This week I received a request from another financial planner to write about how immigrants may plan for financial exit from the US. Facing the new but yet to be clear immigration policies in the US, you may have a fear of being pushed out that your US born friends can’t understand. Or perhaps the current political environment makes you reconsider whether to become an American after all.

While you may have been considering the US as your home and country for a long time, the fact that you are not yet a US citizen means you do not enjoy the same rights, even though you have mostly the same obligations. If you decide that the risk of not calling the US your permanent home, whether by will or by force, is real, then you should create a financial go plan.

As a first generation immigrant to the US, and having lived in multiple countries on the grace of the host country governments, I can relate to the anxiety of facing this uncertainty. In our lives as global nomads, one of the first pieces of advice we received was to prepare a “Go Bag.” Since there is always a possibility we’ll need to leave on short notice, we pack and store a backpack of all the essentials that allow us to start a new life somewhere else.

More important than a Go Bag is a Go Plan. Once you leave the country you called home in the last while, where do you go to start over? How do you get access to funds and legal documents necessary to start over? How do you wrap up your old life in the country you may or may not be able to return to? These are all questions that we need to deal with beforehand.

For us a Go Plan is relatively simple since we have financial ties and families back in the US. We intentionally keep minimal ties to the country we are in to more easily facilitate the inevitable exit. For you it may be a more elaborate process, since you may have more ties in the US than in any other country at this point.

Creating a financial go plan does not mean you are actively seeking to leave. Just like we still haven’t had to use our Go Bag, you may never need to follow your plan. But instead of worrying about the uncertainty, I recommend facing it by putting a plan in place so you know exactly what to do when the time comes for you to execute it.

Before you start making a financial go plan

The process I describe below is general and not comprehensive. I recommend that you consult investment, tax or legal professionals before making any big moves. You may also click into the hyperlinks to see more references on the actual regulations and numbers associated with them.

You will notice that I use a lot of “ifs” in this post. That is because there are so many different possibilities depending on your nationality, your ties to the US, your net worth, and most importantly, your perceived risk of maintaining a life in the US. I am simply trying to show you a way to systematically process uncertainty. It’s up to you to decide whether to take action.

If you are a green card holder who has met the requirement to become a citizen but chose not to, you may want to reconsider. Of course you may have chosen that because you don’t plan to stay in the US for the long-term. In that case, you should have a go plan in place.

However, if you call the US your home and you don’t have anywhere else you want or can go to, then becoming a citizen gives you more protection, better treatment, and the right to exercise your civic duties and have a say in how the government is run.

Step One: Locate your safe haven

First, answer the question: where would you go if you don’t live in the US anymore? You may still have some financial and family ties with your passport country, and that will likely be the first safe haven for you. If you no longer have any ties with your passport country and may have trouble returning there, then it’s time to look into other options.

Depending on your situation, you may have different requirement for the safe haven. If it’s important for you to be able to find employment locally, you may want to look into countries that are actively looking for skilled workers or professional immigrants, such as Canada, Australia, or New Zealand. Learn about the process and restrictions to apply for resident visas in those countries.

Professionals may also find English speaking jobs in places like Singapore, Dubai, or Hong Kong. Start cultivating networks in these expat-rich cities and find out whether there are potential opportunities for you. However, in these countries there is likely no path for you to become a citizen eventually.

For the self-employed or retired, you may have more options. Since you have a non-US passport, find out for which countries you may be eligible for longer term visas. Some small countries may even allow a path to citizenship through investment. If you have the means, look for residence planning companies to help you find the right safe haven. (Here’s an example.)

Step Two: Form financial ties with safe haven

Before you take step two, you should know that currently as a US person for income tax purposes, you have the obligation to report worldwide income and foreign assets above certain threshold. Therefore having financial accounts outside of the US will cost you a lot more time, effort, and sometimes money. However, it’s up to you to decide whether it’s worth it. (See Step Four.)

Furthermore, due to the enactment of FATCA, many foreign banks and custodians are refusing to work with US citizens and green card holders so they can bypass the cost of complying with the regulation. This can be one of the constraints when you decide where your safe haven should be.

#1: Make a Inventory

Prior to deciding how much of a financial tie to maintain with your safe haven, make an inventory of your total assets, liabilities and net worth in the US and abroad. (You may want to use this one page financial plan to help you organize if you’ve never done it before.) Depending how you envision your “exit scenario”, you may decide to simply move a small amount of assets into safe haven accounts to maintain the ties, or keep a greater amount offshore to mitigate political risks.

Whatever route you take, having online access to all of your accounts is a must. This allows you to manage your finances from abroad even if you are not in country.

#2: Bank accounts

If you still have financial ties with your passport country and designate that as your safe haven, you are free to transfer money in between the two countries, unless there is foreign exchange control in your passport country. If you bank with large banking institutions in both countries, you may utilize wire transfer directly. Or you may link both of your accounts to services like PayPal or Transferwise to move money through a third party.

It’s relatively difficult to form financial ties with another safe haven with which you don’t currently have any immigration status or long-term visa. In this case you may look into opening offshore accounts to put part of your assets under non-US jurisdiction. However, the foreign banks that welcome small account balances from people with strong US ties are dwindling by the day. Here’s a resource that may help you with that. (Not an endorsement.)

