Expat with address in California

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Always passive
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Expat with address in California

Post by Always passive »

I am a US citizens living overseas since 2003. My last residence was LA. When I moved overseas I notified Fidelity of my foreign address. Fidelity is fine with that (so far!); however, they do not allow me to purchase anything but single stocks, single bonds or ETFs. This situation has bothered me for many years and has prevented me for managing my portfolio the way I would like and that I could have, had I retained my US address.
I have family in LA. They would be very willing to let me use their address.
This is my question: can I change my address at Fidelity to one in LA; although I will continue to live overseas? Is that legal? Are there any potential tax implications, like California wanting me to pay state taxes, etc.?
I would appreciate some expert opinion. Thank you
Carefreeap
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Re: Expat with address in California

Post by Carefreeap »

I think you're going to make life a lot more difficult going with the US address.

When we moved to Germany (2008-2012) we were notified by BofA's Investment group (now Merrill Lynch) that we had to move our money elsewhere because they didn't have an overseas broker's license. To make a long story short we wound up moving out money to USAA. About a year ago they handed over their investment arm to Charles Schawb. You might check with them.

Doing what you propose is likely illegal. On a practical level it's going to be a mess. You'll need to file tax returns in both countries as well as CA. Our tax returns ran 100 pages and had to be professionally prepared due to the tax treaties and investments in both countries.

Looks like from your signature that you're in Isreal. Isn't there an equivilent investment firm?
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Topic Author
Always passive
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Re: Expat with address in California

Post by Always passive »

Thank you. I thought it was illegal.
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Tejfyy
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Re: Expat with address in California

Post by Tejfyy »

Carefreeap wrote: Sat Feb 06, 2021 10:25 am You'll need to file tax returns in both countries as well as CA. Our tax returns ran 100 pages and had to be professionally prepared due to the tax treaties and investments in both countries.

Looks like from your signature that you're in Isreal. Isn't there an equivilent investment firm?
Americans living anywhere outside of the United States are required to file US returns anyway.
TropikThunder
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Re: Expat with address in California

Post by TropikThunder »

Tejfyy wrote: Sat Feb 06, 2021 9:41 pm
Carefreeap wrote: Sat Feb 06, 2021 10:25 am You'll need to file tax returns in both countries as well as CA. Our tax returns ran 100 pages and had to be professionally prepared due to the tax treaties and investments in both countries.

Looks like from your signature that you're in Isreal. Isn't there an equivilent investment firm?
Americans living anywhere outside of the United States are required to file US returns anyway.
Federal returns, yes, but no sense in creating an obligation to also file state taxes when you didn't need to (especially in CA).
Marseille07
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Re: Expat with address in California

Post by Marseille07 »

You can use their address if they're willing. Beware that they would potentially receive your financial letters which may include sensitive information.

EDIT to add: as some poster mentioned, be sure to understand tax implications as well. If you aren't filing with California today, you might be required to going forward as your income might be considered "sourced" in California simply because of your address on file.
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Always passive
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Re: Expat with address in California

Post by Always passive »

Marseille07 wrote: Sat Feb 06, 2021 11:24 pm You can use their address if they're willing. Beware that they would potentially receive your financial letters which may include sensitive information.

EDIT to add: as some poster mentioned, be sure to understand tax implications as well. If you aren't filing with California today, you might be required to going forward as your income might be considered "sourced" in California simply because of your address on file.
I do file and pay taxes in the US and my country of residence. My fear is state tax liability if I add a virtual address in California. Further. I am also afraid that I may be deceiving Fidelity by giving my virtual US address, and eventually I will pay the consequences.
Bottom line, I feel that I have no other choice but to stay the way I am now.
As an American living overseas, I really do not understand all these limitations. Not only I cannot invest in US funds, but also not in my country of residence funds (there is a complication on how the IRS interpret the non US fund). Highly complicated!
Marseille07
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Re: Expat with address in California

Post by Marseille07 »

Always passive wrote: Sun Feb 07, 2021 12:32 am
Marseille07 wrote: Sat Feb 06, 2021 11:24 pm You can use their address if they're willing. Beware that they would potentially receive your financial letters which may include sensitive information.

