Considerations for Living and Working Abroad

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May 02, 2014


As the economy becomes more global in nature, Americans are increasingly considering opportunities to live and work overseas. The U.S. Department of State estimated in 2011 that 6.3 million U.S. citizens study or work abroad, the highest number ever recorded.

 

 

While planning to relocate abroad can be exciting, it’s critical to think strategically about your time overseas before your plane takes off. Keep in mind these four steps to help lay the groundwork to support a successful time abroad. 

1. Open a Local Bank Account

 

For starters, you’ll need local sources of liquidity. “You need to ensure you have quick access to funds locally,” says John De Clue, Chief Investment Officer for The Private Client Reserve of U.S. Bank, who has spent eight years of his career living abroad.

 

That means your first step may be opening a local bank account in the new country, because banks in the U.S. may put daily limits on how much money can be withdrawn from an ATM. Limits on cash withdrawals typically range from $500 to $1,000, but can often be raised with a client request.

 

In most countries, opening an account is as easy as walking into a local bank. But in other countries, the task may be more difficult. Some foreign banks may be reluctant to open accounts for U.S. citizens since the 2010 enactment of a U.S. law called the Foreign Account Tax Compliance Act (FATCA), which was created to crack down on offshore tax evasion and money laundering. The law requires foreign banks to register with the Internal Revenue Service and report certain information about their U.S. account holders

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May 02, 2014


Consider applying for an account before you arrive in the country to ensure immediate access to funds when your plane lands.

 

Equally important is ensuring you have online access to your U.S. financial resources and investments. While this may seem routine, accessing your financial advisor instantly may be challenging with time differences.

 

2. Know Your Tax Obligations

Another big consideration when moving overseas: taxes. All U.S. citizens and resident aliens living outside the U.S. are required to pay taxes on their worldwide income, no matter where they live.

Americans working overseas may be able to exclude up to $97,600 (adjusted annually for inflation) from their income for tax purposes. Also, some Americans living abroad may be able to deduct certain costs, such as employer-provided meals and housing. 

 

“Talk to your tax advisor before you leave,” says Jason Whong, Wealth Planning Strategist for The Private Client Reserve. “And make sure to keep current with U.S. tax filings. That obligation doesn’t go away.”

 

When negotiating an overseas salary, talk to your human resources department about whether they offer tax equalization, a policy adopted by many corporations to tailor overseas salaries so the employee doesn’t take a tax hit when moving abroad.

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May 02, 2014


3. Understand Access to Benefits

It’s important to investigate all the benefits that your employer may or may not provide, such as medical care and subsidies for housing, cost of living or airfare.

 

De Clue says health care is one of the most fundamental considerations when moving abroad. “Make sure you understand the health care that’s available locally and whether it’s going to be acceptable. Your health is your most important investment.” 

 

4. Plan for Emergencies

Last, but certainly not least, is to put in place

a “worst case scenario” plan. In the event of a medical emergency that might require air evacuation back to the U.S., make sure that you have transportation insurance coverage in place. In addition, ensure that key documents, such as a living will, power of attorney, trusts and guardianship are updated before you leave. Meet with your attorney in advance of your departure to make sure your documents are in order.

 

“One important issue, which is no different from what we would advise any client in the U.S. to do, is to have provisions for someone to step in and make decisions for you if you are unable to do so,” says De Clue. “This is even more important if you’re 6,000 miles away.”

 

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