The Journey: 5 Money Questions For Expats With Wanderlust

By Janet Kidd Stewart
Tribune News Service

WWR Article Summary (tl;dr) Janet Kidd Stewart takes a look at the pros and cons of retiring abroad. Stewart says it is important to consider a sober look at all the transition issues, including taxes, before making a move.

Tribune News Service

Ever wonder about the financial logistics of retiring abroad?

Travel websites make it sound so alluring. “Retire on a shoestring in Belize!” “Check out the freebies for ex-pats in Panama!”

It brings to mind an episode of “The Simpsons” in which Homer, after watching a promotional video, convinces Marge to move to the idyllic Cypress Creek planned community, home of the Globex Corporation.

Of course, just a few scenes in, Marge is drinking heavily out of boredom and Homer’s boss turns out to be a villain.

Don’t let this happen to your retirement. Consider a sober look at all the transition issues, including taxes, before making a move, particularly a move abroad, experts say:
-I’m moving abroad full-time. Do I still have to file a U.S. tax return?

In a word, yes.

“People forget or they don’t know that as a U.S. citizen living outside the U.S., their tax obligations (at home) essentially don’t change,” said Dennis Brager, a Los Angeles tax attorney. “They have an obligation to file a return and potentially pay taxes.”

-So, which tax do I pay?
The first step is understanding Uncle Sam’s long arm when it comes to taxing American citizens living outside the country, notes John Olivieri, a partner with New York law firm White & Case.

“U.S. citizens are taxed on worldwide income, but they’re allowed a credit for taxes paid to a foreign country,” he said. That means they pay the higher foreign rate, and no additional U.S. federal tax, but they don’t get reimbursed for the difference between the two countries’ rates, he said. On the flip side, if the foreign country tax is lower than the U.S. tax owed, the taxpayer will owe the full amount of U.S. tax.

-What about my will?
Particularly in Europe, there may be local laws governing what happens to property when one of its residents dies, Olivieri said. Your will might stipulate that everything goes to your spouse, for example, but some countries would require children to be included as heirs, he said.

And just having a revocable trust that spells out one’s wishes isn’t always enough, he said, because those laws could overrule a trust.

-Should I custody my assets in my new locale?
Probably not, says Brager.

“We have a lot of protections here in the United States,” he said, referring to federal bank and securities backstops. “There’s typically no reason to move one’s investments overseas other than for checking or (small) savings accounts to get easy access to their money. And, frankly, it’s difficult for Americans to open bank accounts because of the paperwork imposed on foreign banks” holding U.S. funds, he said.

-Will I still receive Social Security income?
Generally, yes, but as with many aspects of Social Security, there are complex rules and exceptions. Check out this tool from the Social Security Administration to see if your benefits may be affected by a move:

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