citizens and green card-holders on their worldwide income,

10:38
whether or not they're in the U.S. or living outside of the country. So that still requires you, even if you're living in Toronto or Tuscany, you still are required to file a U.S. income tax return if your income is over a certain threshold, right? If you're retiring abroad, that means that you have — most likely you're collecting Social Security income. You may have some sort of retirement income, either a qualified pension,

11:05
or you're receiving or taking distributions from individual retirement accounts, or 401(k)s, things like that, which would put you above the threshold where you have an income tax filing each year. And then, not only will you necessarily have a federal income tax filing, you may even have a state income tax filing as well. So yes, you still have to comply with a U.S. income tax law. So if that was your motive for wanting to, or primary motive for wanting to retire abroad,

11:34
probably want to reconsider. The other things to consider too, is if you start working part-time, or say you pick up a job in your new country, the U.S. does — if you qualify, the U.S. does have what's called a foreign earned income exclusion amount. So that foreign earned income exclusion, it adjusts annually for inflation. I believe for 2023 [when this episode was recorded], that's about $120,000, U.S. dollars. So, you know, if you're,

12:03
especially if you're working part-time, you're likely making much less than that. You may be able to exclude that portion of your earned income. And that only applies to earned income. So that's salary, wages, bonuses, consulting fees, things like that. Does not apply to things like Social Security, or interest and dividend income, capital gains from your sale of your investments. So it's another thing to keep in mind. It does allow you to exclude

12:33
a certain amount of income, which can be very favorable. For things where you may not be able to exclude income, you also want to be conscious of taking either a foreign tax credit or income tax deduction. Typically, the foreign tax credit is a dollar-for-dollar reduction in your U.S. tax liability. So it tends to be more favorable than, say, taking a deduction.

13:02
Also under the current tax law, the Tax Cuts and Jobs Act that was passed in 2017, state income tax also, even if it would be foreign income taxes paid, to take the deduction for it would be limited to up to $10,000. So even more of a reason that you would likely wind up taking a foreign tax credit. Beyond that, you may

13:30
qualify, depending on the amount of income, you may qualify for taking certain deductions for your foreign housing. So there's a number of factors to consider. But that's why you would definitely want to consult a knowledgeable tax adviser who works with and understands the complexities of U.S. citizens living abroad.

ReKeithen Miller 13:54
I would just add to what Shomari said. Another big piece that comes into play, too, with U.S. citizens abroad is their tax treaties. There are different tax treaties that the U.S. has with different countries. Generally speaking, there's something called the savings clause in these tax treaties, with U.S. citizens, that basically carves out the fact that… that basically says that the U.S., no matter what this treaty says, we can still tax you. But there are certain instances in those treaties where there are

14:22
carve-outs for certain types of income. Maybe there's pension arrangements in other countries, or certain retirement plans, where there may be different treatment than what you may expect. So you want to make sure that you're looking at these treaties to make sure that everything is taken into account, right? But like I said, generally the savings clause says, “Hey, regardless of what this tax treaty says, we can still tax you.” That's generally how it works.

Amy Laburda 14:50
All right. Lots of complications, which suggests to me probably a lot of paperwork as well.

ReKeithen Miller
Yeah, exactly. I mean, we were talking earlier — I was talking about bank accounts, right? Opening an account when you're overseas. And a lot of people, if they don't have a lot of experience, especially with tax and all, they may open a bank account in their new country, their foreign country and think, “All right, I opened an account, it's just holding cash and it's not generating any income. I don't have to worry about reporting this. I don't have to report my

15:18
U.S. bank account to the IRS or the tax agencies. Why would I have to report my foreign bank account?” Well, they will be wrong on that front. Specifically, if the bank account holds a certain amount of assets during the year. So the rule is that there's a form called the FBAR form. It's like the FinCEN 114, you know, it's a very complicated name on it, but

15:41
this form requires you to report your foreign bank accounts if, at any point during the year, you had at least $10,000 or more in these accounts. And if you don't report this to the IRS or to the Treasury Department, you can end up with very onerous taxes. I mean, although it may not seem right, generally speaking, the government says, “Hey, you have foreign accounts. You're not reporting them like you're supposed to. You're probably doing something nefarious.” Obviously, we know that most people aren't. It's just usually

16:09
ignorance about what the tax laws require, or unfamiliarity, rather, is probably a better word to say, about what requirements are. But that's generally how the government approaches these types of things. And then beyond the FBAR form, which requires bank accounts, there's another form, Form 8938. And this is a form introduced, I would say, in the last 10 years or so. And it requires you to report certain foreign financial accounts.

