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Financial implications of moving abroad

Part 3 in the series on moving to the United States. Please see Part 1 Options for those who dream of settling in the US, March 23, 2013 and Part 2 The pondstraddlers dilemma, March 30, 2013. Part 4 will be directed to the investor treaty programme. Martha Harris Myron CPA PFS CFP (USA) TEP JP is a Bermudian journalist and cross border financial planning specialist focused on offshore financial perspectives and the challenges for international citizens living, working and straddling the North Atlantic pond: United States, Canada, United Kingdom, Europe, and the island of Bermuda, the premier international finance centre. She does not provide individual financial planning services. Email her at: Martha.myron@gmail.com. The opinions expressed in this article are those of the author alone, and not The Royal Gazette.

Finally, time to return to another piece of the “wish to move elsewhere (like the United States)” where “a modest retirement pension may actually fund a decent lifestyle”, as one reader stated recently.

The two previous articles generated interesting inquiries to the author, illuminating that people do indeed want to be more mobile, and the lure of United States residency is still very strong.

These information articles, by their nature, cannot provide specific personal financial advice.

Instead, we provide commentary on the questions (changed to protect confidentiality) that were tendered with the hope of raising reader awareness for consideration of using a detailed financial planning and immigration strategy.

“I bought the cutest little house in the United States.

It fits right into my plan to leave Bermuda in a few years and live in the US, just like many Bermudians have done in the past.”

“We are retired and the cost of living in Bermuda is destroying our savings.

“We bought a place in the United States and have sold all of our Bermuda assets.

“We understand from conversations with friends that owning real estate in the US may entitle us to a resident alien card.”

This is just a sample of many relatively similar queries.

The first statement above was the most concerning, “many Bermudians have moved to the United States in the past” as it appears that these moves were made simply and easily.

Moving to another country is a serious business.

Place the query “How long can a foreign national stay in the United States?” into a Google search engine.

The search generates 157 million results, while even the first page lists extensive applications, and instructions to comply with US Customs and Border Protection programs.

Unfortunately, it is apparent that information regarding immigration to another country is still very underestimated and often misunderstood.

Did Bermudians just move to the United States to live over the years?

Yes, anecdotes and facts are in evidence of those situations.

Some Bermudian residents were dual-citizens with the US, married or related to a US person, held green cards, or employment visas, but possessed the right to permanent residence.

Others, Bermudians only (or other foreign nationalities FNs) just moved anyway- residing abroad for years, possibly being able to effect this transition due to less strict immigration standards, or little notice of cross border movements prior to the age of cross border electronic security tracking.

These FNS later have had to cope with the consequences upon return to Bermuda.

They have been denied re-entry to the US for long-term permanent residence and are now restricted to the allowed number of perquisite days per year to visit the US per United States Customs & Immigration Services (USCIS).

There are three main areas that individuals contemplating cross border moves should place in focus, none of which by the way were mentioned in the inquiries.

One: Your Citizenship and the Substantial Presence Test One: Your Citizenship and the Substantial Presence Test Count.

Unless you are a legal permanent resident one cannot just walk in to the United States and set up housekeeping. Permanent residency isn’t allowed in Bermuda or most other places, either, just because you are standing at the gate.

You have to be reasonably certain that the immigration laws, regulatory framework, tax structure, political arena, and economic environment will fit with your financial plans first, and that you will be allowed to move under a customs and immigration programme.

Your length of stay is determined by your foreign citizenship (passport), your visa and your Arrival/Departure Record (I-94).

Two. US Taxation structure is extremely important. USCIS and US Internal Revenue Service do not still effectively coordinate their enforcement efforts. The minute you either receive an extension of time to stay, or inadvertently trip, over the 183-day rule (see substantial presence above), you are headed into possibly substantive tax liability territory.

In a tax paradox, you may be legitimately resident (short-term) as a non-resident alien subject to tax only on US source income for immigration purposes, but be classified as a resident for income tax purposes by US IRS.

This means that all of your income — worldwide — is subject to tax according to US tax law (both federal and possibly state). It also means that you may be required to file a US income tax return, and report on all foreign bank accounts, investments, financial interests and other specified foreign financial assets.

All of your offshore income, Bermuda pensions, dividends and interest, rental income, possible distributions from foreign trusts, capital gains, and related financial income is reportable and subject to taxation.

Three. Your financial planning for Bermudian income, assets, trusts, bank accounts, legacy and related gift transfers for previous and current years may have fit the bill for Bermuda.

However, US tax, estate, gift, and related planning are subject to different rules, not necessarily correlated. Your estate, gift, an other planning for your offshore Bermuda finances may be subject to certain US tax look-back rules that can also generate US taxation issues.

Long-term cross border financial planning is absolutely essential for considering a permanent relocation.

I strongly advise you, the reader, to consult with the US consulate, and an experienced (emphasis on experience) United States international Certified Financial Planner, Certified Public Accountant who specialises in international tax, estate planning, or an international tax & immigration attorney. Don’t start your plan from a backward position.

You want to know that all angles are covered prior to purchasing US real estate, selling out your Bermuda financial positions, or becoming concerned that your immigration plan may not work.

If you are able to bring this dream to successful fulfillment, I caution you to meet all of your US obligations, including your tax filing and reporting commitments that will include reporting all transfers of monies and income from offshore to the US as well as any income from same.

The US Department of the Treasury’s Financial Crimes Enforcement Network routinely tracks all SWIFT and other money wire/deposit transactions to safeguard the US financial system from illicit use, combat money laundering, and protect national security.

Sources: Substantial Presence Test http://www.irs.gov/Individuals/International-Taxpayers/Substantial-Presence-Test, http://www.uscis.gov/portal/site/uscis. US Treasury Financial Crimes Enforcement Network http://www.fincen.gov/.

This article is intended for general educational purposes only and cannot be used for specific individual tax, investment, or retirement advice, nor can this article be relied upon for any personal financial planning purposes.

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Published April 27, 2013 at 9:00 am (Updated April 26, 2013 at 6:48 pm)

Financial implications of moving abroad

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