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Client Story: How Worldview Helped an American Expatriate and his Family Living Abroad

“Our financial affairs are so complicated because we have stuff all over the world, and no one has ever looked at our whole picture,” worried the client when we first sat down with them.

Jim is an American living in Hong Kong. He is originally from New York and was working in Germany when he met his wife, Katharina, a German citizen. Jim has since been posted to numerous countries with his long-time employer, and is now running the Asia region from Hong Kong. He has three children, who are all dual citizens of the U.S. and Germany. Katharina is not a U.S. citizen.

Jim and Katharina have accumulated a significant net worth over the years, with three properties owned in three different countries (two are now rentals) and a significant amount of financial assets in company stock and options, qualified savings accounts in multiple countries, accumulated cash and diversified liquid investments.

In the time that they have worked with us, we successfully guided them through many unique planning decisions, including the following:

 

  • Oversight of U.S.-based investment accounts, which include qualified accounts and 529 plans. The 529 plans were an interesting discussion, because it is uncertain where the kids will be attending university. Higher education in Europe is often free or at least substantially less expensive than in the States. This of course could lead to a situation where a large 529 balance could go unutilized, thus incurring a tax penalty. In the end, we agreed that it was very likely that at least one of their kids would study in the U.S., so keeping the 529 plan is sensible.
  • In-depth involvement in tax planning in conjunction with their various tax advisors, as they have moved among several countries during our time working together. Over the years, we have sought out multiple new tax advisors to join their advisory team, based on their evolving tax situation.
  • Helped identify an inappropriate offshore investment, which was later liquidated. This particular investment was sold to Jim before he married Katharina. These off-shore investment “schemes” have long been sold to non-American expats, but for an American the structure never made any sense because of tax implications. Furthermore, most of these that we have reviewed are also quite poorly performing investments in their own right, due to excessive fees and poor investment results.
  • Organized the various foreign qualified accounts they own, helped to evaluate the investment choices and reallocate holdings. Careful consideration of Jim’s employer pension in Hong Kong resulted in their decision to decline participation beyond mandatory for tax reasons. Since the tax rates in Hong Kong are lower than in the U.S., Jim would benefit from contributing to an IRA.
  • We’ve consulted on employer compensation negotiations, in particular reviewing cost of living allowances and the currency adjusted, net after-tax take home pay of two competing job opportunities. This directly led to a significantly higher final salary, as we were able to help Jim show his employer that their initial offer was not competitive after considering the tax effects.
  • Helped analyze Katharina’s German property holdings, which were gifted to her as a result of her parents’ estate planning. She owns the property with her sibling, but does not have any legal right to the income until her mother passes away. This created some confusion regarding proper taxation. We were also able to demonstrate how the properties fit into their retirement planning.