Should you handle your own international compliance?

Over a decade or so, he had built up a substantial number of assets in multiple countries – real estate, precious metals, and a few foreign companies as holding structures.

Gerald was a finance professional and knew a lot about these topics. But he was struggling to keep on top of the tax and compliance issues – and deal with all the professionals needed to keep it all humming.

So he asked us for three things:

#1: Help him simplify his holdings to preserve the benefits of the international diversification he worked hard to set up.

#2: Take on the ongoing governance of the structure so he wouldn’t have to anymore.

#3: Be ready to help his heirs with distributing assets after his death, whenever that might be.

… which we did by helping him evaluate which assets were causing the most trouble and which ones would balance simplicity with his goals of dollar and financial market risk diversification.

(The solution led to a foreign bank account, foreign asset management, and a holding in gold.)

Unfortunately, though, clients like Gerald are not all that uncommon to us. They succeed — with our help — but here’s the uncomfortable truth: you can’t just internationalize and walk away.

There’s a trap that comes with building holdings abroad without having a clear and systematic way to reduce your single-system risk without creating a compliance and tax headache in the process.

The goal isn’t to diversify internationally just for the fun of it. It’s to build an international plan that can be managed over time without too much hassle.

That’s why the smart move is – right at the beginning – to ask yourself this question:

Are you interested in becoming your own international planning expert?

If the answer is no, you have two options.

Door #1: Keep your international holdings to the simplest options available — and accept that you’re working within narrow limits.

Door #2: Bring on a qualified firm to build the plan and coordinate the ongoing compliance so you don’t have to.

Most of our clients choose Door #2 because they want the flexibility that comes with a properly structured international plan. But let’s say you were inclined to handle it yourself. What would that look like?

Well, here are a few of the skills and assets we use every day that you would need to build too.

#1: You need to understand the applicable rules of the jurisdiction in which you’re working. Every country has its own rules and they can be quite unfamiliar to American investors. We aren’t experts in everything – we work with people who are. But we need to understand the landscape enough to know which questions to ask.

#2: You need to understand the home picture – how foreign investments affect tax and compliance in the US. When you invest in a foreign country, you’re also adding complexity to your annual filings with the IRS et al.

#3: You must keep an eye on all the constantly moving pieces that come with whatever structure is built. An international project is rarely a “set it and forget it” kind of thing. Laws change, rules shift, and planning opportunities come and go. You need someone who’s experienced and knowledgeable enough to stay on top of it.

#4: You need a network of trusted professionals you can call on when you need help. Hidden fees and foreign concepts abound. You don’t need to know everything… and no one truly can. But you need to know who to call when you have a hole in your knowledge.

This last piece is often the hardest to build. In our case, we’ve been at this for decades.

And that’s not to say our resources don’t change from time to time. The US lawyer we trust to implement the domestic side for clients holding foreign assets has only been with us for a few years.

But other resources have been part of our rolodex for years or even decades – back in the days when people had a rolodex sitting on their desk.

So is there a right answer?

At the end of the day, no, not really.

As with much international planning, it’s a question of preferences.

If you like the idea of taking care of everything yourself – and the large amount of knowledge you’ll need to do it properly – by all means. But if that doesn’t interest you, it makes a lot more sense to either…

… Keep your international holdings simple.

… Bring on a qualified firm to help you do it.

Clients often ask us at what level of wealth does it makes sense to engage a service like ours? The answer is – frustratingly – it depends. But here’s a general rule of thumb we’ve found useful for our clients. If you:

• Already have USD 2 million in assets outside the US and/or

• You plan to invest USD 2 million internationally and/or

• Your international holdings include real estate in any civil law country

… it’s highly worth a chat to explore. In some cases, the path is straightforward and you won’t need firms like us. In other cases, there’s a fair bit of complexity where we can add a lot of value. Either way, we’ll tell you up front. At the very least, it will save you a bunch of time and, probably, money too.