Future Move to Spain: Looking for opinions on approach

For residents of Spain.
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globetrottin
Posts: 1
Joined: Tue Jul 14, 2020 2:04 pm

Future Move to Spain: Looking for opinions on approach

Post by globetrottin »

Fellow Bogleheads:

Hoping to get the community take on something my wife and I have been planning for some time: moving back to Spain. We live in the US (Indiana) currently and are both dual citizens in the US and Spain. The move I'm talking about is 5-7 years away, but I fully expect that by the time we're ready to move, we'll have a significant chunk of change in our nest egg from years of employment here. I suppose this what you would consider to be a "good" problem to have, but everything I read indicates the upkeep on my future tax, estate planning, investments is going to be quite the endeavor and quite the cost. Fortunately, I have enough time to plan for all of this and am looking to set myself up in the best way possible.

I'm a big fan of index funds and all of my holdings (outside of the 401(k)) are with Vanguard.

Let's get to the questions for the group:

1) The Vanguard thing seems to be a problem since they don't support US Citizens with foreign addresses, and I suspect my problems do not go away simply by holding a domicile in a state like Florida and using a mail-forwarding service. As I am setting myself up to invest aggressive sums of money on a monthly basis here shortly, should I bite the bullet and move all holdings to Interactive Brokers (all I read points to this being my only real option... seems like mutual fund restrictions have exhausted Schwab and even Fidelity) while states-side? Maybe just stay put in Vanguard until I'm closer to the date (2 years away as an example, to accommodate for a taxable event) and then make the move? Alternatively, should I be considering opening up a brokerage account in Spain and moving my savings into that account and investing back to US funds? I'm just fishing with the last question, it seems off ... just looking to gauge the experience from folks who may have gone through something similar. To add some levity to the question: If you told me that I had to wear a flamenco dress 365 days a year and that gave me a) painless access to my funds, including easy withdrawal / transfer of future liquid to a local account and b) minimize exposure to exchange rates and future tax implications... then I'm all in! :wink:

2) In scouring the interwebs, finding someone who has this US-Spain cross-border experience (tax, legal, accounting, estate planning) is painful and seemingly non-existant... does anyone currently use someone (either US or Spain side) that can provide a proper consult, starting with the financial side? It's one of these cases where I'm willing to spend the money to get some good advice, but can't find a way to spend it! :D

Thanks in advance for any feedback!
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geerhardusvos
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Location: heavenlies

Re: Future Move to Spain: Looking for opinions on approach

Post by geerhardusvos »

globetrottin wrote: Tue Jul 14, 2020 2:52 pm Fellow Bogleheads:

Hoping to get the community take on something my wife and I have been planning for some time: moving back to Spain. We live in the US (Indiana) currently and are both dual citizens in the US and Spain. The move I'm talking about is 5-7 years away, but I fully expect that by the time we're ready to move, we'll have a significant chunk of change in our nest egg from years of employment here. I suppose this what you would consider to be a "good" problem to have, but everything I read indicates the upkeep on my future tax, estate planning, investments is going to be quite the endeavor and quite the cost. Fortunately, I have enough time to plan for all of this and am looking to set myself up in the best way possible.

I'm a big fan of index funds and all of my holdings (outside of the 401(k)) are with Vanguard.

Let's get to the questions for the group:

1) The Vanguard thing seems to be a problem since they don't support US Citizens with foreign addresses, and I suspect my problems do not go away simply by holding a domicile in a state like Florida and using a mail-forwarding service. As I am setting myself up to invest aggressive sums of money on a monthly basis here shortly, should I bite the bullet and move all holdings to Interactive Brokers (all I read points to this being my only real option... seems like mutual fund restrictions have exhausted Schwab and even Fidelity) while states-side? Maybe just stay put in Vanguard until I'm closer to the date (2 years away as an example, to accommodate for a taxable event) and then make the move? Alternatively, should I be considering opening up a brokerage account in Spain and moving my savings into that account and investing back to US funds? I'm just fishing with the last question, it seems off ... just looking to gauge the experience from folks who may have gone through something similar. To add some levity to the question: If you told me that I had to wear a flamenco dress 365 days a year and that gave me a) painless access to my funds, including easy withdrawal / transfer of future liquid to a local account and b) minimize exposure to exchange rates and future tax implications... then I'm all in! :wink:

2) In scouring the interwebs, finding someone who has this US-Spain cross-border experience (tax, legal, accounting, estate planning) is painful and seemingly non-existant... does anyone currently use someone (either US or Spain side) that can provide a proper consult, starting with the financial side? It's one of these cases where I'm willing to spend the money to get some good advice, but can't find a way to spend it! :D

Thanks in advance for any feedback!
There are some ex-pat groups online sometimes associated with other blogs or forums that you should be able to discover with a Google search. Then you can connect with people who have made this transition and might be willing to share some information. And maybe someone on the forum here has some specific insight. Good luck!
VTSAX and chill
sfmurph
Posts: 178
Joined: Mon Aug 12, 2019 8:15 pm

Re: Future Move to Spain: Looking for opinions on approach

Post by sfmurph »

globetrottin wrote: Tue Jul 14, 2020 2:52 pm I'm a big fan of index funds and all of my holdings (outside of the 401(k)) are with Vanguard.
Mutual funds or ETFs? You can't buy more of a mutual fund if you live outside the US (and I understand that Vanguard may liquidate existing holdings too). You should be able to convert to ETF class shares with no tax impact, as long as the funds you own have the dual class structure.

From there, you can ACATS transfer in kind to Interactive Brokers. I'd say sooner over later, to get used to the any oddities, but it's up to you.
vsquid
Posts: 132
Joined: Sat May 18, 2019 2:24 pm

Re: Future Move to Spain: Looking for opinions on approach

Post by vsquid »

I hope you are familiar with the cathc-22 situation that American citizens residing in the EU are subject to. Private individuals having their residence in the EU are not allowed to invest in American funds/ETFs as those do not follow the MIFID II regulations. However American citizens are also unable to invest in European funds/ETFs because of PFIC (passive foreign investment company) regulations..

My understanding is that American brokers who do offer services internationally, like Interactive Brokers and Schwab, will enforce the no American funds/ETFs for European residents regulation. However you can ask to be treated as a "professional" which would unlock American funds/ETFs for you which requires fulfilling several criteria like "has at least 500k on the account", "has work experience from a financial institution".
TedSwippet
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Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: Future Move to Spain: Looking for opinions on approach

Post by TedSwippet »

Welcome.
globetrottin wrote: Tue Jul 14, 2020 2:52 pm 1) The Vanguard thing seems to be a problem since they don't support US Citizens with foreign addresses, and I suspect my problems do not go away simply by holding a domicile in a state like Florida and using a mail-forwarding service.
It's not a given that Vanguard will necessarily restrict or even summarily close your accounts. It seems to depend a lot on which country you move to.

By way of example, I live in the UK -- and for what it's worth, I'm a former green-card holder and not a US citizen -- and so far, Vanguard have allowed me to run my account there without any showstoppers. They won't let me use voice or SMS 2-factor authorisation, or hold, buy or sell ETFs, only mutual funds, and several things that most people can do online I have to do by paper and snail-mail. It's also a bit of a hassle to get money out of them internationally with their insane insistence on a 'medallion signature guarantee', something virtually unobtainable outside of the US, so two or three hops through other US banks required. But broadly, the account still functions, at least to the degree I need it to.

No idea how much of that, if any, will translate to your future situation in Spain. You can ask Vanguard directly, but a) their front-line staff (understandably) probably don't know, so you may get different/conflicting answers depending on the day of the week, and b) the situation seems to change from year to year, perhaps month to month, not least because that's about how frequently the US fiddles with its international tax laws and regulations, so any answer you get now likely won't be relevant when you come to actually move.

