Talking Expat Taxes #15

Yeah. Thanks so much for having me, Alex. I'll do a quick little introduction and then I'm really excited to kick off this conversation. Because I am, I totally agree with you. I always think about cross border as it's a team sport. It's not an individual sport. There's really no just one professional I think that can do it all.

I'll start with my introduction, I guess. So my name is Arielle Tucker. I'm a certified financial planner. I'm also an IRS enrolled agent. I love to, you know, speak tax when geek out on tax, issues as well. I specialize in cross-border planning for US citizens. Who are moving to or living in Europe.

And specifically my focus is really Germany and Switzerland because those are the countries that I've been living and working in for over a decade now. I've been featured in Forbes. I write for Bloomberg Tax, and CNN sharing insights on the unique challenges expats face with taxes, investments, and retirement planning.

I'm also the host of Passport to Wealth, which is a podcast where we explore what it really takes to build wealth and security while living abroad. . I'm so excited to jump in with you today and kind of go through what it looks like from a team. I came from a tax background. You are a tax professional.

I started my career, you know, preparing 10 forties. And really realized when I was especially, in international tax, no one was thinking about the planning tax can so often can be just backward looking. And you worked at pwc? I worked at pwc. I was in the global mobility team, so we were serving those assignees.

Right. And your, your company was paying for your tax return. So we weren't necessarily doing advanced tax planning. We were basically, handed the file and told you have, you know, $1,500 or $5,000 to do this corporate professional tax return. Uh, don't go over the

Yeah, exactly. Yep.

Yeah, so back in 2011, I was fairly newly married. We were living in Boston and I felt so bored with my life. I realized like I could already see the future and it was like, okay, we're going to buy a nice house in the suburbs. We're gonna have 2.5 kids. We're gonna have some nice cars. We'll probably buy a Cape House.

Oh my God, I hate my life. This sucks. How do I get out of this? My husband had been thinking about doing a PhD, so I was really encouraging him to explore what that would look like. And we were looking at programs in Boston, out in California, and then something in Switzerland came up and I said, oh, look at that one.

And we ended up, realizing that he would make. Twice as much doing his PhD in Switzerland than he would in the us. And he would be able to finish the program in five to six years versus like the seven to eight years it takes in the us. And I was like, well, this has really become a financial decision.

So we're moving to Switzerland. So we moved in 2011, which happened to be really lucky timing for me because Faca had just kind of really blown up in Europe and in Switzerland with all the banks here. Everyone was looking for someone who had seen a US 10 40 and I had done some volunteer tax work, for the VITA program.

I don't know if you're familiar with that

Yeah, so, for background review, if you haven't heard of that, program, it's run by volunteers. I was one of many accounting students who was, helping a volunteer in low income inner cities, serving that community. And I had written my senior thesis on the power of the earned income tax credit and low income individual, in low income communities.

And so I had kind of got that bug for tax through the Vida program, but I never thought I would have a career in tax, if that makes sense.

So I show up in Switzerland, I'm looking for a job, and all of a sudden I realized all these firms want to hire me, like all the big

No, no, I, I actually had landed, I had first was doing insurance and then I landed my dream job as a travel agent.

'cause I love to travel and I had traveled a lot and so we were Oh, okay. Yeah. So we were doing stop-loss, stop-loss insurance with sun life.

It all kind of, I, I had really had an itch to, to get out. And so we saw this opportunity and I was like, let's just take it. And then we landed here and I'm like, okay, what am I gonna do for work? Like, I'm 24. I was, I'm just starting my career and I really need to figure this out. So he was set with his PhD and then

I started interviewing for jobs and I got really, again, timing is everything. Would, I've gotten a job at Big Four in the us? Probably not like, right? I hadn't done my CPAI wasn't even an EA at that time. Like I wasn't a traditional big four hire, but I had seen a 10 40, and again, I'd seen low income individual 10 forties, where we were focusing on getting refunds and opening up bank accounts, and all of a sudden I'm working, for executives in Switzerland and throughout Europe, completely different. I remember the first time I saw a Schedule D was working at my desk, and that's a, capital gain, loss, schedule. I was working at my desk and I told my boss like, well, what is this? Form and she's like, what do you mean?

