U.S. Expats

Cash Management Decisions for Expats

Cash Management Decisions for Expats

It is a (relatively) good problem to have: whether it is because of a bonus, diligent savings or unexpected windfall, you’ve accumulated extra cash reserves in your local currency.  The question then becomes how to handle these reserves.  While we can not answer every question related to cash management, we believe that there are two fundamental questions in order to help with these decisions.


-When do you need it?
-In what currency will you be spending it?


If the answer to the first question is “sometime in the future” then the best decision is to invest it in a diversified portfolio, which for most Americans abroad is best done in a US-based Brokerage Account as investing outside of the US presents all sorts of tax issues and compliance risks for Americans abroad (see https://usexpatinvesting.com/wp-content/uploads/2020/04/US-Expat-Investing-Guide.pdf podcast on PFICs).  If, however, the timeline is shorter (a car next year? A house in 2 years?)Americans abroad will want to take a closer look at their situation.

In  the previous few years, interest rates increased in the US slightly faster than those in the rest of the world, and as a result many Americans abroad were wondering whether they should invest these cash reserves in US bank accounts or other cash based savings vehicles (CDs, etc.) rather than those in their home countries. 

The first item to be aware of is that this introduces exchange rate risk into the equation in a way that does not affect clients who keep and spend their funds in the same currency. The possibility of currency risk in the near term should not be overlooked: according to statistics assembled from macrotrends.com (https://www.macrotrends.net/2548/euro-dollar-exchange-rate-historical-chart), on average the usd and euro pair have averaged a fluctuation (in either direction) of 7.5% per annum in the last ten years.  While such a fluctuation can prove valuable should the US dollar increase against the local currency (your funds are worth the higher interest rate PLUS your exchange rate gain), it can also mean any gains from that extra 1% you are earning are not only eliminated, but there is a significant chance you could lose money in your local currency.  


However, good news is that in 2023, interest rates have moved up in most of the rest of the world.  For example, The ECB (European Central Bank), has in the last year increased its interest rates from approximately 0.0% to 4.25% (https://tradingeconomics.com/euro-area/interest-rate) a move which has made interest rates in Europe much more competitive overall (similar moves have also taken place in the UK and elsewhere around the world).  Consequently, Americans abroad might want to take a closer look at offerings like CDs or high yield savings accounts from their local bank, or investigate purchasing government bonds (especially if they live in a generally safe large economy).   


While Americans abroad will likely have to pay tax on these interest earnings in the US (or use tax credits because they paid tax on the earnings in their local country), these items will not have any PFIC reporting requirements.  Additionally, investors should be aware that the standard protections that many Americans assume for their US banking relationships (for example, FDIC insurance) may not exist in their country of residence.


Ultimately, this brief article cannot eliminate the chance you will lose money or make the best decision for your individual situation, it should highlight the significant questions you should ask yourself before deciding how to allocate cash reserves as an American abroad.

By: Keith Ponieważ

You should always consult a financial, tax, or legal professional familiar about your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns. Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost.





Napoleon vs Your Wealth: What Expats in Europe Need to Know About EU Directive 650/2012

Napoleon vs Your Wealth: What Expats in Europe Need to Know About EU Directive 650/2012

In Europe, succession planning can be a very different concept than what Americans are used to at home. In the U.S., we are almost entirely free to dispose of our estates as we please. This includes the ability to transfer everything to a friend, a trust, or to a charity upon death. In European countries apply a range of forced heirship rules, aimed at protecting specific heirs (usually children and blood relatives). 




These restrictions create difficult estate planning situations for Americans in Europe. For example, a married U.S. couple living in France may want the surviving spouse to inherit the entire estate of a deceased husband or wife. They will find that convoluted heirship rules, derived from early 19th century Napoleonic reforms, require that their children receive a portion of the wealth.






These laws are not limited to France, and most countries in Europe will apply some form of forced heirship requirement. A relatively recent piece of EU regulation, directive 650/2012 (1), gives foreign nationals greater flexibility in disposing of their estate. 




In a nutshell, EU Directive 650/2012 allows foreign citizens (say, an American living in Europe) to select the law of their country of citizenship in matters of succession, as opposed to local succession laws which would otherwise apply by default. For example, the previously mentioned American couple in France may have been able to transfer their wealth between spouses if they had made an election of U.S. law under 650/2012, and thereby opted for more flexible U.S. succession rules as opposed to more rigid French law. 



