Donald Trump was just sworn in as the 45th president of the United States. His acceptance speech echoed many of his “America first” campaign promises and was far from the reconciliatory address many were hoping for. In this article I’ll consider what these America first positions mean for US expats and what you need to do now.
First, if you’re already living abroad, and have your assets out of the United States, don’t stress. Trump’s first target will be businesses importing goods and moving jobs abroad. His second target will be to lock cash and assets in this country, as a way to shore up the national debt or nationalize retirement accounts.
Based on his speech today, big businesses based in Mexico are in a lot of trouble. This country has already seen its currency crushed by Trump, and it looks to get worse in the coming months. Bottom line, Mexico has become the poster child for the our employment problems.
However, Mexico’s troubles can be your gain. Prices are low for those paying in dollars, especially in the middle and Southern parts of the country. As it now appears this “opportunity” will continue for at least the next 4 years, you might want to give Mexico another look. For more on this, see: Trump is Making Mexico Great Again… for Expats!
Again, if you’re employed abroad, or running a small business offshore, there doesn’t seem to be any reason for concern. Trump’s tax plans target offshore corporate tax rates and most entrepreneurs don’t pay corporate tax.
90% of our business clients rely on the Foreign Earned Income Exclusion and the Foreign Tax Credit. Neither of these has come under scrutiny during this election cycle. If your income comes in through the FEIE, I don’t see any changes coming your way.
The same goes for business owners providing a service – you internet publishers, ad networks, affiliate marketers, etc. Basically, anyone not selling a physical good into the United States shouldn’t see much change under this administration.
In this group, I include drop-shippers, those who market online and fulfill through Amazon, white label operations, etc. The real risk under this President is a border tax on physical goods being imported into the United States. Very few small to medium sized businesses will be impacted by these taxes.
Where I do see risk is for those who have all of their assets in the United States. I expect new policies that will limit your ability to take your IRA out of the country. Soon to follow will be limitations on foreign transfers and restrictions on international investments.
The reason for this concern is simple: Trump will take immediate action to make America great again. A pledge that will require cutting the deficit, reducing and taxing transfers abroad, and generally controlling the dollar at a level never seen before.
And this America first policy will put many other countries, such as Mexico and China who are both on the wrong side of our great trade wall. This is sure to trigger all kinds of consequences for our currency and country.
Maybe America comes out the other side of this stronger and better than ever… but it’s going to be a tough fight. Things will get worse, maybe much worse, before they get better.
This is not a political statement. I’m not taking sides, I’m here to identify risks. And, as a result of these potential risks, suggest that you move some of your cash off the table and out of the game. Personally, I’m excited to see what happens… but I’m not willing to put everything on red and spin the wheel.
Here are my suggestions on how to move some of your assets out of the United States:
The biggest target for a cash starved system will be our retirement accounts. Americans had about $25 trillion in these accounts in 2015, against a national debt of nearly $20 trillion. Nationalizing retirement accounts, as initiated by Obama’s MyRa program, is the fastest way to shore up currency reserves.
I suggest you get your IRA offshore before this opportunity is closed. This can be done by forming an offshore IRA LLC and investing your retirement account into that foreign structure. Once complete, you’ll have checkbook control over your account and can manage your investments as you see fit.
Next, consider getting residency in a foreign country or buying a second passport. This will allow you to plant a major flag offshore and provide significant asset protection and privacy benefits. Residency or a passport will also give you a safe haven should you decide to get out of Dodge.
There are a number of excellent second passport programs throughout the Caribbean. Most start at about $140,000 for a single applicant and can be completed in 90 days. Click here for a 2017 post on St. Lucia.
If you have the cash, you can buy a passport for the EU from $1.2 million. For information on Mata, the world’s best second passport, click here.
Not in the 1% yet? Consider residency in a business and retirement haven like Panama. The best deal there get’s you permanent residency with an investment of $20,000 in their reforestation program. For more, see: Best Panama Residency by Investment Program
Finally, consider investing offshore and into assets that don’t need to be reported to the IRS. Remember that cash, stocks, bonds, and the like all must be reported each year on the Foreign Bank Account Report and the Statement of Foreign Assets.
Assets that do not need to be reported include physical gold and real estate held in your name. That’s right, if you buy gold and store it in a vault offshore, you don’t need to report it to the IRS on any of the offshore forms… you need to report the gain on your personal return when you sell it, but not the ownership.
The same goes for international real estate held in your name. No forms or special compliance is required for real estate that’s not held in an offshore company or trust. That is to say, real estate in your name is not reportable. If you hold it through a foreign company, you must report the existence of that company.
Also like gold, you must report rental income and the gain from the sale of foreign real estate. This goes on your personal return with no special offshore forms required.
I hope you’ve found this article on What Trump’s inauguration means for expats to be helpful. For more information on how to structure your affairs offshore, please contact me at email@example.com or call us at (619) 550-2743. We will be happy to help you move your IRA abroad, setup an offshore company, or refer you to an international investment advisor.