What is that form? It's a Schedule D. And I think they were like thinking, oh my God, who did we hire? But again, be, it was just because my tax experience was really purely volunteer. I didn't have an accounting degree. So I'm so thankful and grateful for that opportunity. I worked there for a couple of years and my.

Boss ended up coming over from the, Boston office on secondment, and she was a CFP and she was like, oh my God, you would make a fabulous CFP. And I'm like, what's a CFP? And she's like, you get to do that forward planning, that you're always like craving when you're asking the, we're sitting there and having questions.

You're always thinking ahead, we're our job. And our roles at that time had been so backwards thinking and it just drove me crazy and I was

Yeah, yeah. Stop thinking. So I became an ea. We were in Switzerland for a couple more years. I stayed in boutique tax firms. And then we ended up deciding to move back to the US and

at that point in my life, we'd been in Switzerland for about six years and I was thinking, Ugh, I'm ready to go back to the US and really start my life. We had our first daughter, we really wanted to adopt another child, and I was just like, how do we start our life? And it felt like we needed to go back to New York to do that.

We bought a house, we got the two cars, all of the things in the suburban, you know, white picket fence that I thought I wanted. And very quickly realized I was bored again, and I didn't fit in into, America suburbia. I was really struggling with the consumerism and the overconsumption and the waste. It was really, really hard for me, and it was so jarring.

Another thing I found, making friends when you are, we were in like a small town, but everyone else had kind of like stayed there or was there for, work opportunities but it was just kind of like, everyone was like busy and I'd be like, oh, let's, you know, let's do this or make plans to do this.

And it felt like it was so hard to break in. And I hear that from expats all the time when they're moving abroad, they're like, oh, it's so hard to break in. I also found that like in the US it was kind of like hard to find your groove

found our people. Yeah.

So very quickly, my husband and I decided we were gonna have a competition to see which one of us could get a job abroad first.

And I thought it would be him because he had a PhD and he was an engineer and he was brilliant. And a firm in Berlin ended up contacting me and they said, Hey, we really want you to join this FinTech startup and be our US tax advisor. And I was like, and basically tell the engineers how to build the software.

And I was like, that's really interesting. I could do that. And if it gets me out of New York and back into Europe, let's go. So we moved over to Berlin. We moved at the end of 2019, so August, 2019. And then of course, we all know what happened in 2020. The world shut down. And in Berlin that shutdown was so hard.

You could have like five people in the supermarket. We lived across the street from the playground. The playground was wrapped up. Like it was just like so terrible. And I was like, I cannot live here with two children in the middle of a global pandemic. So we googled where was the best place to live in Germany.

'cause we had German visas at that point, and we moved down south. I also at that time got a, another firm writing to me and they said, Hey, you're a unicorn. You're a certified financial planner and a tax person. Come work for us. And I was like, okay, yes, I can do this. So I went to work for them and we lived just outside of Munich and that, I would say, even looking back, we're probably the pro two.

Magical years for us when we lived in this little town called Sternberg, just outside of, Germany. It was like on the lake with the mountains. I mean, it was just go perfect. So then my husband ended up getting his dream job back in Zurich and so he commuted for a year and then we decided we were gonna make that move back to Switzerland.

And I had been thinking. About starting my own firm and realizing I think I'm ready to do this. And I had been so thankful because I had worked at a startup, I had worked at a small firm, and then I realized okay, I have seen how they make the sausage. I can also make the sausage and kind of take ownership in my life at this point.

And

We decided that when we moved into Switzerland, I told my husband, I said, I, I'm, we're gonna move into the most expensive, like country slash city in the world, and I'm not gonna make any money. Like, how does that sound? How does that sound, is the thing. And he had been on a corporate assignment, which I think we all know how cushy those are.

And he was going into academia and I said, do you think we can do this? Like we had our financial plan, and he said, yes, I think we can do it. And so. I launched almost three years ago and really terrified how it was gonna go. But , within three months, we had broke even to all of our startup costs.

We've been hiring employees, we're expanding, and we've been on a wait list for over a year. And so now Alex, I'm like you, I'm so passionate about figuring out how do we elevate. This space because there are not enough professionals in this space to serve the demand. And one of the things that I've noticed is you can't really Google yourself or chat GPT yourself out of some of the planning or tax considerations of being a US expat, because most people don't even know what questions.