As all things having to do with cross border estate planning, the application of this directive is a complex matter. In most cases it will require seeking advice from local experts.




The following bullet points will highlights a few key details to be aware of:



    • The election is not a choice of probate location: many EU countries do not have a concept of probate comparable to the U.S. It is important to note that even if U.S. law is selected, whatever administrative proceeding might be applicable has to be followed locally.



    • The election is tax neutral: regardless of your choice of succession law, local inheritance/estate or gift tax will still apply.



    • Some countries opted out: The UK (pre-brexit), Ireland and Denmark have opted out of the directive (2).



    • There may be alternatives: there may be solutions available under local law to circumvent forced heirship without resorting to 650/2012, these will usually involve either a specific election of matrimonial regime, or a marriage contract.



    • Some practitioners may advise against it: Some estate planning practitioners still consider the directive to be relatively new and untested, and feel that it may add unnecessary complexity. Be sure to consult a local expert to understand all required formalities, procedures and consider alternatives.






By: Syl Michelin




You should always consult a financial, tax, or legal professional familiar about your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns. Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost.



Three Tax-Friendly Off-The-Radar European Countries for Expats

Three Tax-Friendly Off-The-Radar European Countries for Expats

For expats looking to relocate to Europe, the typical destinations are usually Western European countries such as France, Portugal, and Spain. However, there are many hidden gems in Central and Eastern Europe that offer a unique blend:


Old-world charm, rich cultural heritage, affordable cost of living!

 One of the more attractive features of Europe for U.S. expats is the ability to visit, work or even live in more than one country. The mobility of EU passport has enhanced the appeal of all EU nations.  Let’s explore three off-the-radar EU nations in Central and Eastern European countries that U.S. expats should consider.

 There are many non-financial factors to consider when deciding on moving to a foreign country. Including an array of subjective qualities that make one place seem more like “home” to an expat than other locations. While these more subjective qualities are superficially touched on below, this is after all a blog from an international financial advisory perspective.

Accordingly, lower cost of living and lower relative tax burdens played the key role in pinpointing three of the EU’s most fiscally appealing destinations. These three nations are tax-friendly standouts. They have something to offer many expats looking to live on the cheap. To even live relatively lavishly without breaking the bank, or to protect that family wealth. Actually, the order above was chosen simply to accommodate a semi-cheesy axiom that can help you remember our top three choices:

 For EU capitals where tax rates are the best, consider Budapest, Sofia, and Bucharest!

Hey, it was catchier  than anything we could come up with using the country names instead of their capitals.



 Romania, located in Southeastern Europe, is a country that is often overlooked by travelers but has much to offer. The country is home to stunning natural landscapes, including the Carpathian Mountains and the Danube Delta. It also has a rich history and cultural heritage. Bucharest is the capital and is a bustling metropolis with a vibrant nightlife and a thriving arts and culture scene. The country offers a low cost of living and a high quality of life, making it an attractive destination for expats.

Romania, with that scenic beauty and rich history, is also a good place to live in the EU if you are on a budget and need a low-cost, low-tax place to call home. Or if you are rich and wish to stay that way, and leave your legacy of largesse to your heirs. Romania employs a flat tax on personal income at the rate of ten percent. This ten percent rate applies to virtually all sources of income, including wages, self-employment income, interest, dividends and capital gains. Significantly, there are also no wealth, inheritance or gift taxes levied in Romania. The standard value-added tax (VAT) rate is nineteen percent (which compares favorably with most EU countries), with some goods and services exempt from the VAT regime.


 Located on the eastern coast of the Balkan Peninsula, Bulgaria is a country with a rich history and a unique blend of Slavic, Greek, and Ottoman cultures. Sofia is a vibrant and cosmopolitan city with a thriving arts and culture scene, and a low cost of living. The country also boasts stunning natural landscapes, from the Black Sea coast to the snow-capped peaks of the Balkan Mountains.

The healthcare system in Bulgaria is also affordable and of good quality, making it an attractive destination for retirees. Bulgaria also employs a flat tax rate of ten percent on personal income from most sources. This includes earnings (employment or self-employment) and capital gains. Dividends are taxed at an even lower rate of five percent. Also like Romania, Bulgaria does not impose a wealth tax, nor taxes on inheritances and gifts.  There is a low rate of property tax, ranging from 0.01% up to 0.45% on the value of real property. VAT is a comparably favorable standard rate of 20 percent, with lower rates on certain goods and services.



