3 ways to invest your money as an American expat living in the Netherlands
Randy Landsman and Robert Rigby-Hall founded Beacon Global Group in 2012 when they experienced for themselves – living as expats in Europe – how challenging it was to manage their wealth and to invest their money while living abroad.
Americans living abroad, historically, have found it difficult to find and invest in European based financial markets. In 2010, Congress enacted FATCA (Foreign Account Tax Compliance Act), which even further muddies the water for American expats. FATCA makes sure all Americans report their foreign based wealth to the IRS and puts a lot of responsibility on European institutions to track and comply with this regulation.
Thus, European banks, investment funds, and other financial entities have been hesitant if not off-put at dealing with persons potentially connected with the U.S. and therefore regulated by FATCA.
This article provides a list of some of the most common and effective ways to manage your money as an American expat. We’ll start with the most common first, followed by the most effective, and end with a brand new option coming to improve your opportunities to invest. So, make sure to read all the way to the very end to hear it all!
1. Sending your money home
Americans abroad may consider sending their money home to the U.S. but this could be problematic. There are risks associated with currency exchange. In addition, once you send money home, it may be difficult to attain, leaving those with long term expat status at risk.
Even with these two things in mind, U.S. brokerage houses will not take money from expats with overseas addresses. They find that even though the individual is American, it is likely too complex from a compliance perspective to have it be worthwhile. Because of this, it is best to look at European investment options. And while options are few for some expats, here are some possibilities that may work out.
2. Invest in a segregated account
Segregated accounts are managed accounts where investment firms work to grow your money. As an American expat, you can invest in a European, British, or Swiss “Segregated Account” but there are some restrictions.
To even begin things, you have to have at least 1.000.000 euros. For those who are lucky enough to have this kind of money to invest, the return could be great. “You’ve got to have that half a million plus,” Randy says. “Which is a considerable amount of money”.
3. Invest in Universal Access Bonds
Universal Access Bonds, or UABs, are a relatively new product which allow foreign expats abroad to invest in funds they may previously have been unable to invest in. As Randy says, “In simple terms, they are a wrapper that goes on a fund. The client owns bonds that are invested in those underlying funds, which are run by top-tier investment managers”.
UABs are beneficial for five reasons: One, they are compliant with U.S. tax law. “They allow you to pay capital gains tax instead of only income tax. You’re being taxed correctly, which could lead to tax savings if you complete a Qualified Electing Fund form", Randy explains.
Two, they are liquid investment products. According to Randy, some investment funds may be wrapped in pensions. If this is the case, you cannot access your funds until you reach a pensionable age. With UABs though, there is monthly liquidity. This means you can get your money on an as-needed basis. A clear advantage in an uncertain world.
Also, they are established funds. Meaning your fund will be managed by a top-tier investment manager. This means more likelihood that your fund outperforms the rest. UABs are available all throughout Europe. Most financial advisors you work with in Europe will have access to UABs.
Fifth and finally, UABs are reported like 1099’s would be in the US. This is huge. Typical European reporting processes can be burdensome and the mistakes that come with this can result in huge fines. Having a simple, streamlined reporting process, like the 1099 process in the US, is a stress-free way to make sure your taxes are compliant.
Like most investment opportunities, there is risk. However, patrons can tailor their UABs to be low or high risk (with low and high return possibilities respectively). So, keep in mind your investment strategy when choosing a UAB. In addition, UABs are available to those with 25.000 euros or more.
Educate and inform yourself
Whether you’re looking to do the first option and send your money home or want to try an alternate way to get your money on the European market, make sure to educate and inform yourself and reach out to a financial consultant to tailor a plan for you!
If you have questions, want to know what your investment options are, and if a Universal Access Bond would be suitable for your personal financial and tax situation, reach out to Beacon Financial Education to set up a free financial consultation with an independent investment advisor.
Beacon Financial Education does not provide financial, tax or legal advice. None of the information on this site should be considered financial, tax or legal advice. You should consult your financial, tax or legal advisers for information concerning your own specific tax / legal situation.