16:34
And beyond that, you also have to report the activity in those accounts during the year. Now, those thresholds on that reporting [are] a little bit higher. Generally, for individuals, I'm going to focus on people that are living outside the U.S.: If you are a single individual, unmarried, the thresholds are $200,000 at the end of the year, or $300,000 at any point during the year. And then for married individuals, those amounts go up, you know, basically double those amounts.

17:01
And you need to report these accounts to the IRS. A key thing to remember, though, is that if you don't report the 8938 (which goes with your 1040, which is your general income tax return), if this form isn't reported as required, that doesn't start the statute of limitations on your tax return. So I'll take a minute just to explain what that means. Generally when you file a tax return, it gives the government three years to examine your tax return,

17:28
to come back to see if they want to audit it or think that you need to owe more taxes. If you don't file this form with your tax return, that never runs. So technically, the government can go 20 years down the line and say, “Hey, I want to check on, you know, ReKeithen’s taxes or Shomari or Amy's taxes.” They still have the right to, because that door hasn't been closed yet.

Amy Laburda
And I will say for listeners who are visual learners, we do have a fairly intense chart in our book Looking Ahead about the FBAR and about Form 8938.

17:57
So you can compare the two and sort of see. But this is definitely a situation where I imagine you'd normally suggest clients, or friends who ask you, consult with someone who knows a little bit more about what they're doing, because it sounds like there's a lot of possibilities for getting tripped up here.

ReKeithen Miller
Obviously, yes. I mean, beyond these two forms, I mean, there are other forms that are required, depending on if you hold certain foreign partnerships or foreign corporations,

18:24
we can get into… do a whole podcast on just the form requirements and filings that you do. So I would definitely say if you're moving abroad, you're going to hold foreign assets, you probably want to just consult with a tax adviser, because like I said, the penalties can be very stiff and the presumption is that you're probably doing something nefarious, which isn't really the case, but that's how the government tends to treat most people.

Shomari Hearn
And I would just add to that, you may be looking at — part of the reason you may be looking to

18:54
move abroad is to cut your costs, and you figure, “Well, task compliance, you know, it's not worth it for me to pay somebody else to do this. You know, I can just use one of these online service providers.” But when it comes to, as ReKeithen eloquently spelled out… There’s so many ways in which you can trip up, and it can cost you immensely. And believe me, at that point, when you have to hire

19:21
an expert like ReKeithen to unravel all this, it’s going to cost you significantly more than if you hired him from the outset, and did everything and reported everything properly the first time.

Amy Laburda
So Shomari, you touched a little bit on buying a home if you're abroad and its tax implications, and that that was somewhat shaped by the Tax Cuts and Jobs Act. Now, if people are following the news, if they're politically inclined, they may know that a lot of things in that law are scheduled to sunset in 2025.

19:50
Is this a provision that might go away? And if so, what would take its place?

Shomari Hearn
Right. So currently, because of the Tax Cuts and Jobs Act of 2017, typically state and local income taxes, property taxes that you pay on a home in the U.S., for example, are deductible, but they're capped at $10,000. Prior to that act,

20:16
you would even be able to deduct property taxes on real estate that you bought outside of the country. However, that tax act actually removed that ability to take that deduction. So don't… you know, you shouldn't expect, at least for the next couple years, that you will be able to deduct property taxes on that home that you bought abroad. Assuming Congress doesn't act by the end of 2025,

20:43
or decides [not] to extend those current tax provisions, then the ability to deduct those property taxes may be reinstated. And then another thing to consider is, besides property taxes, if there is a mortgage on that property of some sort, you would be able to deduct… you still would be able to deduct the mortgage interest.

