A Guide for U.S. Expats
The new year serves as a great reminder to check in on your finances to help ensure you remain on track toward your long-term goals. As a U.S. expat living abroad, it’s especially important make sure your financial strategies continue to help you navigate the unique financial challenges you face. The following checklist can help you make sure nothing is overlooked as you plan for 2025 and beyond.
Financial planning
- Check in with a qualified international wealth manager to review your goals and make any necessary updates to your financial plan.
- Review your budget, spending goals and cash flow to determine whether any adjustments should be made.
- Check in on your emergency fund to make sure you have at least three to six months of savings set aside in local currency.
- Reevaluate your financial planning goals in light of any major life events or changing goals that have occurred over the course of the year.
- Incorporate any plans to make a major purchase into your financial planning goals.
- Gather updates on U.S. and foreign jurisdiction tax and compliance changes that could impact your tax and planning strategies.
Investments
- Review your investment allocation and make any necessary changes based on your goals.
- Rebalance your portfolio if your current allocation has drifted away from your target allocation.
- Review your portfolio to identify if you are invested in any passive foreign investment companies (PFICs), which can have severe tax consequences for U.S. expats.
- Revisit your portfolio to make sure it remains broadly diversified across multiple currencies, with additional exposure to the currency in which you most regularly spend money.
- Continue to maintain a U.S.-based investment account in order to access the U.S. financial markets, which offer the largest and most liquid selection of investment products.
- Take steps to manage currency risks within your investment portfolio. For example, consider investing in exchange-traded funds (ETFs), which offer an inexpensive way to build a diversified, multi-currency portfolio.
Tax planning
- Devise a plan to use up any available unused foreign tax credits before they expire.
- Consider gifting appreciated assets to a non-resident alien spouse if residing in a low- or no-tax jurisdiction.
- Evaluate whether a Roth conversation strategy works on a net basis for both U.S. and foreign jurisdictions tax purposes.
- Confirm your eligibility for the foreign earned income exclusion (FEIE). You may be eligible if you meet two criteria:
- You have foreign taxed income.
- You meet one of the following additional criteria:
- You’re a bona fide resident, meaning you’ve been a resident of a foreign country for an uninterrupted period of at least one year.
- You meet the physical presence requirement, meaning you’ve lived in a foreign country for a 12-month period that includes 330 full days of presence.
- Understand what tax forms you may need to complete, including the following:
- U.S. Individual Income Tax Return – Form 1040
- Itemized Deductions – Schedule A
- Interest and Ordinary Dividends – Schedule B
- Business Income – Schedule C
- Capital Gains Income – Schedule D/Form 8949
- Foreign Earned Income – Form 2555
- Foreign Tax Credit – Form 1116
- Additional Child Tax Credit – Form 8812 (tax refund for overseas families)
- Treaty-Based Return Position Disclosure – Form 8833
- Foreign Bank and Financial Accounts (FBAR) – FinCEN Form 114
- Application for Automatic Extension of Time to File U.S. Individual Income Tax – Form 4868 (if necessary)
- Foreign Branch (FB) or Foreign Disregarded Entity (FDE) – Form 8858 (do you have a foreign rental?)
- Passive Foreign Investment Companies (PFICs) – Form 8621
- Controlled Foreign Corporation – Form 5471
- Foreign Partnerships – Form 8865
Estate planning
- Review your will to make sure it’s recognized by your current country of residence. If you have a U.S.-based will, you may need to establish a separate situs will or a multi-jurisdictional will.
- Reevaluate any U.S.-based trusts to help ensure they’ll operate as intended, given the tax and probate laws of your current country of residence.
- Take time to understand the estate and/or inheritance tax in your country of residence and work with your estate planning attorney to plan accordingly.
- Consider naming an attorney-in-fact who can make decisions about your U.S.-based assets while you’re living abroad.
- Consider establishing a healthcare directive in your current country of residence (as U.S.-based directives don’t always hold up in foreign countries).
- Organize and review your beneficiary designations to help ensure they continue to address your wishes.
Could you use some help planning for 2025 as a U.S. expat? Creative Planning International is here for you. We specialize in helping U.S. expats and cross-border families maximize their wealth and avoid costly mistakes. We understand the complex interaction of multi-jurisdiction tax and regulatory regimes and help clients develop operationally and financially efficient wealth management strategies customized to their unique set of circumstances. Because we serve in a fiduciary capacity, you can be confident we’re acting solely in your best interests.
