Expat friendly brokerages?

[nun]

I'm making plans to ER in the UK so I'm looking for a US brokerage that doesn't mind if I have a foreign address. I've seen reports of companies like Wells Fargo, Merrill Lynch and Vanguard either closing or restricting the accounts of US citizens with foreign addresses. Does anyone have actual knowledge of a good company for expats.

FYI I asked TIAA-CREF and they said they have no problem at all with providing services to US citizens with non-US residences; I'm still waiting for Vanguard's answer.

 

[Meadbh]

You might want to include TD Bank Group in your search. As you can see, they have both UK and US brokerages.

http://www.td.com/about-tdbfg/our-business/index.jsp

Disclaimer: I am a customer of TD.

HSBC would be another international firm to look at.

 

[nun]

Thanks,
I got sick of waiting fro Vanguard to answer my email so I called them. On the mutual fund side they said that I could manage my IRA exactly the same as if I lived in the US. For the brokerage side of things I had to hold for about 5 mins on the phone while the checked, but eventually the answer was the same; no problem. It looks like this is a hit and miss kind of thing that changes with account holder and firm.

 

[MichaelB]

Schwab used to be popular among non-US residents.

 

[nun]

FYI here is the Vanguard response

Thank you for taking the time to contact us about Vanguard Brokerage
Services(R).

Vanguard funds are registered for sale only to persons who live, that is,
maintain a legal permanent residence, in the United States. Additionally,
foreign countries often have laws governing who can sell securities to
residents of their countries. To reduce the risk that Vanguard Brokerage
Services might violate these foreign securities laws and regulations, we
have a Foreign Investor Policy which restricts investors residing outside
of the United States from opening a Vanguard Brokerage account.

However, current retail Vanguard mutual fund and Vanguard Brokerage clients (clients who have existing accounts) can continue to add to that account, can open new accounts, or exchange to a new Vanguard fund, and add money to the new fund account unless they live in Canada or certain sanctioned countries. Clients that move to the United Kingdom will be allowed to continue to transact on their accounts without restriction.

You may want to seek advice from a qualified tax professional regarding
any tax implications relating to your change of address. You may also wish
to consult with the IRS or visit their website at Internal Revenue Service.

and here is TIAA-CREF

Thank you for your email. I appreciate you taking the time to write us. It is my pleasure to assist you.

Yes, regardless of your residency, you can manage your TIAA-CREF retirement accounts online as a non-US resident by entering your existing User Id and Password.

Tax Ramification:
Since you are a US Citizen, but will reside outside the US; under the Internal Revenue Service (IRS) rules, if you take a withdrawal from your retirement plan and do not complete a rollover to another qualified retirement plan or Traditional IRA account, then your distribution will be taxed at your ordinary income tax rate. Your distribution will be subject to mandatory 20% federal withholding. The amounts withheld will be credited towards taxes due.

Since you are under the age of 59-1/2, you also may incur a 10% premature-distribution tax penalty in addition to your ordinary income tax rate. The IRS does provide for certain exceptions. TIAA-CREF does not provide tax or tax-filing advice. Please consult with a qualified, professional tax advisor regarding your specific situation.

I hope I have been helpful to you. If you have additional questions, I remain available to assist you.

 

[Ed_The_Gypsy]

I have all my pennies in a Vanguard IRA.

I work far, far away from the Waving Fields of Grain.

Recently, I tried to create a non-tax protected account (normal brokerage account) on-line with Vanguard and they wouldn't do it. When I called them, they said it was because I worked overseas and it was too much trouble with the Feds.

So, I tried again on-line and said that that I was retired (not much of a stretch) and was not required to account for my present circumstances.

Got the account.

Go figure.

 

[tmm99]

So what would happen if you wanted to move to Canada? Is it a No Go on continuing to use VG accounts?? Hard for me to tell from the statement..

"Vanguard Brokerage clients (clients who have existing accounts) can continue to add to that account, can open new accounts, or exchange to a new Vanguard fund, and add money to the new fund account unless they live in Canada or certain sanctioned countries."

 

[nun]

So what would happen if you wanted to move to Canada? Is it a No Go on continuing to use VG accounts?? Hard for me to tell from the statement..

"Vanguard Brokerage clients (clients who have existing accounts) can continue to add to that account, can open new accounts, or exchange to a new Vanguard fund, and add money to the new fund account unless they live in Canada or certain sanctioned countries."