21:07
If you're buying — Currently, similarly, under that same tax act, to purchase a new home, you can deduct up to $750,000 of mortgage interest on a loan of up to $750,000, if you're buying now. And then that could be reinstated to $1 million after the tax act sunsets at the end of 2025.

21:32
Just something to consider.

ReKeithen Miller
Yeah, I've actually seen some clients, they had mortgages overseas, but obviously we know we went through our period of very low interest rates. And so, even with mortgage balances pretty high, like they had, in some cases, mortgages under 1%. And so the mortgage interest, given the fact that the standard deduction has been raised in the U.S., a lot of people weren't even getting the chance to take the mortgage interest deduction. So that shows how the differences in

21:59
interest rate policies between countries and things like that can affect the deductions you can take back in the U.S. But yeah, we had clients with these mortgages, and there was a few thousand dollars on a very large mortgage balance, because it was just so low.

Amy Laburda
All right. ReKeithen, the last time you were here, we chatted about state income taxes. And we mentioned earlier in this conversation that moving abroad may not get you out of U.S. state income taxes as well. So what sort of considerations might someone still have to include in their sort of

22:29
planning if they move abroad? You're clearly not in the state physically anymore. So how is the state taxing you?

ReKeithen Miller
Yeah, I mean, so the key consideration that we talked about in our last conversation is just where your domicile is, and if that has actually changed. So you may be, let's say, moving abroad, but you're only going for, you know, maybe you're expecting only to be gone for like a year or two and say, “Hey, this is a test run. I'm coming back.” And so

22:56
did your domicile actually change, right? Because your domicile is a place you intend to return even after an absence, no matter how long that absence may be. So that's a thing to consider. But let's say that you decide, “Hey, I'm cutting the cord. I'm leaving the U.S. I'm moving to my new country,” right? There are some states that say, “Hey, if you didn't change your domicile to another state before you left,

23:22
then your domicile is still here.” And so Virginia is an example of that, where they say, “Hey, you can't change your domicile from Virginia to a foreign country. You're still going to be considered a Virginia resident.” You have to, in that scenario — what they're going to want to do is change their domicile to another state, let's say Nevada or Florida, that doesn't have a state income tax, instead of just moving directly overseas. So that adds another step into the process that you're going to want to consider before moving overseas, to make sure that

23:51
you don't have to continue to pay income taxes to a place where you don't… no longer have a connection.

Amy Laburda
So U.S. citizens moving abroad have a lot to keep in mind, both from the federal government and, as we just talked about, maybe from states. So let's zoom out a minute and talk about citizenship. So, say you're moving to a foreign country, and maybe you're already a dual citizen and have citizenship in that country. Or maybe you move, you plan to be there forever and you go through the process to get naturalized there.

24:20
Once you have that second passport, are there situations where you might consider renouncing your U.S. citizenship to cut some of these complications out of your life?

Shomari Hearn
Yeah. I think it just depends on the situation. But renouncing citizenship is a highly personal decision and certainly not one to take lightly, because there can be so many implications. One is, you know, you renouncing your citizenship — it may be

24:49
difficult if you decide that you changed your mind and you want to become a citizen later on in life, because of health reasons or whatever other reasons, due to family and so forth. It may not be very easy to regain citizenship. There are a number of ways in which you can renounce your citizenship. Typically, it's, you know, going through a formal process of renouncing your citizenship. You usually have to go through a U.S. embassy

25:17
and fill out certain paperwork. I would certainly recommend, if you do make that decision, that you work with, believe it or not, an immigration attorney who understands those laws, understands the process, can explain what it all entails, to ensure that you don't run afoul of anything. There's also a process that you have to… in terms of informing the IRS that you're renouncing your citizenship.

25:46
And it just depends — there’s a form, I believe it's 8854, in which you not only declare, for example, that you've been in compliance with your tax filings for the last five years, but also you need to determine whether or not you are a… what they define as a “covered expatriate” or not. And that depends on your income level or the amount of income taxes you've paid on average for the last five years.

