Let’s face it, no one likes being kicked out the club or the popular group. Whether it was the cool kids lunch table or the popular country club, no one is a fan of being excluded. One area where it is starting to happen more and more is for US expats living abroad who are being kicked out of their brokerage accounts. Many times, they are given only a couple of months’ notice, and this may lead to some sleepless nights. Usually, the reason expats can’t keep their brokerage accounts is because the brokerage firm or advisor do not want to deal with the extra compliance or costs that can come with working with non-US residents.
Thankfully, this does not have to be a scary process, and we have been helping US expats with financial and planning items for fourteen years.
We wrote a case study about a financially complicated situation that arose for an expat whose brokerage account was closed unexpectedly. Additionally, we have written these blogs about moving to and living in Israel which you may enjoy.
And now let’s get into the blog!
What to do if you get kicked out of your brokerage account
Can I keep my brokerage account if I move abroad? This is a question many folks tend to have, whether they have accounts at Vanguard, eTrade, Schwab, Fidelity, or other custodians. Unfortunately, there is no one rule when it comes to non-resident alien brokerage accounts. You’ll have to ask your custodian and consult with the international customer service team about whether you can keep your account with them, and see what they say (preferably before you move!)
It is typical to encounter challenges when trying to establish an investment account as a non-US resident. Your account may even get closed.
What do you do?
If you get kicked out of your US brokerage account, the thing to remember is that your advisor or broker will give you time to find another custodian. You just want to keep a few things in mind, so that you potentially don’t end up with some big tax bills. The first would be if you have a retirement account such as an IRA, you want to find another custodian so that your current broker or advisor does not liquidate the funds and send you a check. If this happens you have 60 days to transfer into another IRA before it becomes taxable. For example, if you had a $500,000 IRA that was liquidated, and you could not transfer it over in 60 days, you would be taxed on the $500,000 at your current tax rate.
The possible tax implications do matter
Also, say you have a taxable account with some large unrealized gains. Your current broker or advisor could be forced to sell the positions to send you cash again possibly causing a large capital gains tax that would need to be paid.
A makeshift US address will not save you
Many people think they can get around the problem and keep their current firm’s brokerage account by using a US address that is maybe a relative or a business. This does not work in the long run, as when the current brokerage firm finds out they will remove the client and account fairly quickly.
Moving to the US?
We are expat financial advisors located in Israel and the US, serving expats globally. By working with an advisor who has experience working with the investment accounts of US expats, we believe that your transfer will be handled smoothly. Advisors who focus on US expats also typically have knowledge of tax and estate planning issues as well as currency conversions.
If you are moving to Israel or another country and don’t know where to start when it comes to your global finances, or hold US or foreign assets, and/or need help figuring out your retirement as an expat, please contact us.
Have questions about retiring in Israel? We’re having a series of webinars in 2023 on this topic. We’re also publishing blogs on this subject.
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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.