The Complications And Rewards Of Living Abroad (Podcast)

ReKeithen Miller
Thank you, Amy, for having me today. I always enjoy our conversations, and I'm looking forward to this one.

Amy Laburda
Great.

00:35
So, ReKeithen, listeners who've been with us since last season may spot a first today: that you're the first one of our guests who's back to discuss, if not exactly the same topic, a pretty similar topic as one that we talked about last season. You and our colleague Shomari Hearn sat down with me last season to talk about retiring abroad.

00:54
Shomari worked on a chapter about international financial planning in our book for older adults, Looking Ahead. And you're the one who wrote the chapter about international financial planning for our book for younger adults, The High Achiever's Guide to Wealth. So when you sat down to write that chapter, since we wrote Looking Ahead first and Shomari’s chapter already existed, did anything sort of jump out at you as, “Oh, this is something I want to cover that didn't really make sense in our other book,” or these are some differences for younger people who are looking to move their life out of the U.S.?

ReKeithen Miller 01:24
Yeah, that's a very good question. As your question kind of foreshadows, there are some things that a retiree is going to have to think about a little bit different than someone who's in their prime working years. Some of the things that I kind of wanted to focus on in this chapter was thinking about your job and earning money, right? Most retirees, they've kind of already got their nest egg together, and they're kind of off, riding off into the sunset, right? It's about enjoying it.

01:48
Whereas someone who's working, they’ve got to figure out how to navigate employment contracts or how to deal with certain things when you're working abroad. We'll get into these, but like tax equalization. Or if you're a little bit younger, you tend to have younger kids. So they may have to consider, “Well, how am I going to deal with education things?” So these were some of the things I wanted to hit on in this chapter that we didn't hit on in our previous book.

Amy Laburda
Makes sense. And I promise we're going to circle back to almost all of the things you mentioned. But before we get into the weeds, I wanted to sort of touch, big picture:

02:18
I know you work with a lot of our clients who are international. I also was wondering if you have had any U.S.-based clients who came to you before they moved, or when they were thinking about a move, saying, “Hey, this is on my mind,” or “This is a prospect on the horizon, what do I need to get in order before we get moving?”

ReKeithen Miller
Yeah, that's another great question. I would say I've dealt with various people in this arena. One of the clients that I had, he worked for [an] international, or global, auto

02:44
manufacturer. And, you know, we sat down before he was getting to move. He was having an opportunity to lead a foreign division there. And so we talked about how we can potentially help him. He was — he was actually getting the opportunity to go over to Japan, which… he had spent some time there when he was younger. So he had young kids at the time. And so getting them the opportunity and exposure to that made this opportunity to work in the foreign division, something that he was very excited about. So we kind of talked through that situation.

03:13
I've also dealt with somebody who didn't work in a multinational firm. And so we had to deal with different things, because there isn't the same support network that you may have — for my client that was working with the multinational firm, you know, they had international tax preparers and his firm covered, like, the tax prep. And so we kind of helped with more of the strategic aspects of his relationship, and also confirming and validating what the international tax preparers that they had at the multinational firm did for him.

03:40
And in the place with the person that was working with a smaller firm, we had to basically provide a lot more support, a lot more handholding, because they didn't have that structure there. And then I've also worked with clients that were, and we've talked about this and we'll get into this later, that were “accidental Americans,” right? And dealing with them, cleaning up the tax aspects, which somebody who is working and moving abroad may have to deal with, that they're not really familiar with everything that comes with it.

Amy Laburda
Right. So I realized, after we did our

04:09
last-season episode about moving abroad, that some of my own biases might have been showing through, because I think I framed it [as] “Obviously everyone would love to live abroad,” because I'm a person who loves travel. And I think those kinds of opportunities, like you mentioned, taking your kids to Japan. I'm like, “Who wouldn't want to do that?” But, as we've already alluded to a couple questions into this conversation, there's a lot of thought and planning that has to go into making this kind of move successful. So before we have someone sort of diving in and starting all of that work,

04:39
what would count in your mind as a financial planner as a long-term move? Obviously, they can go up to “plan to be permanent,” and those certainly count. But how long would count as long term?

ReKeithen Miller
Yeah, I think we should maybe approach this from what the tax authorities say on this aspect, because then it'll get into some of our conversations about tax benefits, because that's what, you know, a lot of the planning is around, when you're talking about living abroad. So generally, it's about one year that they kind of say that a place is going to be your tax home if

05:08
be there one year or more. If you expect to be there one year or less, they generally say, “Hey, it's a temporary assignment.” And why this is important [is] because this comes into play when you're dealing with the foreign earned income exclusion and some of those different benefits that you can get when you're working and living abroad. So I would say one year can be, but it all just depends on your perspective on it, right? Because one year may not seem like a long-term move for some people. It could be more

05:37
considered temporary. But I think it's helpful to frame it through the tax lens here when we're talking about it, because that's where a lot of the benefits that we're going to talk about start.

Amy Laburda
I was lucky enough to do an academic year abroad, which didn't quite hit that 12-month cutoff. And also, as you were saying earlier, compared to a lot of young adults, I didn't work while I was there. I wasn't permitted to, but also I was concentrating on my studies. It wasn't my priority at the time.

06:01
Similarly, last episode, we were mainly talking about retirees who, as you said, are often riding off into the sunset because they've squared away their living expenses one way or another. So for the people in their 20s, 30s, 40s — people you were writing the book chapter for — they're mostly going to be in the thick of their professional life. As you mentioned, talking about your clients, sometimes it's the job itself that's moving you over there. In general, do you think people who are moving abroad during their working life

06:28
line up the job first, like they have a job that they are moving to, or do you think it varies at this point?

ReKeithen Miller
Based on my experience, I think it would be helpful to come from what I think would be an easier way to approach a move abroad. Having the job lined up before you get there is definitely the way I think would be much easier and make the transition easier because, you know, if you're moving to a new country, you may not have the network that you have here. A lot of jobs are about who you know and...