26:15
I believe that threshold now, or that amount, is about $190,000 per year in taxes for the last five years on average. Or if your net worth is $2 million or more. And then that comes with some additional complications, or additional filing requirements, potentially, as a result. And it's not as clean as just saying, “OK, now that I've renounced my citizenship, I no longer have to file a U.S. income tax return.”

26:43
It'll also depend… One of the other things you have to be conscious of, as well, is if you do renounce your citizenship, but you do come here for extended periods of time, the amount of time that you are in the U.S. will help determine whether or not you still have a U.S. income tax filing obligation on your worldwide income again. So it's not as simple as just saying, “All right, I've filed the paperwork. I'm good.

27:12
I can walk away and don't have to worry about the IRS requiring me to file a tax return or paying U.S. income taxes.” So these are just a number of steps to consider in this process.

ReKeithen Miller
Yeah. And I would add, like you're talking about a covered expatriate, right? When you're leaving, obviously it's not as simple as, “Hey, IRS, I'm leaving. I'm a covered expatriate. Goodbye. See you later.” Like the IRS is going to want their pound of flesh, right? So part of that process is they're going to tax you

27:41
on your assets when you're leaving. They'll give you a certain exemption amount. I think it's around $780,000 or something like that. But beyond that, they're going to tax you. So, let's say if you have certain retirement accounts, the calculation is going to be — it's assuming that you have already withdrawn that account as of the date before your expatriation, or the date that you're expatriating, and any amount above that is going to be considered income, right? Or they assume that you sold all your assets. So they're going to tax you. There are certain amounts that aren't

28:11
taxed currently when you're leaving, like certain deferred compensation or pension arrangements. But it has to meet certain requirements. They require that the payee may be a U.S. company. But when you pay your pension, that company is going to have to withhold taxes on it to make sure the IRS is going to get their money. So, if you're a covered expatriate, especially, you're going to want to make sure that you think through all the steps that are going to…

28:36
that are going to take place in — the tax costs is going to be, right? Because they're going to assume that you have sold your assets, but you really haven't. So are you going to have the liquidity to pay those taxes that are going to be due? Or if you have family members that are in the U.S., and you say, “Hey, I want to still give gifts to my nieces or nephews, or my brothers or sisters,” right? They could have additional tax consequences when you give the money back, right? So these are things you want to weigh. And like Shomari said, this is not a step that you take lightly, right? You want to make sure that

29:06
all the things, all the benefits outweigh all the costs that could come up when you're renouncing your citizenship.

Shomari Hearn
Right. And just one thing I failed to mention earlier is, and this is an important step in the process, is if you are going to renounce your citizenship because you're establishing citizenship in another country, make sure you apply for and receive citizenship in that other country before you renounce your U.S. citizenship. Because the last thing you want to do is be deemed stateless,

29:34
meaning that you are no longer a citizen of any country. Even though that sounds like, how can that happen? It has happened before. Probably a popular example of, or somewhat well-known example of that was, I believe his name was Mehran Karimi Nasseri, who was a Iranian refugee

30:02
who ended up in Paris, France. And he was deemed to be stateless, because the Iranian government basically took his passport. He no longer had any papers. And he wound up being required to live, well, he ended up living in the Charles de Gaulle Airport in France for 18 years

30:27
because he didn't have a passport, so clearly he couldn't fly anywhere out of the country, and he couldn't leave the airport, because if he did, he didn't have any papers and he would be arrested. Pretty extreme example, but I mean, you don't want to be living in an airport for years on end because you can't possibly leave or travel anywhere.

Amy Laburda 30:50
Certainly not anyone's first plan for their retirement, I can't imagine. All right, speaking of retirees, we've sort of determined there's no way to avoid it being a little complicated if you want to move abroad, whether you decide to keep your U.S. citizenship or not, lots of complications. So I have to imagine the answer to this will also be: It's complicated. But if you're moving abroad, how would you expect that to impact your estate planning?

