FATCA – Compliant Financial Planning

SJB are in an exceptional position of being both regulated and experienced in Europe as well as the US, meaning we can help US expats living across the world. Please see the link to SJB Global regulations here and SJB US here.

US expats have had very limited opportunities in the financial advice market since FATCA was introduced. We often find individuals are unaware they are considered a US connected person. Many have faced challenges investing assets outside of the US in a legitimate manner due to the limited number of options available. These options come with complex compliance requirements for investors, custodians, advisers, and firms offering these services. Over recent years, more and more providers have begun to specialise in this space to create unique compliant solutions for US expats.

Who are US-connected persons?

The following people are considered US connected persons:

  • Green Cardholders
  • Other visa holders living in the US. Although this can get complicated. H1B visa holders, for example, are only sometimes considered US-connected persons.
  • US taxpayers
  • You were born outside the US but have one US parent
  • You were born in the US, even if you left as a child
  • Also, note the passport you have is irrelevant if you were born in America.

If any of the above apply to you or you believe you are a US-connected person, then we can help.

What requirements need to be met?

Tax-compliant investment or retirement services overseas can be utilized for US expats providing the below criteria is met:

  • The institution you invest your funds with complies with FATCA
  • You are filing the correct forms annually to the IRS
  • Your financial adviser is regulated to provide cross border advice in both the US and your country of residence

Fortunately, SJB is in a unique position to cater for this market due to our cross-border business model with multiple regulations.

What is the average price cost?

US FATCA-Compliant Investment Plans – FATCA compliant platforms are designed for US-connected individuals who want to invest. They provide access to SEC-regulated investment managers and their managed portfolio services (MPS). These investments, that offer a collection of direct equities, bonds, ETFs, and mutual funds, are not penalized by the US tax code.

US Compliant Retirement Plans – Foreign US style personal pension plans have been carefully designed to not just comply with FATCA but also provide additional tax benefits for individuals returning to the US. These products offer gross roll up and lucrative tax benefits that outweigh the benefits of many non-US pension options.

401k Rollover to IRA – Unlike UK expats, US expats don´t have the option to transfer their pensions overseas without the implication of a huge tax charge, however, there are still very attractive onshore options such as rolling over your 401k to an IRA.

Common Misconceptions

Putting your assets in your partner’s name

Although it may not be the most sophisticated option, having your assets in your spouse’s name (assuming they are non-Americans) at a first glance could appear a simple option to overcome FATCA. Extreme measures often need to be taken to avoid any legal issues. For example, both spouses may need to hold separate bank accounts, split costs completely and even separate living arrangements. This is often a risky avoidance method as opposed to a solution and is not recommended.

Giving up your American Green Card or Citizenship

This might seem like a big step, but more and more are doing it, with over 5,000 yearly cases reported, including Facebook founder Eduardo Saverin. FATCA and double taxation on higher incomes have contributed to this situation. However, there is an exit tax for giving up your Green Card. Whether you pay the taxes depends on your immigration status and financial assets.

Continuing to contribute to your existing accounts in America

Assuming they are open to American expats, which often isn’t the case. This does come with risks though, such as currency exchange fluctuations, and various banking fees. This also isn’t an option for Americans who have lived overseas for 25-30 years, and who no longer have US bank and brokerage accounts in many cases. Another risk is that your US brokerage will eventually follow in the footsteps of many others and close your account.

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