06:57
and having that network in place. So if you can kind of, I guess, leverage your U.S.-based network, which a lot of people may have if they haven't lived abroad before, to have a job when you're abroad, that can make the transition a little bit easier. And navigating it from a standpoint of comfort, being able to know how I have to have my resume, maybe working with recruiters. So I think having a job lined up is what I've seen, more so. And I think [it] would be an easier transition. But something that we've

07:27
kind of seen, a trend, especially with remote work, is people kind of jump — diving in and saying, “Hey, I can work from anywhere,” right? “I can travel around Europe.” Specifically if you're a freelancer or something like that, where you may not be tied down to a particular company. But I think for those people that want to dive into that lifestyle, they have to think about, yes, you can work digitally, but you're going to have little tax footprints in all these different countries that you're working in. And so what does that mean, from a tax compliance standpoint?

07:55
In… How do you navigate the different regulatory environments? Like you mentioned, when you were working abroad, which I spent — I mean, when you studied abroad, I'm sorry, you didn't work. Well, thinking about if you're moving to different countries, similar to in the U.S., you may have to have a work visa. So making sure that you have that squared away and understanding what the requirements are there. You may not be able to work wherever you, you know, wherever the wind blows you. Right. So… But I would say generally speaking, having a job lined up before you get there

08:23
is an ideal way to approach it.

Amy Laburda
Yeah. So the digital nomads, as I've heard them called sometimes, sort of lead us back to the tax question, which we've been circling almost since the beginning of the conversation. So let's, let's pause here for a moment. People who listened to our earlier episode, or who've had this experience in their life, know that U.S. citizens are almost unique in that our government taxes us no matter where we live or work. I think there's only one or two other countries

08:48
that do that. So if you're backpacking over Europe while you're a freelancer, as you said, you're leaving little tax footprints everywhere you go. But also, Uncle Sam still wants to know where you are. So obviously if you're a freelancer, you might be doing estimated quarterly payments. If you're working for a company, they may be withholding, if they're an American company. So those are things to keep in mind. But what are some other tax particulars that Americans living outside the country need to keep in mind?

ReKeithen Miller 09:16
A few things. Just about the tax deadline; this is very simple. April 15th, a lot of people see that as a tax deadline. That may not work if you're living in a foreign country, where their tax deadline may be later than ours. So generally speaking, if you're outside the U.S. on the due date for your tax return, the IRS gives you an automatic two-month extension to file your tax return. But a key thing to keep in mind with that is that it's not a two-month extension to pay. So like you said, if you are

09:43
someone who's a freelancer or self-employed, and you're paying estimated taxes, you need to make sure that you pay those, have those taxes paid in before April 15th, because if… you would incur interest from April 15th to June 15th. Then there's a — if you need an additional extension beyond that, you can file for an extension. Other things to think about are tax treaties. What do the tax treaties say about treatment of certain earnings or certain retirement plans that you may be able to get into when you're in a foreign country?

10:12
So we can talk about those. And then navigating the foreign earned income exclusion, whether you should claim a foreign tax credit versus a foreign tax deduction. These are all things that you're going to want to think about from a tax perspective when you're living and working abroad.

Amy Laburda
Sure. And I won't make you get too deep into the weeds of all the different tax perspectives. I will certainly commend your chapter in the book to our listeners if they want more details.

10:35
And certainly there's tons online. But while we're here, just briefly, can you explain what the foreign earned income exclusion is and why people need to keep that one in mind? Because I think it's a big one that people might not have been as familiar with.

ReKeithen Miller
Right. So the foreign earned income exclusion is a benefit. So we're going back to the… earlier in our conversation when I was talking about your tax home in that one year threshold. Right. So this is kind of bringing that back to the forefront here. So.

10:59
In order to get the foreign earned income exclusion, there's a couple of tests. One, it has to be your tax home. Either you have to be a bona fide resident of that [country]. So generally, within a one year timeframe, you have to have lived in a foreign country to make it your tax home. Then there's also the physical presence test, meaning over the last one year, you've spent at least 330 days. So if you meet that requirement, and sometimes people don't meet that requirement when you get to the April 15 deadline. So

11:27
there's… the IRS does allow you to apply for additional extensions just to meet that. But let's assume that you do. So we're going to talk about what the foreign income exclusion is. It allows you to exclude a certain amount of your income that you've earned abroad. So this has to be foreign earned income. It can't be interest, dividends. It's going to be salaries or if you're working as a consultant, this is earned income, as it says in the name.

11:54
Currently, for 2024, I think the exemption amount is $126,500. So let's take an example of somebody that earned $120,000 working in France. And we've already talked about that the U.S. wants you to file a tax return and tax you on that income. If you have the foreign earned income exclusion, that is going to exclude all of your income for U.S. tax purposes. So your taxes due to the U.S. would, in this case, be zero. So this can be a big benefit for some people.

Amy Laburda 12:24
So it's set up to avoid double taxation because, presumably, you're paying France tax on that income.

ReKeithen Miller
Right. Yeah. It's set up to avoid double taxation. But let's use the example of somebody who's earning more than exclusion. They say, well, “I earn more than exclusion. What benefits are out there for me?” Then you have the foreign tax credit. So you can go ahead and claim that. But yeah, it's basically set up to avoid double taxation on income.

Amy Laburda
So I know that you mentioned tax treaties. Let's circle back to that briefly. I think they’re

12:53
going to be pretty central to tax planning for Americans who are living abroad. But it sounds like they're going to vary a lot. Is that a thing where it's just truly the country you're going to be in? You got to look it up because there's no way to tell. Or are there sort of common baselines that people vary between? How similar are some of these tax treaties, I guess, is the question.

ReKeithen Miller
Yeah. My recommendation is to take each one and look at it before you, you know, make any assumptions about

13:21
what's included. I mean, there are certain things that are pretty similar throughout a lot of them. Generally speaking, it's from the U.S. perspective. It has, like, the savings clause that basically gives the IRS the ability to tax U.S. citizens no [matter] where they are. So that's generally in each one of the tax treaties. But, just like any type of legislation or, let's say, certain agreements between countries, there's a lot of negotiation that may go back and forth that may be specific to, let's say,

13:49
a Canadian tax treaty may have provisions in it that may, let's say, a UK tax treaty may not have. Because in the case of Canada, it's a lot of back and forth. You can just drive over the border to the U.S. to work here and drive back. So there may be certain things in there that are specific to somebody… You know, it's really hard for somebody in the UK to commute daily to the U.S. to go back and forth to work, right? So the treaty has certain provisions that countries have negotiated together. So I think it's really important that,

14:18
anytime you're dealing with these, that you look at what each one of them say, because since they've been written, there may have been revisions as they've negotiated different things and you want to not take anything for granted.