 Hungary, though not quite as tax friendly as Romania and Bulgaria, offers a terrific mixture of liveability, workability and affordability that is sure to check a lot of boxes for many adventurous expats. It has a rich culture and history, with a long-standing tradition of music, literature, and the arts.

 Historic Landmarks:

-Buda Castle

-Fisherman’s Bastion in Budapest

-The second-largest synagogue in the world in Szeged

 -Historic thermal baths of Hévíz

 Expats can immerse themselves in Hungarian culture by attending festivals, visiting museums, and exploring the country’s many historic sites. Hungary has a thriving job market, particularly in the technology, finance, and healthcare industries. Many multinational companies have set up operations in Hungary. This offers expats the opportunity to work in a dynamic and growing business environment. Additionally, the country has a low unemployment rate, making it easier for expats to find employment.

 A country of natural beauty…

 Hungary is a country of stunning natural beauty, with rolling hills, forests, and lakes. The country is also home to the Danube River, which flows through Budapest and offers stunning views of the city. Expats can enjoy the great outdoors by hiking, cycling, or simply exploring the countryside.

 Hungarians are known for their warm hospitality and welcoming nature. Expats can expect to be greeted with open arms and will find it easy to make friends with locals.


Also comparing favorably against the tax regimes of most EU countries, Hungary employs a modest tax rate of fifteen percent. This includes all forms of personal income (earnings, dividends, interest, capital gains, and even cryptocurrency trading gains). VAT is a bit higher in Hungary than in Bulgaria or Romania. With a standard rate of twenty-seven percent, with reduced rates of eighteen percent or five percent for certain goods and services. There are no wealth taxes, but there is a gift and inheritance tax regime in Hungary. The standard tax rate on gifts and inheritances is eighteen percent. A lower nine percent tax rate applies for gifts and inheritances of residential property. These gift and inheritance taxes do not apply to wealth transfers to spouses and lineal relatives (children, parents, grandchildren, etc.). Such lineal wealth transfers are exempt for these tax regimes.

Europe is already home to millions of Americans who have ventured back across the Atlantic to work or enjoy their retirement. The majority of these expats, however, accept a steep tax bill and sometimes a cost of living hike (depending on where you’re coming from and where you are going to) for the privilege of a European lifestyle.

At Walkner Condon Financial Advisors, our Expat Team is proud to offer financial guidance and ongoing planning and investment management to American expat families. We’ve also dedicated a great deal of research to inform those considering a move to Europe about the various tax incentive programs that certain Western European countries have to offer. However, most of those incentives are for a definite period of time and standard resident tax rates apply thereafter – rates which can be considerably higher than the U.S. federal tax rates that all U.S. citizens must pay, even while living abroad.

 Accordingly, we believe that, given the growing mobility of the global workforce and the abundance of potential low-cost, low-tax alternatives within Europe, we think looking a little further east may provide Americans looking to venture abroad a whole set of new alternatives. Romania, Bulgaria and Hungary are by no means the only attractive destinations to consider outside of Western Europe that offer the benefits of living within the EU. Whether you are planning a move to Europe or any other continent in the world, we’re here to lend our financial planning and investment insights to help you navigate the complexities of a cross-border (U.S. and foreign) financial and regulatory environment.  If you’d like to learn more, please reach out to our team to discuss your specific circumstances: Book Now! 

By: Stan Farmer


The Hidden Costs of Claiming the Foreign Earned Income Exclusion

The Hidden Costs of Claiming the Foreign Earned Income Exclusion

Many U.S. expats have learned to use and cherish the Foreign Earned Income Exclusion (FEIE), a provision in the U.S. tax code allowing workers to exclude up to $120,000 (for 2023) of their non-U.S. salary for Federal taxation. If nothing else, the FEIE stands out for its absolute simplicity in an otherwise endlessly convoluted tax code: anyone deriving income from a foreign employer can claim the FEIE by filing form 2555, and there are remarkably few exceptions and caveats. It is one of the few “breaks” that expats get in their otherwise needlessly complex financial lives, so it’s perhaps no surprise that it represents the go-to, default option for most U.S. taxpayers abroad when it comes to avoiding double taxation. For the majority of expats, claiming the FEIE each year will absolutely be the right thing to do. However, in this article I will consider some of the drawbacks of using the FEIE, and consider instances where claiming the FEIE may actually have hidden costs. Once these costs are factored in, the same taxpayer may actually find that claiming the FEIE is not the optimal tax strategy.