To ask because a lot of the stuff that we navigate is not logical. It doesn't make sense. It's not your gut reaction.

Yeah, so we are trying to be more focused on the countries that we serve. So I don't support all countries. My focus is really knowing Germany and. Switzerland really well. We also have a few clients in the Netherlands and Portugal and a couple of the smaller countries. I don't do some of the really big ones we refer all out for.

We don't do the uk, I don't do, France. I don't do, Spain. I don't do, did I say Italy already? But some of those big countries that people think about in Europe, I'm like, I don't do those countries. So, but we'll occasionally do some smaller countries because there's just really no advisors, uh, you know.

Serving Luxembourg. So sometimes we'll just kind of help client out, in that case. And then from there, my favorite clients to work with are, I would say what I call emerging wealth. Right? And so they're coming over and they have really good paying, tech jobs, but maybe they're still working on their first 500,000, but they're making 350,000 a year.

And they're thinking about, they're having. They're thinking about buying property or buying a holiday home somewhere. Their parents are aging in the US we're thinking about college planning. Maybe we're getting divorced now. I mean there are so many like moving parts. I really am drawn towards those families.

And I don't know if that's just kind of like, 'cause that's where I am in my life and I just am thinking about these questions all the time. I guess being in cross-border financial planner is a little bit selfish. I have to figure this stuff out too. So. Those are the things that we do, but I really think of our planning as very holistic, right?

So it might be running retirement plans, am I gonna be okay? Right. That's really when people are coming to us, that's what they're looking for. Am I gonna be okay? And a lot of times our clients are so self-selecting, right? They're already thinking about their finances. They already have a good tax professional.

They, already natural savers. So when they come to us, a lot of times we're just giving them permission.

you can buy that second home. Yes. We can think about buying a house in, in Switzerland. Yes. You're gonna, your parents are gonna be okay. So I love serving those, but we also have, some people who are retired, right.

And they are just looking at, to kind of help us with, especially like currency management, right? Right Now when we've had this huge kind of swing of, Frank and Euro against the dollar that. The dollar has weakened. How do we manage that? And so much, I think back to like last year, so many of our recommendations are just risk management recommendations.

We were saying, we recommend building up a reserve of two or three years, in this currency. 'cause you're retired, you're living in this local currency, right? Thinking through those blind spots, being a thought partner, that's so much of what our job is with our clients.

I love that you said how do you handle. Switzerland because that to me highlights like the value that our firm already brings because Right, there's 26 different cantons in Switzerland. So my advice for someone who lives at Canton Zoo is gonna be different than my advice for someone who lives in Geneva.

Yeah. That could be applied throughout I think Europe. More generally, right? Some countries have like states or regions where just like in the US we have states and you might have different tax rates across different states and even in some different, localities in the us right? Now we have that, those local tax.

I would think of Ohio as like the bane of my existence, and I think Pennsylvania does

those are like the worst. And so it's just, it's the same thing. Whereas a client in Germany, we only have a federal tax system in Germany, so we're only really thinking about, what's happening in Germany.

There are still some slight tax differences on location just because, we have the solidarity surcharge, if you are in the West. Generally, it's, it's, it's like one federal system, which is different than Switzerland.

Yeah, absolutely. Yeah, so I think it's important to understand, we, and we work with clients all the time, right? They're calling us and they haven't moved yet, and we're doing the pre-planning. And honestly, those are my favorite calls. And Alex, I don't know if you feel the same way, but like when people call us before they've moved, that is like the best because then we can actually do the plan.

We can review , what do you have going on now, which state are you in now? What is the tax exposure now? And we can very easily compare it. What is it going to be when you move? So that's like the first thing to consider. But then we have clients who call, so they're like. We moved seven years ago for a three year contract.

We weren't supposed to stay. And this actually, this is a client that we're onboarding right now. I have over, 1.5 million Swiss francs and I have not invested it because I kept thinking we were gonna leave or go somewhere else. And I just kept saving and I, now I realize I should have invested it.