Amy Laburda
Makes sense. So one thing I will say that surprised me, when I was editing the first editions of our books, and other people may have known this, was that it's not only the federal government in the U.S. that may want a chunk of your taxes when you're abroad, but states may actually look at charging you income tax, even if you're living in another country.

14:47
How does that work, if you're not living in a state? How can the state sort of reach out and still tax your income?

ReKeithen Miller
Right, so this gets back to the concept of domicile. And so a basic explainer about what a domicile is, is the place that you intend to return whenever you are away from home. So that can be five years, some place can still be your domicile, even 10 years, if your intention is to say, “I want to return back.”

15:16
So states that have state income taxes, a lot of them say, “Hey, if your domicile is still here, you're still going to owe taxes.” So in a lot of these arrangements, where people were… maybe get an overseas assignment, it can be easy for the state to say your domicile is still here. Let's say if your contract says, “Hey, I'm going to work at our foreign division for three years.” Well, during those three years, if you're, say, in a New York or a California,

15:42
or even an Alabama, say… They may say, “Well, your domicile really hasn't changed. So over this intervening three-year period, you still should be paying income taxes to us.” Then there are some states, like Virginia, that say that your domicile cannot change directly to an international location. So they say, “Hey, if you were a Virginia domiciliary while you were here, you need to either change to another state and then move internationally.

16:10
But you can't just say, I'm Virginia domiciliary, and I'm now in the UK, and I’m no longer … Virginia is no longer my domicile.” So there are some states that have very strict definitions of how to change your domicile. A lot of it is just about facts and circumstances.

Amy Laburda
Yeah, as a New Yorker, I can't say I'm shocked that New York's tax authorities are like, “You're a New Yorker forever. Stay here.”

ReKeithen Miller
Well, yeah, and New York is — I'm glad you bring them up. Because there are some states that say… They have rules where they look at

16:40
you being overseas at, say, two or more years or a certain timeframe. And if you haven't been in New York during, let's say this testing period that they have, then they'll say, “OK, you don't have to file a New York tax return,” for example, over that period. But it all, like I said — similar to, like, the tax treaties — is really about understanding what each specific state says about domicile, and when you do and don't have to file a tax return.

Amy Laburda 17:05
Yeah. So for some place like Virginia, where it's maximally “sticky,” I guess, would you generally see people change their domicile within the U.S. before they move abroad, if they want to avoid being a Virginian forever?

ReKeithen Miller
Yeah, I would say if their idea is that they want to, you know, they're not… their intention to… Say if you had somebody who wants to move abroad and stay there indefinitely, right? Then

17:29
I would recommend that they move to one of the states that don't have a state income tax. Call it a Florida, Nevada or whatever, and change their domicile there before they move abroad, instead of having Virginia constantly knocking on their door to say, “Hey, why haven't you filed a state income tax return?” So that would be my recommendation.

Amy Laburda
OK. Now, I realize we've probably barely scratched the surface, but in the name of not making this entirely a tax episode, I won't leave us there forever. But before we leave the topic,

17:57
I just want to speak for myself and say, having edited the book and had these conversations with you, I would certainly want to speak to a tax professional if I were planning a long-term move abroad at this point, because there's just a lot to keep track of. So as that professional, would you generally recommend someone speak to you before they leave the country, while they're abroad, both of those things?

ReKeithen Miller
I would say both. Before is always the right way to approach it, because we can talk through the different things that we've mentioned in this conversation previously.

18:26
And also just making them aware of that, what this move could look like for them from a tax-compliance standpoint. Like if someone's coming to me after they've already made the move, it's kind of hard to take certain things back, right? Right. But if I — we’re able to sit down, talk through different things, I can make sure that they are fully prepared from at least a financial planning standpoint for what the move can entail. It's going to be, someone could be surprised when they move abroad.

18:53
And I tell them, like, well, your tax fees are going to go up, because we have to file certain tax forms or deal with certain compliance issues. It's much better for them to talk to me before, so they can put that in their budget for when they're living abroad. So before is always the best answer. And then,

19:11
beyond just talking to me, I would also recommend that they talk to, let's say, [an] immigration attorney or somebody that's familiar with the laws of the country that they're going to work with. Now, if you're working for a large company, and they're used to moving and shuttling their employees abroad, you may be able to tap into the benefits of your human resources department. But if you aren't, maybe it's talking to an immigration attorney, or talking to someone that's familiar with the local regulations to make sure that you're not missing anything.

Amy Laburda 19:40
So moving beyond just taxes, we talked a lot last time about reporting requirements that Americans face if they're opening bank accounts abroad, if they're investing abroad. I won't make you go through all of that beat by beat again, but on a big-picture level, what are some things that people should be aware of that they need to report, if they're dealing with the monetary system in another country?

ReKeithen Miller 20:01
So, yeah. So when you're… When you're abroad, I think the foreign disclosure forms are something that can easily be missed, because it's not something that you have to deal with if you're living here in the U.S. So there's the FBAR form, or the FinCEN 114, right? This is a form where you have to report your bank accounts if it exceeds $10,000 or more. You may be thinking, “Well, if my — if I just have my money in cash, it’s not earning any interest, why does the IRS care about my foreign bank account?” But

20:30
you know, this is just a requirement the IRS has because they want to keep tabs on where U.S. citizens have their money. And so, if you do not file this form, the tax penalties can be quite onerous, right? Even if it's, you know, your account is only $10,000, they can charge you a penalty for, let's say if it's willful, that could exceed the value of your foreign bank account. Right? So you want to make sure that you're staying on top of the FBAR form. There's also the Form 8938 to report foreign investment accounts or foreign holdings.

21:00
And so, with this form, as we touched on a little bit in our previous episode, this is filed with your income tax return. And so if you don't file this form, for example, the statute of limitations, which is basically the period that the IRS has to come audit your tax return, will never run, in theory. So you want to make sure that you file these foreign disclosure forms. And then you mentioned just previously, just about investment accounts and having to deal with that.

21:27
There may be certain restrictions, if you're in a certain country, that you may have to make adjustments for having your money in investment accounts. They may not allow you to make certain investments. So you want to make sure that you're aware of that before you move abroad, so you can make plans.