Yep Vanguard (and I think all other US brokerages) are a no go if you live in Canada. I think this is because Canada got annoyed with the US over FATCA and brought in a similar law itself requiring US brokerages to share details of Canadian resident account holders with the Canadian Government. So the US brokerages just don't deal with canadian residents anymore. It's the same as non-US banks and brokerages cutting US citizens loose. So US citizens living in Canada have to use Canadian brokerages, but obviously should avoid Canadian mutual funds.

But if you have a Vanguard account when you move out of the US, and you go somewhere other than Canada or N. Korea etc, it looks like you are ok on both the mutual fund and brokerage/ETF side. However, that isn't so for TIAA-CREF. My retirement stuff on the mutual fund side is ok, but I asked about their brokerage and got this reply

Additionally, if you open a TIAA-CREF brokerage account while living in the US, your account would be restricted to sells only and you would be sent a letter to move your account. For information regarding TIAA-CREF Brokerage Services you may contact Brokerage Services at (800) 927-3059, Monday through Friday, 8:00 am to 7:00 pm

I looked at Schwab and if you don't have a US address you get directed to their global site and have to open an account with them and can then buy ETFs and stocks etc on US exchanges, but you won't get the appropriate 1099s at tax time. So the moral is if you want to deal with US brokerages directly when you move abroad find one that is expat friendly and set the accounts up before you leave. Vanguard seems to be reasonably friendly.

 

[scrinch]

I have Vanguard, Schwab, Fidelity, and a couple of other smaller accounts as an expat. I have no problems transacting business in any of them. But I had all of these accounts when I moved overseas, and I use a US PO Box address that is forwarded to me weekly.

 

[Dd852]

I've been an expat for the past 9 years this time (13 years a previous time) - I've consolidated to HSBC for global banking and Vanguard for mutual funds. Both have been very helpful and no hassles. I wish I could say the same for the IRS !

 

[kramer]

I use Schwab and Vanguard and several online banks, but these were all established before I moved overseas. I changed the official address to a mail drop in Texas for all of them. I also maintain a permanent USA phone number via Skype.

After reading this thread, it almost seems worth it to maintain a USA mail drop, which can be had for a cost of less than $100/year, just for insurance purposes in case your brokerage changes policies in the future. Also, best to have an account with more than one brokerage, just in case.

I had a friend who set up a Schwab account from overseas using his family's residence address in the USA, but he had to provide a driver's license number or current State ID number to open it. He used his old expired drivers license and they thankfully accepted that. I think later he changed the address to a mail drop. A current State ID, in addition to an address and phone number, seems to be a requirement for opening many different kinds of accounts.

 

[nun]

I had a friend who set up a Schwab account from overseas using his family's residence address in the USA, but he had to provide a driver's license number or current State ID number to open it. He used his old expired drivers license and they thankfully accepted that. I think later he changed the address to a mail drop. A current State ID, in addition to an address and phone number, seems to be a requirement for opening many different kinds of accounts.

Doing that you just have to be careful that you make the state realize you are actually not resident to avoid the hassle of state taxes.

 

[kramer]

Doing that you just have to be careful that you make the state realize you are actually not resident to avoid the hassle of state taxes.

Agreed, nun. That is one reason I chose Texas for my mail drop, which has no income tax and their law is friendly toward non-residents who use their state as a domicile. It can be a hassle dealing with aggressive states, even if you can prove (eventually) that you don't really owe them income taxes.

 

[tmm99]

Agreed, nun. That is one reason I chose Texas for my mail drop, which has no income tax and their law is friendly toward non-residents who use their state as a domicile. It can be a hassle dealing with aggressive states, even if you can prove (eventually) that you don't really owe them income taxes.

So what do you do when you withdraw money from your 401K, etc? Do you just file taxes in TX for that?

 

[nun]

So what do you do when you withdraw money from your 401K, etc? Do you just file taxes in TX for that?

As Kramer presumably has residence outside the US how he/she files taxes would depend on the US/residence country tax treaty and Kramer's citizenship. As long as TX agrees it is not an actual residence state there should be no state tax due.

 

[haha]

As long as TX agrees it is not an actual residence state there should be no state tax due.

This is especially likely since TX has no state income tax.

Ha

 

[kramer]

So what do you do when you withdraw money from your 401K, etc? Do you just file taxes in TX for that?

