On October 30, 2024, Andrew Fisher and Andrejs Pilajevs from Cerity Partners, a new Institutional Member of SID-US, held a webinar on “Leaving the US: Financial Planning Tips and Traps” with a focus on the financial consequences of emigrating from the United States. Andrew and Andrejs are part of a specialized team within Cerity Partners that advises families in cross-border situations. Watch the event recording below or on our YouTube channel here.
While the U.S. has long attracted people from all over the world, there seems to be an increasing number of people leaving the U.S. for a variety of reasons, both natural-born U.S. citizens and long-time residents. There has been a proliferation of special visas and residency or citizenship schemes, such as “Golden Visas” that make such emigration more enticing. Deciding to leave may or may not be easy but extricating oneself from the U.S. financial system is not. Those decisions can be very complicated. The discussion focused on four key financial elements – assets left in the US; cross-border taxation; estate planning; and expatriation and the exit tax – and how one’s legal status with the U.S. (citizenship, permanent resident, or non-resident) affects those areas.
Most financial assets should be left in the U.S., in particular retirement accounts, especially as a U.S. citizen or permanent resident. Many people prefer to keep any real estate that they have in the U.S. as a good, long-term holding. There will be some complications from dealing with cross-border taxation, but it is likely worthwhile. The U.S. system of taxation of its taxpayers regardless of residence can be cumbersome, but due to the availability of tax exclusions and credits, U.S. tax liability can be mitigated. A U.S. person residing in a lower-tax country will find that the U.S. taxes become the dominant ones. Taxes on investments and other types of passive income can be more challenging. Cutting your tax reporting obligations to the U.S. is the main reason people want to leave after a few years or expatriate.
Expatriation is the system to renounce your legal standing in the U.S. if you are a citizen or have been a long-term permanent resident. For some people, this may trigger an exit tax, or a deemed disposition of their assets to true up their tax liability to the U.S. The tax calculation is complicated. And, very importantly, an expatriation can lead to an undue estate tax burden on remaining U.S. heirs. Estate planning is quite different and much more flexible and generous in the U.S. versus other countries, and is the single largest reason, outside of easy access to the U.S., that emigrants choose to retain their U.S. status.
Key Takeaways
- Do not make life-altering decisions about an international move or immigration in a silo. There are many financial considerations which include aspects of: immigration, investing, taxation, and especially estate planning & wealth transfer. All of these should be factored into your decisions.
- It is possible to live in so many different places now, and “golden” visa and citizenship choices are proliferating. Go seek what you want! Just be mindful that in addition to the many benefits of having access to a new country, there are most certainly trade-offs and negatives in areas of taxation and estate planning.
- Leaving the U.S. is simple; getting rid of your U.S. tax requirements, not so much. The process of renouncing your U.S. citizenship or long-term residency can be expensive and has major financial consequences.
- US citizenship or permanent residency can be burdensome for tax filing requirements but not necessarily for taxes owed. Conversely, it can be a benefit when it comes to wealth transfer.
- Estate planning is the most overlooked area of one’s financial affairs. Estate taxes and expenses can take a big bite out of your legacy to your heirs, if not thought through. Thorough planning leads to peace of mind.
- Many people are not prepared for the US exit tax. Get educated and get planning!
If you have any questions about your personal circumstance, please feel free to reach out to Andrew and Andrejs directly:
Andrejs Pilajevs, CFP®, MSFP, Principal - [email protected]
Andrew Fisher, CFA, CPA, Partner - [email protected]