Amy Laburda
So I think we've determined moving abroad long-term brings a lot of paperwork with it, for either you or your professional that you hire. Now ideally, in a best-case scenario, someone talks to you, as we said, before they move. Someone talks to an attorney before they move and sort of

21:56
gets all these things on track. But life isn't perfect. Not everything happens the way that it should all the time. So if you discover, “Oh, I should have been filing this form, but I didn't know about it,” or “I thought I filed this form correctly, but it turns out I did it wrong.” What happens when you have that kind of mistake? Or if you're trying to

22:14
clean up a mess a little bit behind hand, not because of anything malicious, but just because it's a lot to keep track of?

ReKeithen Miller
Yeah, I think that's a very good question. My first advice to people that find themselves in this situation is don't run from it. It's better to get ahead of it. The IRS is generally… is more lenient when people are forthcoming about these types of things, because it shows that there was no willful intent to circumvent the tax laws.

22:43
And so I wrote an article about this in 2023, and we can probably link to this in the show notes, which covers a lot of the programs that the IRS has. And so there's streamlined offshore procedures, which allow individuals who may have not filed their FBAR forms or their [Form] 8938 or certain other foreign disclosure forms to basically get right with them. And now if you are someone who is a U.S. citizen,

23:11
there may be penalties and interest that you'll have to pay, but generally those are a lot less than the penalties that come from just failure to file these forms. And so I would say what you want to do is reach out to a tax professional that has experience dealing with cleaning up these situations, and being forthcoming with them so that they can present your case to the IRS and get it in front of them before the IRS finds it, right? So that's the way I would handle it.

Amy Laburda
Yeah.

23:39
What a world we would live in if ignoring problems made them go away. But sadly, that's not the world we inhabit.

ReKeithen Miller
No, and that's not the world that you want to be with as far as the government, right? Because when someone is — Generally the tack that the IRS has taken is that if you have foreign accounts and you're not reporting something, they generally assume that you're trying to hide something. Right? You don't want to put yourself in a light where the worst-case scenario can be assumed. So that's why I always say just get ahead of it. You know, just take the steps to just clean it up,

24:09
because you don't want them to assume the worst-case scenario.

Amy Laburda
So beyond just reporting requirements, are there any other things people should be aware of if they're opening accounts in other countries? I assume if you're working in a country, you're going to get paid in that currency. They might want to direct deposit it somewhere. You're probably not going to get around having some sort of account, if you're there for the long haul.

ReKeithen Miller 24:29
Right. So you're going to want to, I would say generally speaking, if you have accounts in the U.S. — say your retirement accounts, your IRAs and things like that — you're going to want to keep those in the U.S. The thing that people need to consider is if you have investment accounts, like I alluded to earlier, some custodians don't work with individuals who are living abroad. So you may have to take steps if you want to continue to invest in these accounts. Let's say…

24:56
maybe you create a revocable trust and you add a trustee of someone who's in the U.S. That way you can continue to invest in your accounts in the U.S. Or maybe creating an entity account, because it would be considered a U.S. person, let's say, if it's a single-member LLC or a flow-through entity like an S-corp that has the investment account. That'll allow you to maintain that investment account with a custodian, instead of them cutting you off or limiting your investment options.

25:24
As far as opening accounts abroad, I would say you want to tread lightly there, specifically if you want to invest in, let's say, foreign mutual funds, because the IRS has these rules called the passive foreign investment company rules. And generally speaking, if an investment is considered a PFIC, which is the acronym, then the tax consequences are much more onerous. So we're familiar with, or some people may be familiar with, the preferable

25:53
capital gains tax treatment if you were to hold the investment for 12 months or longer, if you sell it for a long-term capital gain. Where, generally speaking, PFICs don't qualify for that. They're usually taxed at the highest ordinary income rates. There's also, if the PFIC doesn't qualify for certain tax reporting rules, then there could be throwback taxes, or penalties and interest, once distributions reach a certain amount. So, you know, it could make

26:20
investing in, let's say, a foreign mutual fund or foreign investment account a lot less advantageous. Even if the returns — on their face, you may get in the foreign investment may be a little bit better than you probably could have gotten in the U.S. After taxes, it may not be as advantageous, given all the tax compliance rules and the taxes that come with holding these. So, these are things people should consider before opening a foreign investment account.

Amy Laburda
Yeah.

26:47
Yeah, I think a lot of the things you're talking about, if you're only going to be there for a two- or three-year job, position, it doesn't even make sense to touch them, just because it's so complicated. Now, if you're planning to stay somewhere permanently, as you mentioned, or at least indefinitely, you might want to get into some of these. But also, being a U.S. citizen living elsewhere, as we've discussed, has a lot of reporting requirements, has tax requirements, etc., which might lead some people to say, “Hey, I'm going to stay in this new country forever. I've, you

27:15
know, built a life here. This is my plan, I have no plans to ever return.” Is there a point at which people are considering giving up their U.S. citizenship largely to get rid of this tax burden and these reporting requirements? Or is that really sort of overkill for the amount of paperwork we're talking about here?

ReKeithen Miller
No, I've actually dealt with this recently. I had… And it just depends on

27:39
each person's situation. So I've had some, I think what you're alluding to is expatriation, basically, right? That's the technical term of giving up your U.S., or renouncing your U.S. citizenship. And I had a situation with two sisters. So I'll kind of give you a view into their situation and how they came to determine that their… giving up U.S. citizenship was best for them. So these two sisters were born here in the U.S. when their parents were here in graduate school.

28:08
They're a few years apart. I think when they left the U.S., the oldest sister may have been three or four years old, and the younger sister may have been about two years old. Until they became clients of mine — They were in their early to mid-20s, and they were referred to me because of a contact that I had, and they [the referrer] knew that U.S. citizens had to file on their worldwide income. These sisters had no idea about this requirement,

28:33
and their parents had no connection. They weren't U.S. citizens. They were here just in graduate school. They got their graduate degrees and they moved back to their country. And so these sisters came to me, and they needed to basically clean up their situation. So at the time when they originally became clients, they were under the impression, “Hey, we're just going to get in compliance, and we are U.S. citizens.