EDIT to add: as some poster mentioned, be sure to understand tax implications as well. If you aren't filing with California today, you might be required to going forward as your income might be considered "sourced" in California simply because of your address on file.
I do file and pay taxes in the US and my country of residence. My fear is state tax liability if I add a virtual address in California. Further. I am also afraid that I may be deceiving Fidelity by giving my virtual US address, and eventually I will pay the consequences.
Bottom line, I feel that I have no other choice but to stay the way I am now.
As an American living overseas, I really do not understand all these limitations. Not only I cannot invest in US funds, but also not in my country of residence funds (there is a complication on how the IRS interpret the non US fund). Highly complicated!
What exactly is a virtual address? Your family in LA has a real, physical, residential address no? And yes, state tax liability is what we're talking about, not federal.

Do you even need to be with Fidelity? I hear Schwab and Interactive Brokers are expat friendly. I'm not an expat so I can't confirm how friendly, though.
Last edited by Marseille07 on Sun Feb 07, 2021 12:56 am, edited 1 time in total.
northernisland
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Re: Expat with address in California

Post by northernisland »

Many of those I know living overseas do continue to use a US address so that they can hold funds with Vanguard, Fidelity, etc. I think with the foreign earned income exclusion we only regularly have to pay taxes when we are in the US and then we have a state of residence.

I don't know why the big companies don't like to have investments by Americans living abroad. As far as I know it's not for legal reasons.
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Always passive
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Re: Expat with address in California

Post by Always passive »

Marseille07 wrote: Sun Feb 07, 2021 12:38 am
Always passive wrote: Sun Feb 07, 2021 12:32 am
Marseille07 wrote: Sat Feb 06, 2021 11:24 pm You can use their address if they're willing. Beware that they would potentially receive your financial letters which may include sensitive information.

EDIT to add: as some poster mentioned, be sure to understand tax implications as well. If you aren't filing with California today, you might be required to going forward as your income might be considered "sourced" in California simply because of your address on file.
I do file and pay taxes in the US and my country of residence. My fear is state tax liability if I add a virtual address in California. Further. I am also afraid that I may be deceiving Fidelity by giving my virtual US address, and eventually I will pay the consequences.
Bottom line, I feel that I have no other choice but to stay the way I am now.
As an American living overseas, I really do not understand all these limitations. Not only I cannot invest in US funds, but also not in my country of residence funds (there is a complication on how the IRS interpret the non US fund). Highly complicated!
What exactly is a virtual address? Your family in LA has a real, physical, residential address no? And yes, state tax liability is what we're talking about, not federal.

Do you even need to be with Fidelity? I hear Schwab or Interactive Brokers are expat friendly. I'm not an expat so I can't confirm how friendly, though.
The point is not which broker to use, but what US brokers let you do as an expat, and all follow the same rules. As I mentioned earlier, no mutual funds, only ETFs, stocks, and bonds. If I was allowed I would get a Vanguard target retirement fund or something similar and make life so much simpler. I have managed my portfolio with these limitations for over 10 years, and it seems that I will continue doing so.
Marseille07
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Re: Expat with address in California

Post by Marseille07 »

If you want to give up then I don't stop you. Just suggesting expat-friendly brokers you might be able to try out without doing the virtual address business.
northernisland
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Re: Expat with address in California

Post by northernisland »

To me this sure seems to answer your query:
viewtopic.php?t=110773

I don't believe it's illegal, only that the major funds see it as too difficult to maintain compliance and paperwork with only an overseas address.

On the US side, I think the concern only comes when you have to pay taxes, which takes a little bit of thinking but not that much. For us, with FEIE the taxes we pay on regular mutual funds are quite reasonable (and they're not taxed during the periods, sometimes for years, when we are abroad).

The specifics may matter for you. For instance, where we live the local government doesn't collect taxes on mutual funds held abroad below a certain amount.
AlohaJoe
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Re: Expat with address in California

Post by AlohaJoe »

Marseille07 wrote: Sun Feb 07, 2021 1:12 am If you want to give up then I don't stop you. Just suggesting expat-friendly brokers you might be able to try out without doing the virtual address business.
His problem isn't an "expat friendly" broker. He already has an expat friendly broker. He can buy everything but mutual funds. No broker will allow an expat to buy mutual funds because it is against the law to sell US mutual funds to someone outside of the US. Moving to Schwab or Interactive Brokers won't fix that.

