Key Takeaways
- U.S. expats face unique financial challenges around taxes, currency, estate planning, investing and healthcare that can derail long‑term goals without a coordinated plan.
- Coordinating U.S. and foreign tax rules, managing currency risk and aligning estate and investment decisions across jurisdictions are central to effective expat financial planning.
- Partnering with an experienced international wealth manager and tax advisor can help you avoid double taxation and steer clear of common pitfalls as well as support your long‑term financial success abroad.
As if navigating a new city and learning new customs isn’t challenging enough, U.S. expats face multiple financial obstacles when moving overseas. From complex tax rules and shifting exchange rates to cross‑border estate issues, investing traps and healthcare access, these issues can quickly complicate your financial life and threaten your long‑term financial goals. Here, we highlight five common financial obstacles faced by U.S. expats and offer tips to help you overcome them.
For a broader overview of expat planning topics, you can also review Money Management Challenges Faced by U.S. Expats.
#1 – Tax Regulations
Tax regulations vary greatly by country, but one constant regardless of where you live is that, as a U.S. citizen, you’re required to file a U.S. tax return and report your worldwide income. At the same time, your country of residence may require that you report and pay taxes on your worldwide income as well.
Fortunately, the United States holds tax treaties with many foreign countries that can help reduce or eliminate overlapping tax on the same income, especially when combined with the foreign tax credit. However, even with tax treaties in place, keeping up with two countries’ ever-changing tax laws and how they interact can be complex. Common obstacles include FBAR and other reporting requirements, filing status, treatment of retirement accounts, local tax-year differences and country-specific surtaxes.
Tip: Consider enlisting the help of a qualified international wealth manager and an experienced expat tax professional to help you navigate multi-jurisdictional tax planning and lower your overall tax exposure.
#2 – Currency Fluctuations
Another common financial obstacle faced by U.S. expats is navigating the challenges of having income and assets in one currency and expenses in another. Fluctuating exchange rates can significantly reduce your spending power, which is why it’s important to take steps to manage your currency risk.
One effective strategy includes maintaining a diversified investment portfolio that spans multiple countries, asset classes and investment types while being intentional about the local currency you expect to spend in retirement. Matching your currency to your future expenses can also help mitigate the impact of currency swings. For example, if you plan on spending your retirement in Spain or Costa Rica, it may make sense to hold a larger portion of your investments in European or local-currency stocks and bonds to match the currency of your future retirement expenses.
Keep in mind, however, that if you plan to return to the United States in a few years, it may make more sense to maintain a U.S. dollar-focused investment strategy while still using foreign holdings for diversification. Your international wealth manager can help you establish a currency management strategy that makes sense based on your personal financial situation and long-term goals.
#3 – Estate Planning
U.S.-based wills may not be sufficient to transfer assets outside the U.S., as U.S wills aren’t always recognized by other countries — and U.S. trusts may not operate as intended once the tax and probate laws of another jurisdiction come into play. Also, depending on where you live and where your heirs live, your estate or heirs may be subject to local inheritance or estate tax if you die as a resident of a foreign country. Proper estate planning can help ensure you and your heirs are taking advantage of local exemptions to reduce potential tax liabilities.
Additionally, countries outside the U.S. may have forced heirship laws. This means proper planning is important to help ensure your spouse has sufficient assets for their lifetime.
Tip: To overcome these estate planning obstacles, consider working with an international wealth manager and international estate planning attorney to help ensure you have the right documents in place and that your estate plan addresses:
- Anticipated tax obligations on your estate and retirement accounts in the U.S. and your resident country
- The probate and succession process for every jurisdiction in which you own assets
For additional insight, explore Creative Planning’s Estate Planning & Trusts hub as well as Estate Planning for U.S. Expats and Inheriting From the United States While Living Abroad.
#4 – Investing
A potentially costly mistake made by many U.S. expats is investing in foreign mutual funds. Under U.S. tax law, many non-U.S. registered mutual funds are treated as passive foreign investment companies (PFICs), and these investments are taxed punitively by the United States. In addition, each PFIC must be reported annually on Form 8621, which requires complex accounting and is time consuming to complete.
Foreign brokerages rarely offer U.S.-domiciled investment funds, so it can be very easy to inadvertently invest in a PFIC within a non-U.S. account. In some cases, the foreign account itself is considered a PFIC, such as an assurance vie in France or a Stock & Shares ISA in the UK. The best course of action for many American expats is to avoid these investments entirely by maintaining a U.S.-based brokerage account while living abroad and focusing on tax‑efficient, U.S.-domiciled funds as the core of their investment management strategy.
Tip: Before opening new accounts or purchasing funds abroad, talk with an advisor who understands PFIC rules and expat investing constraints. For more detail, see Americans Abroad: Avoid Foreign Mutual Funds and PFICs and Why U.S. Expats Should Never Own Foreign Mutual Funds. If your situation involves cross‑border pensions or IRAs, IRAs for U.S. Expats: Common Challenges and Potential Solutions is another helpful resource.
#5 – Healthcare
The cost of healthcare can vary widely between different countries, and finding adequate healthcare insurance abroad can be a challenging obstacle to overcome. Some countries are known for providing excellent public healthcare for foreign residents, while others offer limited coverage options, longer wait times or strict eligibility rules.
Depending on your country of residence and employment situation, you may be eligible to participate in a national public healthcare plan. If you’re actively working for a company, you may even be automatically enrolled. Countries typically require you to make monthly contributions in order to access affordable care in public hospitals and clinics.
If you plan to move to a country that doesn’t offer public healthcare to foreign residents, you may need to purchase a private international health insurance policy. Fortunately, there are many global health insurance plans that provide coverage similar to U.S.-based plans.
Tip: Work with your international wealth manager to evaluate public and private options and choose coverage that fits both your medical needs and your broader retirement and financial plans. For more detail, review Healthcare Coverage for U.S. Expats and Medicare for U.S. Expats.