28:54
And we want to get this thing cleaned up so we can continue, you know, and not have any issues,” right? And so we cleaned up their situation. We went through the streamlined offshore procedures. But after a few years and them getting used to complying with the U.S., they were like, “Hey, I don't know if I really, you know, want to continue to do this in the future.” They had their life in their — the country where they were. They were citizens of that country since birth. And, you know, they had their family, their husbands at this point were there, and they really weren't

29:24
coming back and forth to the U.S., not much at all. And so for them, we went through the conversation of, “Well, what makes the most sense for you?” And then they decided that they wanted to expatriate. And so it really worked out for them because given their circumstances, as we talked about on a previous episode with expatriation, there's an exit tax for certain people, if you have a certain amount of wealth. Well, these sisters wouldn't have

29:50
had that apply to them at all, because they had… they’re U.S. citizens and citizens of the country at birth. So they are qualified for a certain exception. So they didn't have to worry about the net worth, that… net worth calculations or things like that. But this is a situation where they decided “I don't want to maintain my U.S. citizenship”. It was more of a compliance burden to them than any type of benefit. So I think for somebody in this

30:15
these circumstances, before deciding if you wanted to expatriate… You know, they were citizens of the EU, right? So that allowed them to travel freely, you know, getting, being able to come and visit somebody back in the U.S. wouldn't be really hard for them, if they decided that they wanted to. So considering what other types of citizenship you have and what that would mean if you still wanted to have some connection to the U.S., it's something which would play into the decision. But for them, the compliance burden outweighed any benefit of maintaining their citizenship.

Amy Laburda
Yeah. And it

30:44
gets us into, you mentioned earlier, the category of “accidental Americans.” It sounds like in this case, they knew they were citizens. They just didn't know that citizens had some of the requirements that they do. But we've certainly seen in the news, other cases, and you may have encountered professionally cases, where people who have citizenship in countries with citizenship that works differently than the U.S. may not even know they are U.S. citizens at all because they, you know, happened to be born here, but their parents aren't Americans or a

31:10
variety of other situations where they end up with citizenship that they don't even really know they have at that point.

ReKeithen Miller
Right. And then in those cases, you know, those people may find out years and years in the future. I think in the article that we wrote, we talked about the prime minister, the UK prime minister, Boris, I can't think of his last name. It's escaping me.

Amy Laburda
Johnson.

ReKeithen Miller
Boris Johnson. Thank you, Amy. And how he was an accidental American and the story backstory for that. So I would recommend that article for anybody that wants to

31:38
delve deeper into this. But yeah, for those people, you can end up… Luckily these sisters caught it when they're in their mid, you know, their mid-20s and they had only been working for, like, maybe three or four years. So it was much easier for us to clean up the backlog. But thinking about it, if it's 15, 20 years, where they've accumulated a lot more assets, it could, you know, be a bigger mess to untangle. But this also harkens back to my statement earlier about jumping on situations and coming out

32:08
before the IRS finds out. Because in the case of the sisters, it was to their benefit that they were… went through the procedures to clean things up. Because part of the expatriation process is certifying to the IRS that over the last, call it five years, you have filed all the required tax returns, you've paid all your required taxes — that includes your disclosure requirements. Well, that five-year period kind of overlapped with the whole process where we needed to clean things up.

32:38
So if the sisters hadn't come out to me beforehand and did that, then they wouldn't have been able to expatriate at the time that they wanted to. So this kind of further bolsters my point about, hey, if you have issues, just go ahead and come out and get them fixed, because it allows you more flexibility down the line.

Amy Laburda
So we talked about some of the reasons, sort of in passing, that you might not want to give up citizenship: if you still have family here, if you think there's any chance you might return. Obviously,

33:05
re-getting citizenship is much, much harder than keeping it if you already have it. Now, the U.S. allows people to be dual citizens. You mentioned these sisters had dual citizenship, and I think

33:16
many of us have encountered people who have that privilege. Not every country allows that. But if you're living in a country that allows you to hold dual citizenship, and you decide you want to become a citizen there while remaining an American, is that something financially that makes sense to consider too? Or is it just kind of depending on what you want and your particular circumstances?

ReKeithen Miller
Yeah, I mean, I think it's something that could be intriguing if you think that you may potentially want to renounce your U.S. citizenship. So it all goes back to what your intentions are. If someone is intending to,

33:45
let's say, make a move and make it permanent — as permanent as can be with things in life — having citizenship in another country would allow you the flexibility if you want to renounce your U.S. citizenship, right? Because you don't want to end up stateless, which can happen. So if it's a situation where you're living in a foreign country and you can have dual citizenship, it's something that you should consider, but also making sure that you go into it with clear eyes. So I would say talk to a local tax professional,

34:14
meaning in the foreign country where you are, to see if there are any additional requirements that would come with citizenship in your new place. But yeah, I mean, it allows you to have more flexibility, I would say… So on its face, it doesn't seem like something I would discourage. I do want to kind of address something that you said in this question, and kind of calling back to the decision about expatriation. Because

34:39
for the sisters that we were dealing with, they had no family here in the U.S., but it could be a different calculus for somebody, even our dual citizen person that we were just talking about. A lot of people listening to this podcast that are thinking about living abroad may have family in the U.S. and what that could mean for them from a certain… from a certain standpoint. So the drawbacks to expatriation for people that have family in the U.S. is,

35:05
there are certain taxes that would apply if you were to say, give your U.S. citizen family members gifts. So if you want to be generous to your family members, there's a gift tax for people that have expatriated that give gifts to family members. So that's something that like, hey, it can come into play depending on what your estate plan may say about, you know, bequests that would happen, or if you want to make lifetime gifts to people, that's an additional expense that you may not be expecting if you're looking at expatriation. So that can affect

35:35
people that you leave behind.

Amy Laburda
Yeah. So I guess: good to leave in mind that expatriating can introduce complications too. You're not just running from complications, you're swapping them for new ones, really, in a lot of ways.

ReKeithen Miller
Yes. Especially if you have family members that are going to be… stay behind that you want to maybe support and do certain things for.

Amy Laburda
Speaking of family, early in our conversation, you mentioned kids as

35:58
a concern for people in your book's demographic that Shomari didn't really have to worry about so much in our book for older adults. So if you plan to have children, or know it's at least possible, what do you need to know about citizenship for your kids and having kids in a foreign country as a U.S. citizen?

ReKeithen Miller
Yeah, that's a very good question. I would say that it just depends on the situation of the parents. So in a situation like...

