Home Finance Money Management Financial planning for expats
Last update on June 07, 2021

Expats often find their wealth suspended between two cultures. A financial expert advises how to deal with expat financial planning issues such as tax, retirement, and repatriation planning.

Those who grew up in a country different from their birth country are called third-culture kids. The term indicates a life that is suspended between two cultures: being at home and being a stranger in both cultures at the same time. As an expatriate, your wealth is probably suspended between two cultures as well; financial planning as an expat can be difficult, especially as your family ages and your assets grow.

Those who live abroad can enjoy the richness of another culture, create lasting memories, and share altruistically with those who are less fortunate. Financially, a life abroad can be rewarding, but it can also be complex. The components of managing and protecting wealth while abroad are often very different from home. The financial goals of expat families usually center around two things: growing wealth to allow for the freedom to return home; and preserving wealth to maintain their new, international lifestyle.

However, there is a laundry list of hurdles on the way to achieving financial planning goals. How can you and your family maintain your current lifestyle while also planning for the future from abroad? Will the future of banking be more friendly towards the increasingly mobile expat?


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Tax, tax, tax

The added dimension of financial planning for taxes while abroad (especially for United States citizens, who must continue filing tax returns at home) can be mind-boggling. An employer’s tax equalization policy also influences these taxation issues. Sometimes restrictive and ever-changing taxation laws make short- and long-term financial planning a byzantine effort.

Retirement planning

Eligibility for retirement plans in the host country or the home country is not always clear. If employment status doesn’t allow for either, it’s sometimes possible to take advantage of tax-deferred retirement opportunities without the employer. Knowing when and where the expat family will retire is not always clear which makes retirement planning difficult, although there are some investment tips that can prepare for this. As an example, British expats could consider a QROPS scheme.

Trailing spouses

Many trailing spouses express a general lack of empowerment. This is caused by a range of issues, such as the inability to continue a personally or financially rewarding career, the fear of the breakdown of the marriage, or the complexity of managing the household in the host country. While these are not directly related to a household’s financial planning, they are issues that should be addressed in a wealth management plan. This helps ensure your financial resources soothe these issues rather make them worse.

Financial planning for repatriation

Going home can be just as complex as moving abroad, if not even more so. The financial cost, reverse culture shock, and difficulty of re-establishing an identity are sometimes more difficult than when moving abroad.

Finding advisors who understand

To manage wealth effectively, a network of experts is necessary to coordinate the major components of a wealth management plan. To do so abroad is even more important. However, the supply of professionals who have a complete understanding of the expatriate financial experience is thin.

Accountants are necessary for home country tax compliance; however, they can also offer advice regarding the tax implications for your host country, as well. An estate planning attorney can easily prepare documents for the same jurisdiction; however, lacking an understanding of the implications of having no domicile, custodial issues, probate issues, and death tax can make estate planning like solving a Rubik’s Cube. Brokerage firms may not be proficient in serving the needs of their customers abroad. Insurance companies may not understand the risks you face. Financial planning firms may have a full understanding of their clients at home, but they may not know what you need for living abroad. This creates a hodgepodge of advice that can weaken a wealth management plan.

Choosing the right advisor

A word about choosing financial advisors; attorneys and accountants need to act as a fiduciary on behalf of the client, putting the client’s interests first. Unfortunately, selling financial products to clients (instead of providing good advice) drives the financial industry. Find a financial advisor who acts as a fiduciary and receives payment only from the client (and does not accept commissions of any kind). Make sure to find an advisor who is an expert in your country. This creates a pristine relationship between you and your advisor.

If your wealth is suspended between two cultures, manage your financial resources as a whole. Find advisors who understand the expatriate experience; if one is an expert in one component while another is an expert in another area, have your panel of experts work together to coordinate the advice given to you.