US Citizens

US Non-resident Wealth Management

Helping Mid to High net worth US Expats

Recently, as a US citizen abroad, you may have felt a little disadvantaged compared with other nationalities – especially as a mid to high net worth individual.

Liberty Wealth are providing a unique service that will ensure better future tax planning for US expats. As part of this service, Liberty Wealth can assist with your American pension provisions and investing whilst you are out of the US. We can also assist with US Expat tax planning through our various partnerships.

In recent times, as an American Expat, it has been difficult enough to open a bank account let alone try to invest or contribute to a US pension scheme. Many institutions outside of the US are severing their financial relationship with their US expat clients.

Even if you do manage to invest, there is the challenge of negotiating a tax advantage on savings that are otherwise subject to US tax at the following rates:

US Tax graph

*Short Term Gains are defined to be gains realised within 12 months of purchase
**Medicare to be charged where total unearned income exceeds $200,000 or $250,000 if individual is married and filing jointly!

So why are things so difficult these days?

US Tax Situation

  • US taxpayers with over $97,000 in total annual income are subject to US tax on their worldwide income irrespective of residency and required to report to the IRS on an annual basis.
  • President Obama made it clear that he intends to target the 6 million US expat taxpayers to help tackle the $1 trillion US government deficit.
  • Investments into Passive Foreign Investment Companies (PFICs) are taxed at an even higher rate than the above table – possibly affecting previous year’s tax filings.
  • The introduction of the Foreign Account Tax Compliance Act (FATCA) on 18th March 2010 has resulted in many institutions closing the accounts of US expat taxpayer’s portfolios in order to avoid having to report to the IRS.

Current Pension Options

One of the main areas that American Expats are disadvantaged is the ability to fund a US pension scheme.

So what options do you have at the moment? US taxpayers abroad can fund US resident pension plans as shown below:

401(k)

  • Membership:
    Only if you have a US employer
  • Maximum annual contributions:
    $51,000 per annum
  • Maximum amount that qualifies for tax relief:
    $17,500 ($23,000 if over 50)
  • Retirement age:
    59.5
  • Tax treatment of retirement benefits:
    Taxed as usual income

IRA

  • Membership:
    Open to any US taxpayer
  • Maximum annual contributions:
    $5,500 ($6,500 if over 50)*
  • Maximum amount that qualifies for tax relief:
    $5,500 ($6,500 if over 50)
  • Retirement age:
    59.5
  • Tax treatment of retirement benefits:
    Taxed as usual income

Roth IRA

  • Membership:
    Open to any US taxpayer
  • Maximum annual contributions:
    $5,500 ($6,500 if over 50)*
  • Maximum amount that qualifies for tax relief:
    Nil
  • Retirement age:
    59.5
  • Tax treatment of retirement benefits:
    Tax free

*Advice needed on funding limits as this does depend on income and filing status.

In practice however, it can be very difficult to fund any of these pension schemes whilst abroad.

So how can Liberty help?

Whilst adhering to FATCA (Foreign Account Tax Compliance Act), Liberty Wealth aim to ensure that as an American Expat your pension provisions and investments whilst outside the US are taken care of.

With an IPP (International Pension Plan) you are able to take advantage of favourable tax breaks from the IRS, and have the ability to invest into non-US securities without the complicated tax drags. All, whilst in the safety of a fully IRS compliant structure.

If you are a US citizen abroad subject to US tax, we can offer unrivalled US expat tax advice, such as:

  • Mitigating against potential capital gains on existing portfolios
  • Tax free withdrawals
  • Tax free growth
  • Fully IRS compliant products
  • International banking facilities
  • Taking pension benefits from age 50

If you are interested in tax free growth on your savings, in a fully IRS compliant vehicle, that gives you a tax free income when you retire at the age 50, please get in touch with us by phone, email or by filling out the contact form on the side of this page.

We look forward to speaking with you!

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