36:25
We may know that if a child is born to, let's say, a U.S. citizen abroad, that that child can qualify for U.S. citizenship. Similarly, if both parents are U.S. citizens, it's a little bit [of an] easier situation than if, let's say, one parent is a citizen and one parent is not. A lot of it has to do with… and it also may come down to whether the parents are married or not. A good place to look into this, because this can be kind of a

36:53
podcast in itself, is the U.S. State Department. And it kind of goes through, I would say a decision tree, that may not be the right word. But it kind of lays out the different scenarios of… if two people are married and they’re U.S. citizens, if they're married and one isn't, and what the, what it may mean for the child. The most complicated situation, because some of the citizenship depends on the relationship to the child, is a situation where

37:19
the parents may be thinking about assisted reproductive technologies, right? And if the U.S. citizen parent, you know, from a legal standpoint they may be the parent, but let’s say they're not the biological parent. That can introduce complications where the child may not be able to be a U.S. citizen, depending on what type of technologies you use for the child and who's a citizen and who isn't. And so, if U.S. citizenship is something that you would want

37:48
for your child while you're living abroad, these are different things that you're going to have to navigate, depending on the U.S. citizenship status of the parents, whether they're married or not. And then also, with some of these situations, the parents must have had residency in the U.S. over a certain time period. And a lot of the cutoff was, I think around age 14, they had to spend a certain number of years in the U.S. as U.S. citizens. So

38:14
these are things that people are going to want to think about, if citizenship is something they want for their offspring.

Amy Laburda
Yeah. It sounds like certainly research at a minimum, but maybe also a good moment to talk to an attorney who's familiar with the citizenship laws, both in the U.S. and where you are. Just so, as you said, statelessness is the worst case scenario. So you definitely want to make sure your kid is a citizen of somewhere, and ideally of the places you would like your child to be a citizen of.

ReKeithen Miller
Yeah. And I mean, in a scenario where someone is born in the foreign country and that's where their parents are, I would imagine that,

38:43
you know, a lot of countries have birthright citizenship, generally speaking. So in this scenario, it's just more about, hey, if you want your child to also have U.S. citizenship while you're both abroad. And so like you say, talking to an immigration attorney or understanding the scenarios of what the parents have had to spend certain time in the U.S., depending on their marital status and their situation, is key to understand.

Amy Laburda
OK.

39:11
Let's say you already have kids. As you mentioned earlier in the podcast, maybe one of the things that excites you about a move abroad is exposing your kids to another culture or letting your kids see a little bit more of the world. If you're taking kids with you when you move, obviously it's going to depend on your situation, the country you're going to, a variety of things. But are there certain things you would advise someone to sort of bear in mind about how your kid will move through the world when you're abroad?

ReKeithen Miller
Definitely. So here's a list of questions that I typically ask people

39:40
when they're encountering this situation, and things that everyone should think about. What type of school do they want to put their kids in? Is it a public school, a private school, or an international school? And why would that matter? Let's say if you're going to a country where the primary language is not English, and your family didn't speak a foreign language before you left to this new country, right? So

40:09
do you want them to be taught primarily in English, which is usually allowed in international school? Do you want them to be taught in the local language? That may depend on how long you expect to be overseas. And that, you know, so what language do you want children to be taught in in school? Let's say if you are going to a country with a foreign language, is there language support for the child as they integrate, right? Because it's different moving with the child that's maybe three or four or five,

40:36
than moving with someone who's in middle school or high school, right? That's a different, more difficult transition for the family. What level of school will the kids be in when they move to the new country? Will they need to take certain classes or tests to comply with the new country's rules? Thinking about what the curricula are, is there… what the teaching styles will be. Like, is it more project-based learning? Like, just, you know, understanding

41:02
how things could be different for the children, and try to plan and get them ready for this transition. Another thing is if you have a special-needs child, is there support in the new country where you are? I mean, in the U.S., we're — generally speaking, the states have rules to have individualized education plans. Is that provided in the new country where you are? And if not, then how to navigate that, right? Even in the U.S., where it is a law, parents still have to advocate for their kids. And so,

41:31
how will you navigate the new system that you're going to be in? And then, you know, something else that's important, if you're away from family, you don't have family in a new foreign country. Childcare, right? The parents still want to have a life, you know, if you want to go on a date night or something like that. So figuring out childcare in a place where you don't have relatives or friends. Like these are things that I would tell people to think about when they're moving somewhere with children and their education.

Amy Laburda 41:57
OK. I think we've established we could do an entire season of this podcast about moving abroad at this point. But while we're here, I wanted to touch on… We talked about living on retirement accounts in our last episode. But if you're in your working life, you're probably saving for retirement, or at least you probably should be. You mentioned earlier, probably keep your retirement accounts in the U.S. if you have them. But what about more savings while you're abroad, if you're making new contributions? Is that something you can just

42:26
contribute to your American account and call it a day? Or is there anything else to think about with that?

ReKeithen Miller
Yeah, well, as with anything, a lot of these situations, it depends. So if you are working, let's say, for a multinational company, you still may be able to participate in the U.S.-based 401(k), if it's allowed. So in that situation, that's the simplest scenario, right? Your being able to still participate in the 401(k) plan here. But in a lot of scenarios…

42:53
Let's say if you're working for a new foreign company and that doesn't have a U.S.-based plan, or the plan isn't structured in a way that allows for people living abroad to participate in them, then you have to decide, “Well, should I invest in the foreign pension plans, if that's allowed?” And in that scenario, I think it's… I would say, approach that with caution, because if it's not outlined in, let's say, a tax treaty between the two countries, you could end up in some

43:22
disadvantageous tax consequences, where you get a deduction, let's say, in the foreign country where you are, but you're still a U.S. taxpayer. The U.S. may not provide you with that tax deduction. So you can have a scenario where you're thinking, “Oh, I contributed this to a pension plan and it’s tax deferred,” where the U.S. says, “Nope, I'm still going to tax you on the money that you contributed in.” And then also,

43:47
we're generally… With 401(k)s here in the U.S. or retirement plans in the U.S., there's no taxation on the earnings in those plans, at least until you start withdrawing the money. Well, that may not be the case with a foreign pension. Now, as I said, there are certain tax treaties that provide similar tax advantages to foreign pensions that they do to U.S. pensions. For example, Canada and the UK, the U.S. recognizes those pensions.

