Moving to and living in the USA
Managing Two Financial Worlds
Living in the USA with Swiss Ties –
Financial Planning Implications
The United States government does not provide as broad a safety net as the Swiss government does for its residents. As a result, US residents are used to taking a more active role in managing risk and building wealth to support themselves in retirement. This can be intimidating for Swiss nationals moving to the USA for the first time. It also requires a shift in mindset for Americans returning to the USA after decades living abroad.
We can help you manage your international relocation and efficiently coordinate your US and Swiss finances. Whether you are moving to the USA for the first time and need to learn your new environment, you are a Swiss family that has been living in the USA for a number of years, or you are an American family returning home after years living in Switzerland.
We can help you manage your:
- Pre-immigration tax planning: Like Switzerland, the USA taxes its residents on their worldwide income. Unlike Switzerland, the United States doesn’t have a wealth tax, but it taxes capital gains on financial investments even if the appreciation of the investment happened before the owner moved to the USA. We can help develop an efficient tax plan to step-up your cost basis on those assets prior to becoming a US tax resident. This can result in potentially significant tax savings.
- PFICs (Passive Foreign Investment Companies): The US taxes non-US mutual funds, exchange traded funds (ETFs) and other pooled investments that are not US registered as (PFICs). PFICs require complex tax reporting and are subject to punitive taxation. We can help you restructure your Swiss investments, such as making favorable US tax elections. This will reduce the tax burden on non-US investments without negatively impacting your investment returns.
- Bank accounts: Some Swiss banks increase their clients’ account fees or force them to close their accounts after giving up Swiss residency. We can help you evaluate your options and structure your bank accounts and deposits to minimize disruptions, unnecessary costs, and risks.
- Pension distributions: US tax laws do not recognize Swiss Pillars 2 and Pillars 3 as qualified retirement accounts. When moving to the USA for the first time, capital distributions of Pillars 2 and 3 are fully taxed in the USA as income if taken after becoming a US tax resident. We can help you plan your US tax residency start date at the federal and state level, to reduce or eliminate these taxes. Rolling over a Pillar 3 account or rolling over your Pillar 2 to a Vested Benefits Account can also have income tax and PFIC consequences that we can help you understand, plan for and minimize.
- Reporting requirements: US tax residents are required to annually report their foreign financial assets in their US income tax returns and FBAR Form FinCEN 114. These requirements apply to Swiss bank accounts, Swiss pensions and investment accounts, ownership of Swiss corporations and partnerships, real estate, certain insurance products, etc. Ownership of at least 10% of a non-US company such as a SA or AG, Sarl or GmbH, can trigger additional reporting requirements with different levels of complexity. We can help you understand the requirements that apply to your situation, avoid penalties and remain in full compliance.
- Tax treaties: There are three tax treaties between the USA and Switzerland: for income taxes, for social security taxes (Totalization Agreement), and for estate taxes. We can help you navigate the treaties and claim any benefits that are relevant to your situation.
- Insurance: Coverage for disability and life insurance is not automatic or mandated by US law. Unlike Switzerland, US employers generally provide very limited coverage and it is up to the individual employee to obtain this coverage themselves. We can help you select and obtain the right level of insurance coverage based on your personal circumstances and needs.
- Estate planning: Unlike Switzerland, there are no forced heirship rules in the USA. We can help you understand the estate implications of becoming US domiciled. We can work with estate attorneys to put together an estate plan that addresses your needs and accounts for your US and Swiss assets.
- Other considerations: international moves are costly and complex. We can help you budget for and manage those expenses, manage foreign exchange rate risk, make international money transfers, select the most appropriate employee benefits, understand your executive compensation, and open and manage US investment accounts
If you are a US citizen relocating back to the USA from Switzerland or are Swiss but have been living in the USA for a while, you may already be familiar with some of these issues. Some considerations change once you become a US tax resident, particularly as they related to the taxation of Swiss pension distributions and foreign investment funds. We can help you evaluate your options and make the choices that provide the best return for you, based on your personal situation and goals.
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Work with a team of experienced and specialized advisors who truly understand your situation and needs.
Still Have More Questions?
No Problem. Read the FAQs.
Do you prepare US tax returns?
Swiss American Wealth Advisors provides US tax return review services as part financial planning, but it does not prepare tax returns. One of our founders, Marina Hernandez, is also a credentialed tax professional. Her tax preparation firm, MHTax, prepares US tax returns for a few of our clients. This service is independent from Swiss American and our clients are not required to use it.
Do you prepare Swiss tax returns?
Swiss American Wealth Advisors provides Swiss tax return review services as part of financial planning, but it does not prepare Swiss tax returns. For clients of both Swiss American and MHTax, MHTax offers coordination with a Swiss tax firm to prepare both the US and Swiss tax returns using a unified client portal and document exchange system. This service is independent of Swiss American and requires separate engagements with the tax preparation firms.
Can I work with you if I don’t need investment management?
Yes. Although we manage investment assets for most clients, we do not require a minimum asset level to work with us and occasionally we work with clients with no asset management needs. Our minimum annual fee contemplates that some of our clients are looking exclusively for financial planning services because they are just starting to build their wealth, their wealth is invested in their businesses, it is tied to real estate or in employer pensions that cannot be externally managed.
Can I work with you if I don’t need financial planning?
Yes. While most of our clients want us to provide services beyond financial planning, we of course also work with clients who are looking to delegate only the management of their investment accounts. Typically, these are clients who like to work with an organization that has the expertise, experience and structure to manage their investments in an international compliant manner.
Is my money safe with you?
We work hard to make sure your money is safe. We are members of a fee-only Registered Investment Advisor (RIA) with approximately $2.5 billion in assets under management serving over 3,500 families. We work only with top financial institutions like Charles Schwab and Fidelity as our independent custodians, and we use leading industry technology for investment management and financial planning. We hold multiple professional credentials, and we are held to a fiduciary standard, which means that we are required to always provide advice that is in your best interest, even when it’s against our own.
How are you compensated?
To minimize conflicts of interest and seek better alignment with our clients, we do not accept sales commissions or referral fees from investment product providers or independent professionals. We only receive compensation in the form of wealth advisory fees paid by our clients as detailed in their wealth advisory agreements. Our clients pay us a transparent fee for our advice.
What is your investment philosophy?
We believe that a disciplined investment approach using portfolios that are well diversified across asset classes and regions can deliver superior long-term results. We build our portfolios with highly liquid and low-cost ETFs from established providers like Blackrock or Vanguard. We pay attention to asset location and follow a tax efficient rebalancing process to maximize after tax returns. We also offer ESG portfolio solutions for clients interested in considering environmental, social and governance factors with their investments. ESG portfolios have been the fastest growing segment in our investment offering.
Do you work with expats who don’t live in Switzerland?
Yes. We work with foreign families of different origins living in the USA, and with American families who at some point had ties to Switzerland but returned home or moved to third countries and wanted to keep working with us. Although we believe that our combined decades of experience on US-Swiss crossborder issues allows us to provide the best value to clients with those ties, our multicultural and multilingual backgrounds attract multinational clients who do not feel understood or well served by domestic focused advisors.
What can I do if I need advice but can’t afford your fees?
We believe that every person deserves access to quality financial education that can empower them to make good financial decisions. For individuals and families who are unable to retain our professional services, our public benefit initiatives support free financial education through the Crossborder Planner [free newsletter and blog], and the Crossborder Academy [free webinars], covering topics like tax reporting, tax planning, saving for retirement, benefiting charities or caring for the next generation.
