If you’re planning on leaving the United States to sample life overseas there’s a number of things that you should research in advance in order to ensure that you avoid some of the common pitfalls that many U.S. expatriates have fallen into.
Here’s our lowdown on critical areas to research and understand BEFORE you move overseas.
All US citizens living abroad are still eligible to pay taxes on their worldwide income. While a number of exemptions are in place, it is advisable that you do complete a tax return on an annual basis, even if you believe that you are not eligible for any tax payments. Hire a qualified tax accountant to assist you with your tax return and ensure that the individual has an advanced knowledge of the U.S. tax system so that you can make the most of any exclusions, deductions or credits that you may be due.
For more information read:
In addition to filing an annual tax return all American expats who hold financial interests in a foreign bank that are worth $10,000 USD or more are required to complete a Report of Foreign Bank and Financial Accounts (FBAR) every year. The penalties for failing to complete this return can be very severe, as one U.S. expatriate found out: Expat Tax Penalty
For further information read: FBAR Requirements
Having a U.S. inheritance plan does not necessarily mean that your assets will be distributed, as you would like in the event of your death. In some countries a failure to complete a thorough will or trust will entail that your assets are distributed under their own laws, as opposed to under U.S laws. Even if your will is in place, not all companies will honor it in the way you intended. While you cannot completely avoid this there are a couple of actions you should take:
Many expatriates relocate to countries where the cost of living is significantly lower than their home country and they therefore find that they are able to save large amounts of money. Many wealth advisers tell U.S. expats to put a large proportion of these savings in a U.S. account in order to protect against currency fluctuations and minimize brokerage fees. Make sure you don’t forget about your FBAR requirements.
The exchange rate that is in place at the date you negotiate your salary will not necessarily remain the same throughout your experience living abroad and many expatriates have found themselves in difficult financial situations as a result of changes to the value of the dollar. Ideally, if you plan on returning to the U.S. at a later date, you should negotiate a salary that is paid in two currencies: the currency of your host country for your day to day living expenses and in the U.S. dollar for longer term savings. If this won’t be possible try and implement a term that states that the salary will be reviewed on a regular basis in order to compensate for any forex changes.
Health and travel insurance plans are critical when living overseas and it is crucial that you are adequately covered at all times. The level and type of insurance you will need will vary according to the level of public care and social services that are available in your host country. Ensure you research health care requirements in full before selecting an insurance policy.
For further information see: Expat Medical Insurance
Deciding what items to take with you when moving overseas can be quite difficult, especially if you are not sure how long you will be staying or whether you will even like life in the host country. When deciding what items you would like to take with you be aware of the fact that many countries charge import taxes on goods that are shipping after a delayed period of the expatriate’s first arrival in the country. Research what the customs laws and regulations are in your host country before planning which items you will ship immediately.
Try and maintain a U.S. bank account throughout the duration of your time overseas. Not only will this enable you to pay any bills quickly and easily, it will also help you to maintain a credit history that will be of use to you when you return to the U.S.
For more information see our free article on Expat Banking.
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