What do I do? Right? And so we're coming up with plans, right? We're, I'm like, if you've just saved 1.5 million, maybe we don't wanna just put that all in the market. We know time in market is the most powerful thing, but there's also that emotional component, right? Like, do you really wanna just take this thing that you've had and you have got that emotional tie to it?

Stick it all in the market and see it potentially go up 20% tomorrow or down 20% tomorrow, right? Like we don't, we, I can't predict the future. So we're coming up with, the actual plans. How, which currency, how do we hold the money, right? Because as you know, as US citizens, or US Tide individual, so even if you're a US Green Card and holder and you're move, you're moving abroad, we're reporting everything back to the us.

So we always have to have a US lens, which means we're not going to be able to potentially access the same benefits in Switzerland or in Germany or across Europe, where there are the local tax incentives that say, Hey, we really wanna incentivize, right? This is what tax does. Tax policy is so interesting.

Economic policy is so interesting to me because it's literally what are the levers that we could pull to make people produce the outcomes that we want? Right?

And so you think about what are the incentives in the us right? There's a lot of incentives around owning real estate, right? It's really interesting.

There's a lot of incentives around having children. There's a lot of incentives, around saving for retirement. Okay? And that's, every other country in the world does the same thing, right? But we have to now walk the tightrope of what is. What are we allowed to do in the local country as a US person?

Because we don't always have the same access, right? It might depend. Our access might change depending on the visa type we have, depending on, how long we're planning on being in a place, right? We don't wanna sign up for a really

Yes, and I, and I completely agree, your access changes when you're, when you have an inter international address. Some banks and custodians are happy to continue to support you. Charles Schwab Interactive Brokers, they support clients all over the world.

oh, it depends on the country. Schwab does have a jurisdiction

Yeah, it is complicated. So custodians can change, access can change. I mean, this goes back to. We don't always know how long people are moving abroad, especially if they're moving for a job, right? And so when someone calls me and they're going on a true expat assignment, my employer is putting me on assignment.

I'm going to stay and continue to pay us social security. We are keeping our house, maybe we're turning into a rental for a year or two, but we have, we are going back to that house. We are basically just abroad. I, we say. I don't really see a reason for a one or two year assignment to suddenly alert everyone that you've moved abroad because the intention is you're going back when your corporate, like most corporate policies, they're going to basically tie your, if you have a tax equalization, they're gonna tie that all to your state of residence.

Right. And so to me, we have not actually broken our ties. And I would encourage you to kind of continue to keep your. Banking and financial life as normal as

I wouldn't use a friend's address, honestly. I don't know if I want all my financial documents, but I would keep an address, either, either if that's, my home address because I'm keeping my home and there's a mail forwarding company, or it's a PO box, something with a scanning option.

I would keep that address because the intention when we leave is to come back. Right. And now that intention can change. I see that all the time, right? We thought we were gonna be abroad for three years and now it's been seven and oh my gosh, like we're now, we've been localized and we wanna sell our house.

So the planning opportunities for someone who's maybe only moving for two years, well, we're thinking about what are you paying now? What will you pay? Pay in the future. And is there any interesting opportunities? Should we be taking advantage of, capital gains or doing Roth conversions or doing something during this period because our tax rate is suddenly lower.

And this is especially powerful for people coming from, you know, I always think of like California or New York or Massachusetts, right? These high tax states. And now maybe if we're moving into Switzerland, we're actually moving into a lower tax situation. So that's one thing that I'm always thinking about.

And then if we decide to stay, we reevaluate, right? Like what makes sense at this time, based on the facts and circumstances that we know? Because I think it doesn't get easier as an expat. There's always kind of that unsettled feeling, I think, for a lot of people until

the passport.

Oh, I think that's a great question. And what I always say in cross-border financial planning, the complexity will find us. We don't have to go and find it. Right. Like it's, don't worry. And I, 'cause sometimes I have clients, I, I work with a lot of engineers, right? And they're like, oh, we could do this, we could do this.

And I'm like, oh my God. Like, please don't, don't worry. There's gonna be

So I'm serving US citizens and their families living and working in Europe. Our primary custodian is still Charles Schwab in the us right? And that is because for most clients. That serves, that fits the need. And we just basically take extra precautions to think about how are we receiving dividends?