The OP is worrying too much about trying to have a "glidepath", which is easy to get in a mutual fund not in an ETF. But glidepaths are, IMHO, mostly marketing snake oil.

I think the OP should just buy ETFs with a reasonable asset allocation and then check every five or six years to rebalance .

I wouldn't do the fake address thing to avoid having to do 15 minutes of work twice a decade.
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typical.investor
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Re: Expat with address in California

Post by typical.investor »

northernisland wrote: Sun Feb 07, 2021 2:02 am To me this sure seems to answer your query:
viewtopic.php?t=110773

I don't believe it's illegal, only that the major funds see it as too difficult to maintain compliance and paperwork with only an overseas address.
Actually, US mutual funds can only be sold to US residents by industry regulations. It has something to do with how taxes are withheld in the fund.

As such, US brokers can only offer ETFs to non US residents.

That some brokers decide they don't want to even offer ETFs is up to the individual broker. This is generally the case with Vanguard who doesn't want the compliance burdens, although there seem to be exceptions such as people who were grandfathered in before enforcement of regulations tightened.

As for using a US address when you don't really live there. I don't believe that per se is illegal -- only difficult in that it may subject you to State taxes and your information gets sent where you are not. This is as the legal definition is a bit slippery. You can have more than one residence and if you believe in your heart and intend to return to the US, then the US can be considered your domicile.
Simply put, your domicile is your home—the state you consider your permanent place of residence. If you aren't living there right now, then it's the place to which you intend to return and make your home indefinitely. You can have more than one residence, but only one domicile.
But while it's not illegal, many brokers will require a proof of residency in the form of a paycheck, utility bill in your name or other such record. It depends on the broker and if you are in public records at that address and how long you've been with the broker (i.e. how well they know you for KYC purposes), and how strict their compliance is.
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typical.investor
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Re: Expat with address in California

Post by typical.investor »

AlohaJoe wrote: Sun Feb 07, 2021 2:20 am I wouldn't do the fake address thing to avoid having to do 15 minutes of work twice a decade.
I wouldn't do the fake address thing as your info might get sent there.

Vanguard for instance only sent notices by mail about annuities getting switched to another company.
zuma
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Re: Expat with address in California

Post by zuma »

California likes to go hunting for tax from anyone who has lived there. I can confirm this as former CA resident now living in Europe. I would avoid using a CA address if possible.
halfnine
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Re: Expat with address in California

Post by halfnine »

AlohaJoe wrote: Sun Feb 07, 2021 2:20 am
Marseille07 wrote: Sun Feb 07, 2021 1:12 am If you want to give up then I don't stop you. Just suggesting expat-friendly brokers you might be able to try out without doing the virtual address business.
His problem isn't an "expat friendly" broker. He already has an expat friendly broker. He can buy everything but mutual funds. No broker will allow an expat to buy mutual funds because it is against the law to sell US mutual funds to someone outside of the US. Moving to Schwab or Interactive Brokers won't fix that.

The OP is worrying too much about trying to have a "glidepath", which is easy to get in a mutual fund not in an ETF. But glidepaths are, IMHO, mostly marketing snake oil.

I think the OP should just buy ETFs with a reasonable asset allocation and then check every five or six years to rebalance .

I wouldn't do the fake address thing to avoid having to do 15 minutes of work twice a decade.
This. And that is basically what I do.

To the OP, honestly, this is not the headache of being abroad. The real headaches are how the foreign country you are in taxes these assets and if (or maybe it is more when) the US financial institution decides it no longer wants your business.
crre
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Re: Expat with address in California

Post by crre »

i use an address in the form of "my name, c/o relative's name, relative's u.s. address". broker has never complained.
humblecoder
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Re: Expat with address in California

Post by humblecoder »

This might be of interest. Showed up when a searched for "state income tax expat". Remember, all, google is your friend!

https://www.greenbacktaxservices.com/bl ... -taxation/
bagle
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Re: Expat with address in California

Post by bagle »

California is well known for claiming that former residents intend to return to the Golden state.

A friend moved from Calif. to Europe nearly 30 years ago, but continued to use a Calif. address for mail from financial services firms such as Vanguard. Beginning 6 years ago, he began receiving letters from the Calif. franchise tax board asking him to justify why he had not filed Calif. state taxes. I believe they would accept his explanation - then put the burden of proof on him again the following year. He finally changed his US mailing address.
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