Hidden cost #1: Missing out on unused foreign tax credits

Interestingly, many expats who use FEIE don’t actually need it, and could use the mechanism of tax credits to avoid double taxation instead (claiming credits in one country for taxes paid in the other). Expats in high tax jurisdictions in particular probably pay enough in foreign taxes to fully offset any potential U.S. tax liability, even without excluding any income.  Other higher income earners may also use a combination of the two approaches: the FEIE up to the statutory limit, and tax credits for the remainder of their income. The benefit of the tax credit approach is that any unused foreign credit can be rolled over for 10 years, and, therefore, may be used in the future to offset potential U.S. tax liability. While using foreign credits is not always easy (indeed many foreign tax credits end up expiring), certain situations such as moving to a low tax country, or using certain pension withdrawal strategies, may give rise to very attractive opportunities for an expat to capitalize on their unused foreign tax credits. Using the FEIE may reduce or completely eliminate these opportunities.

Hidden cost #2: Losing the ability to contribute to an IRA

Excluding your income from federal taxation sounds great, but if you exclude all of your income, you may be making yourself ineligible for IRA or Roth IRA contributions, which require the presence of employment income as the primary criterion for eligibility. As a result, you could be missing out on the opportunity for tax deferred or even tax exempt growth afforded by IRAs and Roth IRAs. The benefit of making such contributions will vary greatly depending on your personal circumstances and country of residence, and some expats may not benefit from them at all. For a more detailed discussion on IRA contributions for expats please refer to my previous article on the topic: 


Hidden cost #3: not receiving refundable tax credits

For expat parents who may qualify for child care tax credits, using the FEIE may have another hidden cost: it will make you ineligible for the refundable portion of that credit. In practice, this could mean missing out on the opportunity to receive USD $1,400 per child annually paid to you in cash, due to specific tax rules making FEIE claimants ineligible for tax credit refunds. Filers who simply claim foreign tax credits are unaffected and remain fully eligible for this tax credit, including the refundable portion. 

Given the drawbacks outlined above, it is clear that while the FEIE is intuitively attractive for its efficient and straightforward nature, careful analysis may reveal certain shortcomings that could very well prompt some expat taxpayers to reconsider its use in favor of the tax credit approach. Unfortunately, the IRS does not let taxpayers simply flip-flop between credits and the FEIE. Once the FEIE election is revoked, it cannot be claimed again for at least 5 years, and will require a specific written request and IRS approval to re establish.* For many taxpayers, that convoluted procedure alone may justify the added cost of using the FEIE, and in all cases it is clear that revoking the FEIE should only be done after very careful consideration and consultation with your accountant and advisor.

* https://hodgen.com/flip-flopping-the-foreign-earned-income-exclusion/


Headshot of financial advisor Syl Michelin in a blue suit with white button up shirt and gray background

Syl Michelin, CFA®


Syl Michelin is a Chartered Financial Analyst and fee-only, fiduciary financial advisor who works with cross-border families and American expatriates. 

You should always consult a financial, tax, or legal professional familiar about your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns. Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost.


Navigating the Expatriation Process for U.S. Citizens 

Navigating the Expatriation Process for U.S. Citizens 

Why Expatriate?

Americans tend to be a relatively patriotic group, even when life’s journey takes them overseas to live. However, as many Americans become settled over time in a new country, it is only natural that they adapt to the culture, the language, the environment, etc. and adopt a new country as their “home.” Many of our expat clients acquire dual citizenship after spending significant time in a new residence country, or are able to acquire a second passport even faster due to the nationality of their parents or grandparents. 

Unfortunately, and quite unfairly, the retention of U.S. citizenship often then becomes a special burden to them, because of the unique laws of the United States that base income tax residency on citizenship, not on actual residency. Accordingly, the U.S. “dual national,” who may feel the ties to the U.S. ever fading, is also a “dual tax resident,” meaning that they are also subject to income taxation on worldwide income, from all sources, in both their new “home” country and the United States. Moreover, should they choose to gift wealth during their lifetime, or bequeath their wealth to others at death, the gift, estate and/or inheritance tax laws of both countries may stake a claim to tax these wealth transfers.