How will that be taxed in the other country? How are we receiving capital gains or interest? How will that be taxed in the other country? Especially when we're thinking about higher tax countries and in Euros, especially with the, currency movements. Is this gonna be a gain or loss in. In Germany, right?

That's a huge deal. I was just talking to someone today and they were like, oh, why should I move my funds over to you? 'cause I, I love my guy at Merrill Lynch. And I was like, does he know anything about Germany? Like at all? And he was like, no, but he's done really a great job for me. And I'm like, okay.

But when he's looking at that account and he's thinking about tax loss harvesting, he could be. The, those could be gains in a different country, right? Once you convert everything. And so I think it's really important to understand and educate consumers, again, I don't want people to blow up their financial lives to work with us, but, and it really depends on how much money you have.

Let's just be honest, okay? If you have $200,000, you probably be totally fine just keeping like your local person, if they're happy to work with you. But once you have a certain net worth. It's, you're really gonna be penalized by not having someone who's thinking about your situation holistically, especially if you're moving to a higher tax country.

Right? And or taxes are just different. The exposure is different. I think about all the time our clients who are navigating. Inheritance tax, right? We don't really have this concept of inheritance tax in the us. It's not very prevalent. I think less than 1% of Americans are gonna be subject to, US federal estate tax, so that those people are kind of like, well, my parents have done it.

They've got everything checked out. We don't really need to do anything. And it's like, well, now you move abroad. The rules are completely different. And if you're just looking, working with local advisors or your parents' advisors in the middle of, you know, Minnesota and they've never seen, a foreign tax credit or 25 55 or foreign investments, if you accidentally kind of get tied into this stuff, you are not actually being served appropriately.

Mm-hmm.

and I love this because I think about, I think, again, when people are calling me and we are doing pre-planning, this is where I can, we can add so much value because we can think about where do you wanna live? Oh, well, all of our friends are living in this, Canton. And why do they all live there?

Oh, the taxes are really low. Cool. Taxes are like a seesaw, right? And so in Switzerland, if you pay the lowest tax, you're just gonna be writing a bigger check to the us. And so you kinda have to decide where, like, how do I wanna live? And sometimes we can optimize that a little bit, right? Because we do have, if you are able to take the 400 income exclusion for some reason, then there's a housing exclusion.

And so maybe we can increase that and not owe as much, potentially in the us but it really all depends and comes down to which Canton are you living in? Which state are you living in? One of the things I've always noticed and found interesting on the foreign housing exclusion is you look at the cities where the embassies are and the exclusions are insane, right?

Like in Berlin, I think it's like some 60 or $70,000. And Geneva I think is like $80,000. I mean, you. Can kind of like look and see like the, some of the political, um, I dunno, pressure or kind of outcomes

cost of living. Yeah. Yeah.

And that is why I don't do the uk. UK is a completely different texture and right, and so I always think about that and I'm like, oh my gosh. If you are moving to, or thinking about the uk, find a UK. Specialists. There are a number of people who only do UK US all day, every day work with one of them. Right.

I would say, and we've talked about this a little bit before I say that about anything, don't find someone who's a generalist, I can do anything. I'll figure it out. Work with someone who's really a specialist and understands your situation. And bonus if they have some like, lived experience, actually doing that.

'cause I think that creates a, just a different level of kind of empathy of like, oh. All the other things that are going on in the, in the, in the situation.

Yeah, so we onboard very, we're very intentional at this point, right? We have a 30 minute complimentary call for people who are interested in ongoing financial planning services. We no longer, have capacity to just have, I have a quick question calls. So we also now offer a 45 minute, basically expat expert session where you can pay for our time and expertise and we'll get right on the phone with you and we'll go right into your situation.

So that's kind of like you kind of decide, who, which avenue. I am so proud to say like all of our fees, our services, everything is transparent on our website. So there's no surprises coming into that call. You know exactly what we charge, you know exactly how we work. And then once we determine that we're a good fit, we actually normally are operating on a wait list.

So it may be. That we agree that we wanna work with each other, we'll send over that engagement letter. You'll sign that, and that's really what would secure your onboarding date with us. Once we get to that onboarding date, we are so excited to kick things off. We've have, we have everything set up in advance and we start a very intentional, onboarding process that last anywhere between three and six months, depending on client complexity and situation and kind of urgency.