ReKeithen Miller
Right, I mean, you're right. It is complicated, specifically depending on what

31:20
countries you're moving to. I would say this is another example of another situation where you're going to want to plan ahead. So let's say, for example, I'll use the U.K. for example. So I'm moving from the U.S. to the U.K. A popular estate planning tool that people use here in the U.S. is a trust, right? And so let's say you're trustee of your revocable trust or whatever, what have you, and you're moving to the U.K. So you have to look at what the requirements are

31:49
to be there. So you may think, “Well, my trust is in the U.S., all the assets are there. I don't have any tax considerations to figure out.” Well, it depends on what the laws are in the new country you're going to. In this case, they say, “Well, it depends on where the trustees are located,” right? And who's able to tax it depending on where the trustees are. And so what you want to do is… This is where pre-planning comes in. You want to make sure that you have someone who is — maybe, that you trust, that they're in the U.S. Maybe it's a family member or if you

32:16
don't have a family member, maybe it's a corporate trustee or somebody that you want to appoint to make sure that you don't run into these issues in the U.K. with their requirements. Another thing, I said it depends on the countries that you're moving to. Some countries recognize trusts and some don't. So trust is a uniquely common law type of instrument, where certain civil law countries, think about it — I have experience with clients that are in Brazil.

32:43
Trusts are a really foreign concept to them. So a lot of people in these countries, they use different… they may use different estate planning vehicles, whether it's private foundations or corporations or something like that, in order to accomplish your goals. And so you can have a complication with tax consequences if you have a trust and the government doesn't recognize it, right? And so we had a situation here with a client, where we had a trust

33:09
but then the government instituted a certain offshore investment tax, right? And so in order for him to be able to get that offshore investment credit, right, we had to think of another vehicle that we can use besides the trust, because it was a timing issue there. And so these are things that you want to pre-plan for and make sure like — I would say, exit planning, right? You’re exiting the U.S., you do some exit planning to see, “All right, what are all the different things I need to check off?”

33:38
And estate planning is going to be up on that list, because we're used to how we do things here, but other countries, they do it differently, obviously.

Shomari Hearn
And I would add a couple of things to what ReKeithen said. So one being with, when you, even here in the U.S., if you own property, if you're a resident of, say, New York, and you also own property in another state that has,

34:08
you know, estate tax. You may have… you have what's called ancillary probate, right, where, you know, you may not only be filing and going through a probate process — or your executor, or your appointee — going through the probate process in your resident state, but also where… the other state in which you have, you know, real property. So that, you know, that's also one thing to consider, whether or not this the same applies when, you know,

34:37
going abroad. Using the U.K., for example, and you also still have, you're also a U.S. resident, so of course you'll be subject to U.S. estate tax filing requirements as well. And the other thing that you may not be aware of is, and these are the types of things that you want to explore and learn beforehand, is for example, in Brazil, they have what's called forced heirship. So that means that, if you have children,

35:06
no matter what, you have to leave 50% of your assets to your children. Whether you're married, not married. Versus in the U.S., you may, you know, by default, you may leave — your assets may go to your surviving spouse, right? And then they get to determine, you know, where those assets go, whether or not you want, you know, after your surviving spouse dies, you don't want to leave anything to your children or leave it all at charity, you could do that, right? But in a place like Brazil, for example, that has forced heirship, no matter what,

35:35
at least 50% of those assets will have to go to your children.

ReKeithen Miller
Yeah, and that reminds me, Shomari, too, just about the estate planning or estate considerations, right? So you may think, “Hey, I'm outside the U.S. I don't have…” I mean, you know, if you kept your U.S. citizenship, you're still going to have some estate considerations here. But let's go through the example that we talked about a little bit earlier, about, you know, renouncing your citizenship.

36:02
Let's say that you want to keep [a] certain amount of assets in the U.S., whether it's a home or things like that. Well, now the exemption for someone that's a U.S. citizen is over $12 million, right? But for a noncitizen, an individual, the exemption is only $60,000 or something like that, right? And so that's another thing you need to consider, because you have a home here, whereas like you can have a $2 million or $3 million home, or even a million dollar home, or whatever it may be. And it wouldn't have been subject to estate tax

36:31
if you're a U.S. citizen, you kept your citizenship, right? But you renounced it. Now you have a bigger estate tax bill, right? And so, like I said, all of this is connected and it’s always about planning, planning, planning to see where maybe where the dominoes could fall. If you do one thing, how it'll affect everything else down the line.