Complications for Long-Term U.S. Residents

There is another, larger group of U.S. taxpayers that may find themselves in this same situation: long-term U.S. residents. These are noncitizens that held a U.S. green card and lived in the United States for eight years in any fifteen-year period. Once you become a long-term resident, U.S. tax residency permanently follows you when you leave the United States, whether the long-term resident returns to their home country or elsewhere. They may let their green card expire, but the tax residency is not so easily shed.

Severing Ties with U.S. Tax Residency

There is a way out for both the U.S. citizen abroad and the U.S. long-term resident abroad that wants to sever ties with their burdensome U.S. tax residency: Formal expatriation, first through immigration filings renouncing long-term resident status (Form I-407) or citizenship (State Department Form 4079, Form 4080, Form 4081, and Form 4082), followed thereafter in a final U.S. tax resident form 1040 filing, accompanied with special expatriation tax filing form IRS Form 8854 (the Expatriation Statement). 

As a financial advisor who has had many client and prospective client discussions regarding the tax consequences, formal tax process, and tax-minimization strategies concerning expatriation, I will focus on the tax aspects of expatriation rather than get into the less familiar weeds of the surrendering of green cards or passports. I have only one point to emphasize on initiating the process through an expatriating act (Form I-407 or Forms 4079-4082): Do NOT go through with this until you have worked out the details of the tax filings and statements associated with expatriation, discussed below, and conclude that this is the right time to set this process into motion. 

Form 8854 and “Covered Expat” Status

Form 8854 is, essentially, a declaration of the expatriate’s complete balance sheet as of that day before they formally expatriated (the “valuation date”). It must include all the items that would be considered to be in their taxable estate if they were to have died on the day before she formally expatriated. Valuations of assets ranging the gamut, including real estate, art and jewelry, private business ownership interests, etc. must be attested to by licensed appraisers, while pensions, retirement accounts, brokerage accounts must be listed and provide their market values as of that same date. In addition to itemized valuations as of the valuation date, cost basis information must also be provided, for reasons that will be made clear below. Moreover, the expatriating individual must also make an attestation that they made full, complete and accurate tax filings to the U.S. Department of Revenue for the last five years.

The expatriation statement, tax returns over the preceding five years, and personal attestation of complete transparency and accuracy will help determine the most critical element of expatriation, namely, whether the expatriating individual will be deemed to be a covered expatriate. This status will largely determine the financial and consequences of expatriation, now and into the future. If covered expat status is avoided, the expatriating individual will pay their last U.S. federal tax bill as a tax resident (reporting worldwide income) for the year (or partial year) before expatriating and then, thereafter, would only be liable for U.S. taxes on U.S. source income, and subject to the U.S. tax withholding rules that apply to non-U.S. persons. 

However, should the circumstances trigger the key status as a covered expatriate, additional financial obligations ensue. First, the covered expatriate will owe an exit tax, above and beyond ordinary income tax obligations, in the year of expatriation. More details of the exit tax may be the subject of an article focussing on this particular subject, but, to summarize briefly:

  • The exit tax is calculated as if the expatriating individual sold all of their assets provided on Form 8854 the day before expatriating, meaning that all unrealized gains at that time are now, in-fact, realized. This is subject to a special exemption on the first $737,000 of realized gains (2020, adjusts annually); and
  • For retirement accounts, the exit tax is calculated as if the expatriating individual took full distribution of the pension, deferred compensation plan, retirement plan or IRA account. As this is ordinary income to the expatriate, the capital gains exemption above does not reduce taxes owed from these implied distributions. For qualified retirement plans like 401(k)s, but not IRAs, there is an ability to defer the tax from this implied distribution to when actual distributions are made, subject to special conditions, including application of the 30% withholding tax on each distribution and the waiver of the future right to reduce this withholding rate by tax treaty.

The burdens do not stop with the exit tax, either. Additionally, the covered expat will be deterred in the future from gifting or bequeathing assets to U.S. tax residents, such as family members that do not expatriate. Gifts and bequests from a covered expatriate are not entitled to a gift or estate tax exemption, and are taxed at the maximum tax rate by law on the entirety of the gift or bequest (currently 40%, or even 80% on generation-skipping gifts or bequests). This tax is actually paid by the beneficiary/recipient U.S. tax resident.

