Dear fellow practitioners, CPAs, attorneys, and other professionals. Welcome to the sixth edition of our “Dreidel” newsletter about planning and investment issues of US citizens living overseas.
This month Mike Reed focuses on custodial account closure issues for US expats in Israel.
We have written before about US expats living overseas who are suddenly notified by their financial institution that they will no longer be able to hold their account, or if they keep their account, the only transactions allowed are liquidating ones. Often, the institution no longer wants to deal with the new US regulations and reporting requirements that went into effect in 2021.
Last year we had a new client who came to us because her firm of 25 years was dropping her account due to these new internal policies. They decided that the two US expat clients they held were going to be just as much work and cost from a compliance perspective as their other 200 accounts combined. Fortunately, they worked with those two expat clients to move the accounts in an orderly fashion; but often this is not the case.
Usually, the firm will give 60 days’ notice and then the accounts are liquidated. This can cause potential issues such as recognizing gains in taxable accounts, or early withdrawal penalties if a retirement account is not able to be rolled over within 60 days to a new firm.
Another client came to us because their current institution told them that while they were not kicking them out, but instead they were going to severely limit what they could do with their account. They were told they could no longer purchase shares of mutual funds, (even ones they own) and would be limited to only individual stocks and bonds in the future. While it is possible to build a portfolio with individual stocks and bonds, it becomes much harder to research and monitor, and costly – as transaction costs add up. The client was also notified that they would not be able to choose the highest yielding fund for their cash as well.
Looking for an institution that can hold assets for an expat and allow them all the investment freedom of a US resident is important, and is no easy task.
We are happy to discuss this in further detail, if you do have non-US clients who live outside the US with US brokerage assets. Please contact us to discuss.
Disclaimer
Nardis Advisors LLC (“Nardis”) is a Registered Investment Advisory Firm regulated by the U.S Securities and Exchange Commission in accordance and compliance with applicable securities laws and regulations. Registration does not imply a certain level of skill or training. Nardis does not render or offer to render personalized investment advice through this medium. The information provided herein is for informational purposes only and does not constitute financial, investment or legal advice. Investment advice can only be rendered after delivery of the Firm’s disclosure statement (Form ADV Part 2) and execution of an investment advisory agreement between the client and Nardis.