44:17
So I would say look at the tax treaty before you do that. Another thing, before diving in and investing in a foreign pension is, it could open you up to some of the reporting requirements or the PFIC rules that I talked about earlier, where if there's certain mutual fund investments or certain investments in those, where there's more onerous tax treatments in addition to

44:39
certain foreign disclosure requirements. If the pension plan is set up more like a trust, there could be additional foreign disclosure requirements. So I would say when you're moving abroad and you don't have the option of participating in, let's say, a company plan, there is a lot more to think about before you just dive in and start contributing to a foreign pension, because it can open you up to more disclosure requirements and maybe additional taxes.

Amy Laburda
OK. So we've talked in

45:07
earlier episodes of the podcast about the importance of having a will for everyone, having an estate plan for everyone. And if you're planning to stay abroad indefinitely, or even just for several years, I imagine that there might be some effects on your estate planning, of being abroad. Are there any sort of big things that people should look for, or things that they may want to consider before they even leave, to keep their estate plan working the way that they want it to?

ReKeithen Miller
So

45:34
one of the first things that comes to mind is that we're used to the estate planning laws here in the U.S., but certain countries have, let's say if your estate plan is drawn, drafted a certain way, they have certain heirship requirements. So you may say in your estate plan, “I want to leave all of my money to charity, and I don't want to leave any to my kids. They're well-provided for.” Well, in certain countries, especially if you're going to be there long-term and make this your home,

46:04
they have certain forced heirships, where they say, “Hey, you can't disinherit your family.” X amount has to go to, say, your kids or your spouse. So if you're moving to another jurisdiction, understanding what that can mean. Another consideration is if you have certain trusts that you've established in your U.S. estate plan, figuring out what the laws may say about the taxation of those trusts. I know for example, in the UK, taxation is not only about

46:34
the U.S. citizenship of the trustees or where the trust was founded, but it's about the residency of the trustee. And so if you're a U.S. trustee, and you're a trustee of a U.S. trust, and you're living in the UK, the UK says, “Well, we have tax authority over this trust.” So maybe before you move to the UK, you have someone who's going to be a U.S. resident person be a trustee of that trust, especially if it's a temporary situation. It

47:04
could also mean updating your estate plan to comply with certain local laws. So these are things to think about.

Amy Laburda
So we've sat here, and we've talked about all the complications and the extra work that living abroad can create for you. But I think it's important to step back and remember that living abroad can be a fantastic experience that can bring you a lot of joy and enrichment, let you see the world in a new way. There are certainly still

47:27
plenty of reasons that living abroad can be a really wonderful thing, if that's a thing you have the opportunity to do and that you want to do. Whether it's real or theoretical, have you ever had a client come to you and say, “Hey, I'd love to live in London,” say, “but I'm just really afraid of all this paperwork and all these reporting requirements. And I feel like it's a little bit overwhelming.” Would you have any advice for that person, who has the desire but is a little daunted by all the things we've just talked through?

ReKeithen Miller 47:56
Yeah, I would say: Live your life. You know, people always say there's two things you can count on this world — death and taxes. So taxes are going to be around, right? But you may not have the opportunity to bring your children up in, let's say, a foreign country where they get exposure to maybe your ancestry, and they can learn a foreign language. I kind of view a passport as a way to open doorways to different experiences. And I would say that,

48:25
you know, for somebody that's hesitating on, you know, deciding to move or live abroad, just take the leap, right? I mean, that, you know, as far as the tax consequences and what that all entails, leave that to the tax professionals, of us, to deal with, right? We can navigate these. I've mentioned all the different requirements that you have to do, but you don't have to be an expert in that. You can hire somebody else to do that, right? So don't forgo the

48:53
the joys of living abroad, being able to travel, to get these experiences that may be once-in-a-life experiences, because you have concerns about tax consequences. Because I had — one thing I have not said, although I have kind of warned you, maybe scared you about some of these compliance issues, is that they're impossible to deal with, you know, right? So all of these things can be overcome. So I would say,

49:21
go ahead and make the leap. I know about my study abroad time, when I was in college, I — it was one of the best times that I had when I was in school. It was difficult in some aspects, because I studied abroad in Spain, and I lived in a flat with local individuals and they didn't speak English really. And so it…

49:43
But it allowed me to stretch myself and get out of my comfort zone. And so… And at that time, my Spanish was so much better than it is now.

Amy Laburda
Oh, of course.

ReKeithen Miller
And so like, you know, I enjoyed them like teasing me about my big American breakfast and, like, the different cultural differences. And like, you know, although I wasn't working at the time and I didn't have to worry about some of the tax consequences, I wouldn't trade that experience

50:08
for anything. It was just a great time to just, to challenge myself and to see the different ways that I was able to grow throughout that.

Amy Laburda
Yeah, ReKeithen, I can definitely relate to that. I was in the UK, not in Spain. So I had the advantage of being in an English-speaking country, didn't have the language barrier to deal with. But I definitely felt there were a lot of things that just everyone around you is taking for granted, because that's the water that they swam in their entire life.

50:36
And suddenly things that were easy for you, like: How does this plug work? Or where do I go to get my groceries? And things that just, you don't have to think about at home, suddenly are all things that are doable, but they are things you have to take the mental energy to figure out, like, “Oh, how do I do this here? What's the thing people do?” And sometimes that can lead to great things. And sometimes it was just a little frustrating, when you were like, “This is so easy back home.” So I think certainly a great year I also wouldn't trade away.

51:05
But I think even when you don't have a language barrier, that friction is still certainly a part of it.

ReKeithen Miller
Yeah, definitely. I mean, the plug thing is funny, because I remember going and buying all these adapters and all these things. But I also had to adapt to… I studied abroad in Madrid, right? And so, I had to adapt to the language, but I also had to adapt to, like you said, just being away from family. Like, I remember there were just times, and at that point I was…

51:34
My girlfriend, who is now my wife of over 16, 17 years, right? Just being away from her. And like, so for people that decide that they're going to make a trip to work abroad and live abroad or whatever, and they're leaving family and friends behind, you may not be leaving a significant other behind, but just like that connection, right? And so, you know, you mentioned you're in England and having to deal with that. Like, how do you think that experience maybe helped you

52:03
in your worldview?