Amy Laburda
This is certainly not the first episode of the podcast where we've suggested that consulting a professional is probably a wise move, but it feels like, if not the most so, maybe one of the most

37:01
sensitive topics in which you want to involve a professional before you make any big decisions. So if someone is looking for a financial professional to give them this sort of advice, do you have any sort of things you would recommend looking for, or questions you'd recommend asking them, to see if this is a thing they're experienced in and comfortable with, and where they can advise you with the right education and background?

Shomari Hearn
Sure. When you're asking or you're evaluating or considering different advisers, asking what…

37:31
How many clients do they have that are U.S. citizens that live abroad? And where do they live? Because even if that adviser may have experience working with a client that, or clients that live in one particular country, and they're very familiar with all the implications that go with that particular country, that's great. But if I'm not moving to that country, if it's Brazil where they have the expertise and I want to move to the U.K., well, I want to…

38:00
I want to know that the adviser, or person I'm consulting, has a lot of experience in that area as well so that there aren't any missteps.

ReKeithen Miller
Yeah, I would add to that too. Yeah, one: seeing where their clients are located. Another thing is, do they have relationships in those other countries with advisers that can help them? Obviously, I know a lot about U.S. taxes, right? And that's complicated in itself. But for my clients that are

38:26
moving abroad, whether it's Italy, New Zealand or Brazil, or wherever it may be, I have contacts in those countries to make sure that when they're there, their tax obligations there are handled, or I'm able to consult with somebody to make sure that I'm not missing something, right? Because I'm… like I said, I'm versed in U.S. taxes, but I want to make sure that someone else that is doing that foreign country's taxes, they're doing it, they're understanding the estate planning. So ask them

38:54
what kind of relationship that they have. And a lot of times I've referred people, and I've been referred to people, from my clients that are either moving abroad or they have new people that are moving to the U.S. or other considerations. So that's something that's important, right?

Amy Laburda
All right, so we've covered a lot of ground. There's a lot of ground to cover on this topic. Was there anything else, when you're talking to someone who's considering moving abroad, that you would want to make sure that they know or had thought about, or have we kind of hit all the highlights today?

ReKeithen Miller 39:21
I would say, you know, you've probably heard us talk about all the planning that you needed to do before you leave or things that you need to make sure… You heard me talk about the FBAR form. You may be like, “Hey, what is that? I haven't filed that. It sounds like I have accounts that have… may have met their criteria. Man, what should I do?” And I would say you should go ahead and don't just hope that it goes away. Because if the IRS figures it out or finds it out, they're going to be less likely to work with you. So

39:50
as you're looking through this process, or listening to this podcast, and something may have come to mind, what you want to do is like, “Hey, I need to maybe talk to somebody a little bit more to see what my… if my circumstances warrant maybe doing certain types of filings” where you bring your account up to date. And in certain circumstances, if, depending on the facts and circumstances of the case, you may not owe any additional taxes or

40:15
or penalties, right? So don't hide from these types of things that we talked about. And even if you didn't do the proper exit planning before, there's always a chance to bring yourself up to date and get yourself better for the future, right? So that's something I would keep in mind for people.

Amy Laburda
All right, well, Shomari, ReKeithen, thank you so much for joining me on the season one finale of “Something Personal.” It was great talking to you today.

Shomari Hearn
Oh, thanks for having us again.

ReKeithen Miller
Yeah, thanks for having us. We really enjoyed it.

Amy Laburda 40:44
“Something Personal” is a production of Palisades Hudson Financial Group, a financial planning and investment firm headquartered in South Florida. Our other offices are in Atlanta; Austin; the Portland, Oregon metropolitan area; and the New York City metro area. “Something Personal” is hosted by me, Amy Laburda. Our producers are Ali Elkin and Joseph Ranghelli. Joseph Ranghelli is also our director, editor and mixer. Our firm has written two books:

41:13
Looking Ahead: Life, Family, Wealth and Business After 55, and The High Achiever's Guide to Wealth, which offers advice for younger professionals, entrepreneurs, athletes and performers. Both books are available on Amazon, in paperback and as e-books.