Financial Planning for American Executives Abroad

American executives abroad should review their full compensation package and personal balance sheet before making major tax, investment, retirement or relocation decisions.

A review should usually consider:

• US citizenship or green card status
• foreign tax residence
• state tax exposure
• salary and bonuses
• deferred compensation
• RSUs and stock options
• employer stock concentration
• foreign earned income exclusion
• foreign tax credits
• employer pension benefits
• 401(k), IRA and Roth IRA accounts
• foreign pensions
• investment accounts
• PFIC exposure
• foreign bank account reporting
• FATCA reporting
• cash reserves
• currency exposure
• insurance and protection
• estate planning
• future relocation

The IRS says US citizens and resident aliens abroad are generally subject to the same filing rules as those living in the United States and are taxed on worldwide income.

That means an American executive working abroad should not assume overseas income, foreign bank accounts or foreign investment opportunities sit outside the US planning system.

The financial plan should connect compensation, tax, investments, pensions, reporting, currency and family goals into one structure.

Executive compensation can be difficult because the earning event, tax event and cashflow event may not happen at the same time.

For example:

• a bonus may relate to work performed in more than one country
• RSUs may be granted in one country and vest in another
• stock options may be granted, vested, exercised and sold across different tax years or countries
• deferred compensation may pay out after a relocation
• employer stock may create concentration risk
• tax withholding may not match the final tax liability
• currency movements can change the real value of compensation
• local tax treatment may differ from US tax treatment
• foreign account reporting may apply once proceeds are held overseas

This is why American executives abroad should not treat equity compensation as a standalone tax issue.

The financial planning questions are broader:

• how much tax should be reserved?
• when should shares be sold?
• how much employer stock is too much?
• where should proceeds be held?
• which currency should proceeds be converted into?
• should proceeds repay debt, fund investments, build cash or support retirement?
• does the executive need additional insurance?
• does the estate plan reflect the new wealth?

A strong plan turns compensation into structured wealth.

This page is for general information only and does not constitute personalised financial, tax, legal, investment, pension transfer, retirement, estate planning, employment, immigration, compensation or currency advice.

Executive compensation, bonuses, RSUs, stock options, deferred compensation, 401(k), IRA, Roth IRA, foreign pensions, tax residence, foreign earned income exclusion, foreign tax credits, withholding, FBAR, FATCA, PFIC exposure, foreign business ownership, currency planning and estate planning depend on personal circumstances and may change.

US tax advice should be taken from a suitably qualified US tax adviser or CPA. Local tax advice should also be taken in the country where you live and work.

Financial planning should be coordinated with legal, tax, pension, employment and estate planning advice where appropriate.

Investing involves risk. Pension, retirement account and investment values can fall as well as rise, and you may get back less than you invest.

Currency movements can affect the value of income, bonuses, investments, transfers and retirement income.