#3: Investment accounts

If you wish to move your investments offshore, you can look for specialists using custodian accounts located in Hong Kong, Qatar, Singapore, British Virgin Islands, the Bahamas, Malta, etc. The investments can generally be denominated in major world currencies, such as Euro or US dollars. If you choose to keep the investment in local currency, you will be taking the risk of currency fluctuation, which may increase or decrease your return.

You may also find online trading accounts located around the world. Here’s a resource for the more reputable companies. However, some of them may not take clients who are currently US residents. (As mentioned earlier, to avoid having to comply with FATCA regulations.)

Note that you may use custodians in other parts of the world to invest on the US stock exchanges, Nevertheless, it’s likely more expensive than using US custodians to invest in the US market. In addition, the competitive market in the US has driven down the fund expense ratio, account fees and trading cost to the lowest in the world. You are likely to incur higher cost by holding your investment outside of the US.

Another word of caution, you may want to avoid investing in pooled investments, such as mutual funds registered in other countries, unless your are investing in retirement or pension accounts in countries with tax treaty with the US. These types of investments, called PFIC, require special reporting and come with greater tax liability in the US. If you open online brokerage account overseas, you will likely need to feel comfortable selecting individual stocks, or using Exchange Traded Funds.

Also keep in mind that for certain offshore destinations you may need to hand over the management of your investment to an advisor. The cost of doing so is generally much higher than doing it yourself with an online discount broker. The offshore advisory companies may also impose minimum asset requirements, or charge more than those in the US, due to the additional compliance cost.

Lastly, having financial ties with more than one country means you will need to have estate planning done in coordination with all the countries involved. In addition to having vastly different laws, one country’s legal document isn’t always accepted in another country.

Step Three: Manage US assets

Even if you leave the US permanently, it doesn’t mean that you cannot hold assets in the US. In fact, many foreign investors invest in the US through holding US property or trading in US brokerage account. You simply own these assets as a non-resident alien and pay taxes on investment income as such.

So the real question is, what do you wish to do with your US assets if you no longer live in the US? And what is the best way to structure them now?

In general, it’s best to make your assets as liquid as possible if you face the uncertainty of your residence. Nevertheless, for most people who have lived and worked in the US for a while, you likely have the following illiquid assets –

#1: Tax-advantaged accounts

While the investments in your 401(k), IRA, 529 plan and Health Savings Account are liquid, you don’t always have full access to the balance anytime without paying a penalty. By investing in these accounts, you take the risk of not being able to take the money with you.

It doesn’t mean that you should stop investing in these types of accounts completely. Sometimes the upfront reward may still be higher than the penalty. For example, if you get a match from your company 401(k), the free money may more than compensate for the penalty of early withdrawal. You simply need to do the math on your own to figure out whether it’s worth it.

If you are looking for more flexibility, a Roth IRA is generally a better vehicle than a Traditional IRA, since you can withdrawal your contribution portion anytime without penalty or being taxed again.

On the other hand, sometimes 529 plan and Health Savings Account balance can be used on expenses occurred overseas, so the main issue is being able to access the account balance when you may already be overseas. This means you likely need to maintain a normal US checking account to receive the distribution.

Many US financial institutions do not keep clients with a foreign address anymore. Therefore it’s likely you will need to utilize virtual mailbox service with a full residential address, or enlist the help of family or friends remaining in the US.

#2: Real Estate

If you own a home at the time you leave the US, you may choose to sell it or lease it for income. Either way, you should have a basic understanding of marketability of your home, and have vetted a few professional managers who may help you maintain the property or process the transactions.

If you choose to turn your primary residence into investment property, you will now own the property as a foreign investor down the road. You will need to investigate further the tax and legal consequences in your safe haven for doing so. Also, foreign real estate investors are generally subject to a flat withholding rate on the rent income and the eventual sales proceeds.

Of course if you already own investment properties in addition to your primary residence, the process of converting your primary residence into rental property is relatively simple. You may also already use a LLC to hold the properties. I recommend consulting an attorney in your state to understand how becoming a foreign investor may change the status of your existing LLC.

#3: Personal Property

Being a global nomad, my policy has been to not accumulate personal property I’m not willing to leave behind. Whether or not you are a follower of minimalism living, I think it’s good to know that everything you own can be replaced.

If you own tangible collections such as gold, paintings, or antiques, you may want to consider moving them to your safe haven. You may consider leaving them in bank safe deposit boxes so you don’t have to worry about them through your transitions.

Step Four: Do a cost benefit analysis

Now you have a plan outlined, how much would it cost you? And is your perceived risk worth the extra cost to execute at least part of the plan?

Here’s a summary of the things that may cost you time, money, and effort:

  1. Applying for a visa in a third country
  2. Fulfilling visa requirements in a third country
  3. Opening and maintaining bank / investment accounts in a third country or your passport country
  4. Paying the extra expense of not investing in the lowest cost country (US)
  5. Hiring advisors to manage investment accounts in a third country or your passport country
  6. Engaging tax professionals to make sure you are compliant with laws in all countries you have financial ties with
  7. Working with attorneys to coordinate estate planning in all countries involved
  8. Using professionals to manage your real estate in the US or in safe haven
  9. Keeping tangible valuable assets in safe deposit box in safe haven

Depending on your unique situation, you may feel comfortable knowing you have an extra account abroad. Or you may want to seek further immigration. I hope this post help you create a financial go plan and decide on the best way to move forward.


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