And we go through, all of your documents. Right? And tax to me is such a huge component of, making sure you have the right team in place. Then we go through your cash flow. We do a values exercise because I find with the clients that we're oftentimes supporting, I mean, let's be honest, we're really working with the top, you know, five or 10% of wealth, right?

And so we, our biggest resource becomes not. Money, but time and really getting intentional about like, why are we doing this planning? What is the purpose of this planning? And once we understand those values, we can define goals. And goals are what I can actually put dollar and frank signs to or euroscience to.

And that's what I really care about. And so once we have those goals, we can start to run those fire drills, right. For so many of our clients, and I don't know if you feel this way too, but like there's been this shift in retirement. I even, I just like hate even using the word retirement

because it's like we saw our grandparents, or maybe for our parents retire at 65 and live for another 10 years and go golfing, going for some nice ho you know, holidays.

And honestly most of our clients don't wanna do that. They're working really intense drops. They're working in, big tech in pharma, um,

Yeah,

it's really intense. I mean, a lot of my clients are pulling 12 hours days. All the time and working weekends and Right. And that's the expectation in tech, in pharma, in startup culture. And so we are all recognizing, wow, this is not sustainable for like until you're 65. Maybe we're gonna get you till like 45 and we're gonna have so much money built up at that time that we're talking about.

Do you wanna do consulting? Do you just wanna work a less stressful job and make you, maybe you make a quarter of what you used to earn, but that's okay. Like it's, we're not doing it for the money, we're doing it for something else, right? We're trying to really understand what are we trying to pursue, who are we?

So that's kind of like this huge shift that we've had with our clients. And so I'm really trying to build that into our planning with these kind of like this idea of fire drills. When

And we do also work with some individuals who are, in their fifties or their early sixties, and sometimes they're thinking they're gonna work till 65. And we're having really under on this conversations because we see, especially in Europe, ageism, it's huge. I mean, it's a, it's present everywhere, but there are some.

The way that employment law and tax law is set up transparently there, it kind of causes ageism. So a lot of people ha they have to stop by 65 unless they have like a, a special, um,

and a lot of our clients we're having a conversation where. Even if they think they wanna work till 65, let's run that fire drill and see what happens if you get a package at 60. Because that is very common. And unfortunately, it's more common than people realize. Everyone thinks it won't happen to them.

It's more likely to happen to them than not, quite honestly. And so just kind of preparing for what that looks like, because a lot of our clients, they're at the top of their career. They're C-suite executives, and they're thinking. Well, I'll just do this till 65 and then I'll do some consulting.

'cause I, I don't really necessarily wanna retire. And I also say if you wanna do consulting, start five years. Before you wanna turn on that spigot. Because even if you're really, really good, it still takes time to present yourself in a different light. You're no longer, an executive on this board.

You are now this different person and you need to make sure that you skills and what you're bringing to the table, like people are actually going to want to engage with. And building those bridges takes can take years.

And then we get to investment management. I mean, really we we're doing the investment management towards the end of our onboarding process because I've come to realize I really can't tell you what to do with your money until I know who you are and what we're trying to solve for. And so I think it's really silly to start an engagement with just, okay, we'll just manage your money.

It's like. Cool, cool. And sometimes I've like, I think that's the easiest part, is the money management. And so we try to just be really clear about maybe our firm's a little bit different in that, in that way I.

So you can go to our website connected financial planning.com. Um, again, we lay out all of our. Processes and fees. I'm very active on LinkedIn. I love posting and talking about, US expat issues. And then also I am the host of Passport to Wealth. So go to passport to wealth.com. And Alex, I'm hoping you'll come on our show on passport to Wealth, podcast.

So we can also just kind of continue this conversation.

I think

have these, this resource, the Swiss pillar one, two, and three. And that has

oh, we also have, we, yes. I also have a presentation on it. But yeah, we've talked a lot because this, I mean this is like a number one question and so my goal here is how do we get good information out to people?

So they're not trying to google this to death it there, this, these are simple questions for us to answer and give guidance for people.

Great. Thank you so much Alex.

Bye.