I am 47 years old and not drawing yet from tax deferred accounts. But even if I were, I would owe federal taxes only.

My principal residence is in the Philippines. My only income is passive income from dividends and capital gains. I file US federal income taxes each year. The Philippines does not tax me on passive income earned outside of the Philippines.

Even if my mailing address were in California, I would only owe federal income taxes, since I would not be a California resident. Although they would probably make me go to some lengths to prove that.

However, before I moved abroad, I was appalled at California's tax laws regarding citizens who leave the state. At the time, there was a chance I would eventually return, and also a chance I would work abroad teaching English, and California has some claw back laws whereby you could owe taxes retroactively for your entire absence, even if you went back there for a short time (say, for instance, for a stay in between jobs abroad). So that motivated me to change my residence to Texas which has no state income tax -- both for financial and compliance costs.

So far, my only real problem has been getting jury summons notices at my Texas mail stop address.

 

[tmm99]

However, before I moved abroad, I was appalled at California's tax laws regarding citizens who leave the state. At the time, there was a chance I would eventually return, and also a chance I would work abroad teaching English, and California has some claw back laws whereby you could owe taxes retroactively for your entire absence, even if you went back there for a short time (say, for instance, for a stay in between jobs abroad). So that motivated me to change my residence to Texas which has no state .

That sounds crazy. I live in CA and their state tax is on the high side, but I didn't know they had such crazy tax laws, although I don't know if this particular one is actually enforced (but why take chances!)

 

[nun]

That sounds crazy. I live in CA and their state tax is on the high side, but I didn't know they had such crazy tax laws, although I don't know if this particular one is actually enforced (but why take chances!)

CA is a "domicile state" and notoriously difficult when it comes to taxes. If you don't get domicile in another US state CA assumes to are still CA domiciled. You have to prove that you have no intention of moving back to CA.

 

[MichaelB]

This is not unique to California. Many states presume one continues to be a resident, even when not present. There is no common criteria or definition of state residency in the US, so each state is free to impose it's own set of rules. Ending one's residency in any particular state is not complicated, just detailed.

It does help to have a US address, though, and from what I've read of Kramer's posts over the years Texas appears to be a good candidate.

 

[scrinch]

I've spent several weeks of evenings this year learning the ins and outs of California residency for expats. In fact I spent another few weeks teaching it to my Megacorp-hired US tax accountants, after reading the tax code, 20 years of appeals (including Joe Morgan the baseball player's), textbooks, and Franchise Tax Board training manuals.

Yes, California is aggressive in claiming residency, but not to a crazy extent. Basically it comes down to this. If you are a California resident, you can break your residency by: 1)establishing a domicile in another state or country...a domicile is your real physical home, with your doctors, church, clubs, friends...not just a POBox, drivers license, and a voter registration; or 2)leaving the state for "other than temporary or transitory purposes." There is now a safe harbor definition of "other than temporary or transitory"...i.e. being gone for 1.5 years without returning for more than 45 days. The appeal process has set a precedent for another definition... intending to be away from the state for work for an indefinite period expected to be more than 2 years while not maintaining a home in readiness to reoccupy (i.e...you'd better rent your house out while you're overseas). So in fact you can maintain a California domicile and not be considered a resident while you're gone.
For those who are considered residents, income tax is owed on worldwide income. For those not considered residents, tax is only owed on income generated in the state...for example your rental income.

 

[Ed_The_Gypsy]

"Texas means 'friend'." (Actually, 'tejas'. but that's where it came from.)

Off-topic, there is a reason that Texas is booming and the rest of the country is not doing well.

 

[2B]

There is a trailer park north of Houston that has about 10 times the number of residents as trailer spots. It's geared towards people who live in their RV and live all around the country. The RV park serves as their mail drop so everybody avoids state income tax, has an address and a place to get a drivers license.

On a related note, these people have a very high absentee voter participation. This area used to be a dem stronghold but the RV "residents" have changed this to repub territory. The dems have sued and complained but they have lost on every turn to try to make it a requirement for actually being a resident a certain amount of the year to vote.

 

[dumpweed]

I have Vanguard, Schwab, Fidelity, and a couple of other smaller accounts as an expat. I have no problems transacting business in any of them. But I had all of these accounts when I moved overseas, and I use a US PO Box address that is forwarded to me weekly.

Do you mind sharing which mail forwarding service you are using?

TIA