Covered Expat Status “Test”

By now, given the punitive taxation that accompanies the covered expat status, it is obviously critical to understand the test for acquiring this unfortunate status and the exceptions that otherwise prevent the triggering of covered expat status. Basically, the covered expat status is triggered by any one of three tests – fail any of the there following tests, and the expatriating individual shall be deemed a covered expat:

  • The Compliance Test – As mentioned above, the expatriating person must certify they have been compliant with federal tax laws over the past five years. Failure to certify and/or failure to submit adequate evidence to substantiate compliance will result in covered expat status. Expect extra scrutiny of these tax forms during the process.
  • High Income Tax Liability Test – Looking at those past five years of tax returns, the expatriating individual will be deemed a covered expatriate if their average federal income tax liability over the five-year period exceeds $172,000 (2021, adjusted annually). Do not confuse this with annual income or adjusted gross income – the standard is an actual tax liability on average per year exceeding $172,000, which implies high earnings and/or significant capital gains realization during part or all of those five years.
  • High Net Worth Test – Looking at the balance sheet of the individual taxpayer, as submitted in Form 8854, including substantiation of the valuation of assets and liabilities, if the expatriating person’s net worth on the valuation date exceeds $2 million, the expatriate shall be deemed a covered expat. Remember, joint assets should be apportioned between individuals, so this is an individual net worth threshold, not a joint threshold. Unlike the high income tax liability test, the $2 million threshold does not adjust to account for inflation.

It should come as little surprise that this third test, high net worth, is more often the test that triggers covered expat status, especially considering that net worth covers each and every item that would fall within the expatriating person’s taxable estate. However, getting around either of those tests’ thresholds may be a matter of timing, or, especially in case of the high net worth test, a matter of strategically repositioning family wealth among family members.

There are a couple of important exceptions for those that would otherwise fail the covered expat tests:

  • Dual nationals from birth (oftentimes considered “accidental Americans”), who have lived in the U.S. less than 10 of the previous 15 years prior to the year of expatriation, who continue to be citizens and tax residents of that other country for which they hold citizenship; and
  • Citizens who expatriate before the age of 18 ½ , who were resident of the United States for less than 10 years.

Remember that all expatriating persons must still file Form 8854 and go through the tax process of expatriation, even though these two groups may do so without fear of being deemed a covered expatriation.

Conclusion: A Complex Process Demands Upfront Professional Planning

To generally recap the tax rules regarding expatriation – the procedure for eliminating tax residency on the basis of citizenship or long-term residency status – the expatriating person must commit an expatriating act and complete the tax filing and certification process outlined above. For the citizen, this will involve forms and procedures to formally terminate citizenship, e.g., surrendering of the U.S. passport. For a long-term tax resident, this might involve voluntarily surrendering your green card. Letting a green card expire without renewal, by itself, may not be an expatriating act. Therefore, the completion of Form I-401, entitled “Record of Abandonment of Lawful Permanent Resident Status,” is critical to establish intent to expatriate for long-term residents. This will then trigger the obligation to complete Form 8854 and certify compliance with U.S. federal tax laws. 

During this tax process to conclude expatriation, a critical factor determining the real cost to get out of U.S. tax residency will be whether covered expat status is triggered. Because the consequences of that status can be so punitive in the present (exit tax) and thereafter to the American beneficiaries or heirs, it seems only logical to suggest that the expatriating person get some meaningful tax and financial advice well in advance of committing the expatriating act. In particular, if there is any real possibility that the three tests for covered expatriation could be met, and the two exceptions for covered expats will not apply, then developing and implementing a comprehensive strategy for expatriation with experienced financial and tax professionals may prove pivotal to navigating this process without creating unnecessary tax burdens for the expatriating person and their American families. 

How We Can Help

At Walkner Condon, our international team of financial advisors is here to help guide clients that want to consider the possibility of expatriation. The first step of the process may be to determine what real tax advantage would flow from successfully expatriating. This requires an analysis of both U.S. and resident country tax laws and whatever tax treaties or compacts may factor in the distribution of tax payments by the client to each country. 

If there may be financial relief to be gained through expatriation, then an evaluation of whether the client would meet the covered expat criteria, or, importantly, whether there are steps necessary prior to expatriation to either (a) avoid covered expatriate status, (b) at least reduce the exit tax consequences, or (c) modify estate plans to reduce the gift and/or estate tax consequences flowing from the decision to expatriate. 

Ultimately, if a general strategy map toward expatriation is formulated, we’ll make sure that clients also get the tax and legal expertise needed to successfully implement that strategy and successfully navigate the complex rules of formal expatriation. It begins with a conversation, and we’re here to provide knowledge, support and advice that is helpful and impactful. 

Stan Farmer