Finally, don't necessarily rule out maintaining a US address to keep Vanguard happy. Doing this doesn't break any US law or regulation. Any decision by Vanguard to close or reject US citizens with foreign addresses is a purely commercial one on their part. Generally, unwillingness to engage with, or inability to parse, the tsunami of US tax rules and regulations that trigger whenever money leaves US territory.
vsquid wrote: Tue Jul 21, 2020 1:56 am I hope you are familiar with the catch-22 situation that American citizens residing in the EU are subject to. Private individuals having their residence in the EU are not allowed to invest in American funds/ETFs as those do not follow the MIFID II regulations. However American citizens are also unable to invest in European funds/ETFs because of PFIC (passive foreign investment company) regulations..
Right. It's a huge pain for many US citizens living in Europe. Fully described in this wiki page section:

US tax pitfalls for a US person living abroad - Bogleheads
Last edited by TedSwippet on Tue Jul 21, 2020 3:38 am, edited 1 time in total.
phantom
Posts: 195
Joined: Fri Oct 31, 2008 2:20 pm
Location: Switzerland

Re: Future Move to Spain: Looking for opinions on approach

Post by phantom »

Since your move is 5 - 7 years away, I would advise to do nothing at this point. The rules keep constantly changing with respect to US expats abroad. First mutual funds are not allowed in US brokerages, now ETFs are not allowed either, and holding ETFs in a foreign account creates horrible tax consequences for your US taxes. Having said this, a lot of us expats still keep a US address and just hope that our US brokerage does not find out that we are living abroad for an extended period of time.

If the situation remains as today, or gets worse (e.g. US brokerages start very actively weeding out expats), then you may want to seriously give thought to giving up your US citizenship. A Spanish passport is a good one and you can invest in essentially the same low-cost ETFs in Europe. But again, I would advise to do nothing at this point and just see what the status is in five years. My hope is that somebody will see how ridiculous things have become and simplify the whole system.
TedSwippet
Posts: 5181
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: Future Move to Spain: Looking for opinions on approach

Post by TedSwippet »

phantom wrote: Tue Jul 21, 2020 3:14 amIf the situation remains as today, or gets worse (e.g. US brokerages start very actively weeding out expats), then you may want to seriously give thought to giving up your US citizenship. A Spanish passport is a good one and you can invest in essentially the same low-cost ETFs in Europe. But again, I would advise to do nothing at this point and just see what the status is in five years. My hope is that somebody will see how ridiculous things have become and simplify the whole system.
Indeed. The situation was ridiculous even before HEART and the outrageous 'exit tax', and then FATCA, and then GILTI. It's perhaps not unreasonable to hope for improvement, but I'd suggest it's probably futile to expect any. The trajectory is inexorably towards the worse rather than the better, without regard to whichever party controls congress.

One interesting middle-ground could be for just one spouse to renounce US citizenship. That way, the non-US citizen spouse can do all of the non-US investing for the pair and so operate without regular hindrance from US tax laws, but as they remain married to a US citizen they have a relatively easy route back to a US green card (or even citizenship) if a move back to the US is on the cards in future, while also minimising problems with the spitefully low US estate tax exemption for nonresident aliens (because that doesn't apply where the inheriting spouse is a US citizen).
ChrisGer
Posts: 1
Joined: Wed Sep 23, 2020 8:00 pm

Re: Future Move to Spain: Looking for opinions on approach

Post by ChrisGer »

Hello Globetrottin

We are in exactly the same situation as you are, planning on moving to Spain in about 6 years (from Texas), and if all goes as per plan with a good size nest egg in pre and taxable accounts. I’m not of any help here yet. But as we learn more we will be sharing more over time. So just reaching out for now. We are also in search for same paid advisors services.

I’m dual citizen of Germany and USA but still trying unclear if the benefits or drawbacks this setup brings.

Chris
wineandplaya
Posts: 306
Joined: Fri Sep 14, 2018 9:42 am

Re: Future Move to Spain: Looking for opinions on approach

Post by wineandplaya »

ChrisGer wrote: Wed Sep 23, 2020 8:24 pm Hello Globetrottin

We are in exactly the same situation as you are, planning on moving to Spain in about 6 years (from Texas), and if all goes as per plan with a good size nest egg in pre and taxable accounts. I’m not of any help here yet. But as we learn more we will be sharing more over time. So just reaching out for now. We are also in search for same paid advisors services.

I’m dual citizen of Germany and USA but still trying unclear if the benefits or drawbacks this setup brings.

Chris
Have you considered realizing some or all capital gains in taxable accounts while still in the US? Especially if you live in a place like Texas with no state income tax.
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