When you plan to retire abroad or invest in real estate abroad, financial planning issues, including taxes, insurance, investments and estate plans must be approached before leaving the shores of America.
Here are some things to consider when you plan to retire abroad and abroad:
EXPERT ADVICE: The first thing that is required is to seek out experts who can help you with the questions you have as well as help you with the questions you need to ask. To protect yourself, your spouse and your most important years, speak with an expert with experience in real estate and tax law for expatriates.
Taxes can be complicated, so it is prudent to meet with a tax advisor who has experience in foreign taxation. This is especially true if the person plans to work part-time and has a potential tax liability in the United States and in their new country of residence. "
TAXES: Assuming you haven't given up your US citizenship, there will always be two certainties in your life, your death and your taxes. No matter where you live, as long as you are a U.S. citizen, you will still have to pay taxes on all income earned. However, the good news is that some tax treaties and exclusions and deductions from foreign earned income are available, but for the most part, it is difficult to decipher and use these deductions and properly without help.
The United States provides a foreign tax credit to at least partially alleviate the burden of double taxation of paying taxes to a foreign government and to the United States, but you will likely still owe taxes on United States. Even if you retire abroad, you may still owe state taxes. But if you established a residence in a tax-free state before you moved abroad, you could position yourself to save thousands. Also check if interest paid on foreign property is tax deductible in the United States.
HEALTH CARE INSURANCE: How you pay for health care is also a concern. Most retiree health plans provided by the employer do not have or have very limited overseas coverage and Medicare will not provide coverage to U.S. citizens living abroad .
It only means that you will need to insure yourself, buy coverage in your new country, or buy an international policy. The good news also on this front: in many destinations, you can buy health insurance as good or better than your current provider and get it for a fraction of what you pay now.
For example, in many destinations, Americans will have access to excellent health services, provided by doctors trained in the United States or Europe. Your health care could cost you about half, or less, of what you pay for today. In addition, since a doctor's visit to Panama or Ecuador will only cost you 25 to 50 dollars, many will simply choose to pay out of their own pocket.
In less developed countries, the quality of your health care will obviously have to be taken into account. Even if expatriates are eligible for social security benefits which can be deposited directly into a US bank account, retirees may incur certain charges for transferring money to a foreign bank account and converting US dollars to local currency. There are fees, but in most cases you can have your social security transferred abroad.
INVESTMENTS: Since taxing investments in a foreign country can be complicated and some countries outright prohibit the ownership of foreign nationals, retirees who plan to invest in property or securities in a foreign country should consider working with a reputable lawyer and other finance professionals.
Most countries do not have strong regulatory agencies like we do here in the United States. Agencies such as the "Financial Industry Regulatory Authority" and the "Securities & Exchange Commission" … so be very careful if you plan to invest in the country in which you reside:
IMMOVABLE: A problem that seems to surprise many Americans concerns the different rules of land ownership in foreign countries. Many Americans mistakenly assume that the right to own property is the same elsewhere as in the United States, this is not true. For example, in Central America, what people can think of as real estate can shares of a company. In this case, no real estate property exists, so if the company fails, the entire investment may be lost.
A good rule of thumb for those wishing to retire abroad is to determine how easy it is for an American to sell property abroad. Some governments are happy that the Americans are investing, but they are unhappy with allowing the profits to be "exported", so they place restrictions on the transfer of money and other assets from the country. Investing abroad can be a pleasant experience. Basically, it comes down to knowing the rules, laws and regulations of the foreign country.
REAL ESTATE PLANNING: U.S. courts generally do not have jurisdiction to transfer the next generation of transmission of a foreign asset owned by a U.S. citizen. Trusts written in the United States generally cannot contain foreign assets. Retirees should consider working with a local estate attorney for the appropriate transfer assets, as well as estate planning. It must be understood whether existing wills, enduring powers of attorney and advance directives in health care are recognized by the foreign government.
To allow the distribution of both all US property and your foreign property. Updating your wills is a good idea, especially if you own foreign real estate. You may even need a foreign will to manage your foreign assets, or simply adjust your US will, to provide for the disposition of your foreign property. Have your "powers of attorney" verified by a local attorney, especially as he will be local hospital who will review the medical power of attorney if you become disabled.
ALTERNATIVES: For those who want to relocate to an exotic location but don't face tax or potential estate planning issues, you may want to consider Panama, Ecuador, Guam, Puerto Rico, and the US Virgin Islands. Things are less complicated for people planning to retire there and a growing number of other countries are offering incentives to retirees 65 and older, especially in Asia.
Panama offers discounts on doctors' bills and cheaper mortgages. Ecuador treats its retired community with great respect by offering sales tax refunds, half-price bus and plane tickets and front-line privileges in places like the bank , airport customs and others. Some governments like the Philippines have streamlined their visa process and introduced low monthly income requirements to make it easier for them to move to their country.
Panama offers a "friendly nations" visa granting full residence to foreigners from other countries as well as many other financial incentives.
It is a symbiotic relationship. Elderly people can stretch their nest eggs further with lower living and health care costs and the developing country benefits from an economic boost thanks to spending by retirees.
The programs appear to work with 50,000 retired workers and their spouses receiving social security benefits in South and Central America and the Caribbean. Meanwhile, 100,000 retirees and their spouses were covered by social security in Asian countries … an increase of more than 200% since 2003.