Amy Laburda
Oh, for sure. I mean, I think it certainly made me bolder in a lot of ways. So I was on spring break and I didn't have the money to come back to the U.S. So I just decided, “Oh, I'll do some exploring in Europe.” And I had a friend who was studying in Florence, Italy. I decided to go spend three or four days with her. Unfortunately, as will not shock people who are familiar with Italian infrastructure,

52:29
there was a train strike that happened while I was there. She was supposed to meet me at the Bologna train station, which is — I flew into Bologna, and then we were going to take the train to Florence. And she just didn't show up. And now, this is before smartphones existed. We had no way to contact each other. I didn't know what had happened, and I speak zero Italian. Still don't. And so I ended up

52:52
having to navigate leaving earlier, getting a hotel room, like just this whole situation I did not expect. She and I are still friends, in fairness. I did not hold it against her. It was out of her control. But I think, you know, now when I'm dealing with a flight delay here in the U.S. or something's gone wrong with my travel, I'm like, “Well, at least I'm not stuck in a train station where I don't speak the language at all and I don't know what to do next.” And I think similarly, I felt a lot of the isolation that you were describing.

53:21
But on the flip side, I think that isolation really taught me that, “Oh, I can be self-reliant, and I can figure out a lot of these really stressful situations if they arrive. And it's a thing that I can handle when it comes my way.” And I think that's a thing I've really carried forward. I don't know if you had any similar mishaps, but I think it makes you feel like, “Oh, this is not the end of the world. I can handle this.”

ReKeithen Miller
Yeah. I wouldn't call it necessarily a mishap, but it was just like a…

53:47
integration into the place where I was, because as you may know, famously in Spain, they have siesta. So I remember I was going out, and I was trying to go shopping, and I needed to get some food, but it happened during siesta time. So nothing was really open. And so I was just like, oh, like, I'm so used to being in the U.S. and just being able to go to the store when I want, like 24 hours, you know, blah, blah, blah. Just so spoiled.

Amy Laburda 54:15
But also the industrious American, he's like, I don't need to rest. It's time to do some chores.

ReKeithen Miller
Exactly. And so that was something. But I think something I also have taken away from my experience abroad. And we talked a lot in this podcast about just younger children and what that could mean for them. And it made me — for my children that I have now, it's like, hey, I want to get them a passport. I want to take them around the world, to show them that

54:44
it's bigger than, you know, the U.S., right? There are other people that do things, and like the way we do it… I know we love American exceptionalism, right? We think of ourselves as exceptional, but there are other ways to do things, and just getting them exposure to how people live life. Because I want them to feel comfortable when they get older to say, hey, I want to study abroad in maybe a country that speaks a foreign language, and them being OK with that.

55:14
Or even, like we're talking about here, if they want to go and live abroad for a little bit, and work abroad, just knowing that the possibilities, like I said, with a passport, you know, grow exponentially, and them not being afraid to do that.

Amy Laburda
And I think to your point about American exceptionalism, another, certainly,benefit for me of spending time abroad, and I think for a lot of people, is just de-centering yourself, right? You're like, the world isn't necessarily always set up for your convenience.

55:39
And I think that's a good thing to internalize early in your life, because it certainly has helped with patience, with flexibility, with just sort of realizing there are a lot of ways to live and to arrange things. And many, many of them work, but they're different than what you're used to. And that's fine. There's nothing wrong with them.

ReKeithen Miller
That's completely fine. You know, you don't have to be a hustle culture and, you know, working 60, 70, 80 hours. Like if that's not something you want, like if you want to be more laid back,

56:07
you know, there's some countries that accommodate that a little bit more in your working life. So there's no one right way to do something, and there's no, definitely no one way to live a life. Like there's infinite ways to live a life. And so like I say, the benefits in a lot of these situations, if you determine it's something that you're set on and you're ready to plan for, don't let what we've talked about as far as compliance stop you from doing it.

Amy Laburda 56:33
Yeah, I will say you haven't talked me out of thinking international travel sounds great. So I think our listeners should take heart too. Now I like to end the episode giving the mic back fully to my guests. So we've obviously covered a ton of ground today, but is there anything else about living abroad, or financial planning for living abroad, that you want to touch on but we haven't really gotten to anywhere else in our conversation?

ReKeithen Miller
I mean, I think we covered it, but I would just say or kind of just summarize the things that we talked about.

57:03
It's better to plan before you make that leap I just told you to make, to go and live abroad. You want to plan first. Then you want to think about, not only to find out your aspects of living abroad, but the real-life aspects. Thinking about if you're having family here, right? And you're moving with the, say, your young kids or you're just moving yourself. What does that look like?

57:27
Really for yourself, are you OK with, say, missing certain family events, whether it's family reunions or, you know, if you're not able to go to a wedding because you're, you know, halfway around the world. Does that sit right with you? You know, how does… how would that make you feel? If you're navigating certain things for your kids, like, you know, are they going to be able to handle the movement? Kids are resilient. I have two of them. I know they are, right? But really like,

57:55
navigating that transition with them. And you're not only having to think about working, but helping them to adjust. Are you ready to take on that challenge? And so we talked a lot about the financial aspects and the reporting requirements, but really thinking about like, are you ready for what all comes with living abroad? Are you ready to dive into the culture, right? Even if you're going to a place that speaks English as well,

58:22
that doesn't mean the culture is going to be the same. There's different things that you should, out of respect for the place that you're going, try to learn how the people there live and really plug yourself in, because that's where you're going to get the best out of living abroad. Not just going and living in your own bubble, right? At least that's my opinion. So are you ready to do that? Are you ready to put in the work to build a network while you're living abroad,

58:46
to make sure that you're able to succeed, right? Because you're maybe leaving, you know, the network that you've built here in the U.S. behind. So these are things that I think are important, and I kind of want to touch on more of the softer side of it to leave people with.

Amy Laburda
Sounds great. ReKeithen, thank you so much for chatting with me today. I hope that listening to this conversation has made people more willing to take that leap that you mentioned. I think they won't be sorry if they do.

ReKeithen Miller
Thank you, Amy, for having me. I really enjoyed the conversation and hopefully

59:15
people were able to take a little nugget from this conversation to help them if they're deciding they want to live abroad.

Amy Laburda 59:23
“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:

59:52
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.