I spent a couple hours on a video conference today with friends and associates from Silicon Valley.
The topic of "fleeing the USA with your assets, this it too much" came up.
I wrote a quick note after our call, which I will give you the expurgated form of here, it's just an outline, sorry for the lame formatting:
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Moving Capital Overseas – Technical Overview
When people ask what I mean by “moving capital overseas,” the answer really is “it depends.” There are multiple layers: investment diversification, currency management, cross-border banking, tax residency, and in extreme cases, expatriation.
1. Core Investment Mechanics
For most U.S. investors, the simplest way to “move capital overseas” is not to physically open foreign accounts but to allocate a meaningful percentage of portfolio assets to international equities, bonds, and index funds through a U.S. brokerage.
Equities & Funds: Virtually all major U.S. brokerages offer international ETFs (e.g., MSCI EAFE, MSCI ACWI ex-U.S.), ADRs, and direct foreign stock purchases.
Bonds: Global bond funds or country-specific sovereign debt exposures.
Currency Hedging: Funds can be chosen with or without currency hedges, depending on whether you want exposure to FX risk.
This approach requires no overseas legal presence, but foreign dividend withholding and double taxation issues arise. The U.S. provides credits for foreign taxes paid, but you must file correctly to avoid paying twice.
2. Objectives of Offshore Allocation
The goals for overseas diversification vary:
Systemic Diversification: Reduce reliance on the U.S. economy, markets, and fiscal/monetary policy.
Currency Diversification: Gain exposure to EUR, GBP, CHF, NOK, DKK, etc., as a hedge against USD weakness.
Practical Positioning: Make it easier to transact, live, or establish residency abroad (property purchases, tuition, medical costs).
Residency/Immigration Planning: Some countries require assets in-country before granting long-term visas.
Citizenship Risk Management: For individuals worried about future U.S. capital controls, estate taxation, or political instability.
Expatriation (Extreme Case): Renouncing U.S. citizenship requires careful advance structuring to minimize exposure to the IRS “exit tax” under IRC §877A.
3. My Current Positioning
I’ve been living on investment capital (mainly from my NetApp days) for 25 years. My approach is deliberately conservative: long horizon (60+ years, given family longevity), desire to leave an estate, and an overriding goal of avoiding ruin rather than maximizing return.
Roughly 50% of my portfolio is allocated internationally, mostly via U.S. brokerages.
I adjust this “overseas knob” depending on relative outlook between U.S. and foreign economies. Historically, this has smoothed volatility and given downside protection during regional crises.
Correlations are higher today than 25 years ago—COVID showed that systemic shocks propagate globally—but geographic diversification still helps.
4. Banking and Custody Issues
Once my daughter moved to the UK (Cambridge, then St. Andrews), I had to address cross-border banking for tuition, living expenses, and family logistics. Lessons learned:
Residency Barriers: Many banks will not open accounts for non-residents due to KYC/AML burdens and FATCA reporting. Even if legal, banks often decline U.S. persons because of IRS Form 8938 and FBAR requirements.
Workarounds: Some U.S. institutions (e.g., Charles Schwab International, Fidelity, Interactive Brokers) have EU subsidiaries, giving near-seamless global access.
Local Property & Daily Life: For property purchases or residency applications, you often must fund a local account. This is easier once you’ve established either residency or a substantial banking relationship.
5. Geographic Focus
I am preparing for long-term residence in Ireland or the UK:
Ireland: Attractive for residency; relatively straightforward financial entry requirements; moderate tax regime for retirees with U.S. income sources; EU mobility.
UK: My daughter’s permanent base. Brexit complicates EU mobility, but UK residence plus Irish residence provides flexible “visa bouncing.”
Nordics (Norway, Denmark, Iceland): Culturally attractive, but entry requirements often involve substantial in-country asset commitments or restrictive tax regimes.
Property acquisition in these jurisdictions is legally straightforward but requires familiarity with local stamp duties, capital gains rules, and inheritance laws.
6. What I Am Not Doing
Renunciation: I have no plans to renounce U.S. citizenship. The exit tax applies if your net worth exceeds ~$2M or if your average annual tax liability is above a threshold (~$200k+). It effectively marks all assets to market at expatriation and taxes unrealized gains. Avoidable only with careful pre-planning, usually not worth the cost.
Exotic Offshore Structures: I am not engaging in Caribbean IBCs, Panama foundations, or Vanuatu passports. These can be useful for true flight-capital strategies, but my objectives (residency flexibility, diversification, family proximity) don’t require them.
7. Compliance Considerations
Any U.S. person with offshore accounts faces mandatory reporting:
FBAR (FinCEN 114): Required if aggregate offshore account balances exceed $10,000.
FATCA (Form 8938): Required above thresholds depending on residency and filing status.
Foreign Tax Credits (Form 1116): To avoid double taxation on dividends/interest.
Failure to comply carries draconian penalties. Anyone contemplating significant offshore structuring must work with cross-border tax counsel.
8. Conclusion
In practice, “moving capital overseas” for me means:
Maintaining a structurally significant allocation (~50%) to international markets via U.S. brokerages.
Establishing parallel banking and property positions in the UK/Ireland to align with my daughter’s permanent residence.
Preparing for future Irish/UK residency while retaining U.S. citizenship.
Researching—but not implementing—more extreme offshore strategies, in case of systemic instability.
For most people, the 90% solution is simply international diversification through your U.S. brokerage. The other layers—banking, visas, property, taxation—are situational, depending on whether you actually plan to live abroad.
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Originally Posted by iris lilies
