(Image credit: Getty Images)
Young professionals are increasingly building new lives and businesses overseas, drawn by the lifestyle, affordability and opportunity that foreign countries offer.
Increasing numbers of U.S. taxpayers are launching start-ups and consulting firms (paywall), opening cafés and running small tourism ventures everywhere from Mexico to Portugal and Vietnam.
But while the dream is compelling, the reality is complicated.
Article continues below
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more – straight to your e-mail.
Profit and prosper with the best of expert advice – straight to your e-mail.
The U.S. is one of the few countries that taxes its citizens on worldwide income, meaning new ventures abroad are still very much entangled in the U.S. financial and legal systems.
That’s where financial advisers come in. American clients living and working abroad don’t just need an investment plan — they need someone who can guide them through the cross-border maze. U.S. CFP® professionals who also live and work abroad are in a unique position to support them.
Here are six of the most important ways they can do so.
1. Entity selection abroad
Forming a limited company in Portugal or registering as self-employed in Hong Kong carries major implications for U.S. taxes. Without planning, clients can end up paying far more than they need to.
Our firm, which is based in Singapore, advised a client who had set up a luxury travel company there. She had chosen a local corporate structure without U.S. input and triggered thousands in additional annual tax liability due to global intangible low-taxed income (GILTI), a U.S. tax on certain foreign earnings of American-owned companies.
We analyzed the U.S. tax consequences of her current business structure and determined the most tax-efficient way to restructure the business from a local and U.S. tax perspective.
2. Navigating retirement savings across borders
Clients are often unsure whether they can keep saving in U.S. retirement accounts when they earn money abroad. Exclusions, treaties and local pension schemes can make things complicated.
One entrepreneur we worked with in Malaysia discovered the mandatory local pension contributions to the country’s Employees Provident Fund weren’t recognized for U.S. tax purposes as a pension but as taxable income instead.
We helped him restructure the business income to be considered U.S.-based so he could also fund a solo 401(k) and contribute to Social Security.
3. Coordinating estate and succession planning
Many expat entrepreneurs hope to build family businesses, but estate laws abroad can derail succession plans. France, Spain, Portugal and other countries implement “forced heirship” rules that override U.S. wills.
A café owner in France assumed she could leave her shares freely to her spouse. But French law guaranteed her that her two children would receive a large share of the inheritance along with her husband. By coordinating with a local attorney and a cross-border French/U.S. tax firm, we helped her design a plan that respected both her wishes and local law.
4. Managing banking and currency risks
Entrepreneurs abroad know that juggling multiple currencies can affect profitability. Exchange-rate swings, foreign transaction fees and local banking restrictions can eat into margins.
Advisers can help clients set up multi-currency accounts, hedge currency exposure, actively manage cash and educate them to reduce friction when moving money between countries.
5. Spotting overlooked risks
Small business owners abroad face insurance, liability and social security obligations that aren’t always obvious.
For example, one client who started a medical consulting firm in Singapore thought that his U.S. liability umbrella policy would cover his risks globally. Advisers can flag these exposures and connect clients with local professionals to close the gaps.
6. Not relying on a single U.S.-based adviser
The most effective model is a coordinated team: A U.S. cross-border adviser who lives and works where their clients are located, paired with local attorneys, expat accountants and specialist consultants. Your adviser back home doesn’t fully understand the challenges expats face day-to-day. Things that may be simple in the U.S. become complex abroad.
We worked with an entrepreneur who initially hoped to “keep it simple” with one U.S. based adviser. But once we brought in a local expat accountant and an attorney with global specialization, the tax and legal structure fell into place, saving money and avoiding major compliance risks.
Acting as anchors for clients
Advising clients who start businesses abroad is the next frontier of financial planning.
For these clients, U.S. qualified local financial advisers are anchors, helping globally mobile entrepreneurs steady their finances, navigate competing tax systems and protect the legacies they’re working to build.
The American dream is increasingly lived out across borders. Advisers who recognize that shift will guide the next wave of clients who chase opportunity abroad.
