When it comes to saving and investing for a child's future, parents and guardians have a few different account options to consider. Two common choices are the Uniform Gifts to Minors Act (UGMA) account and the Uniform Transfers to Minors Act (UTMA) account. While these custodial accounts share some similarities, there are also important distinctions between the two. What is a UGMA Account? A UGMA account is a custodial account that allows adults to gift cash, securities, insurance policies, and other types of assets to a minor child. The adult serves as the custodian and manages the account until the child reaches the age of majority, which is typically 18 or 21 depending on the state. Once the child reaches this age, they gain full control over the account and the assets within it. UGMA accounts are governed by the Uniform Gifts to Minors Act, which was originally enacted in 1956. These accounts allow a wider range of assets to be contributed compared to some other custodial account types. What is a UTMA Account? Like a UGMA, a UTMA account is a custodial account that allows adults to gift assets to a minor child. However, the Uniform Transfers to Minors Act, which was enacted in 1983, expanded the types of assets that can be contributed to include real estate, fine art, patents, royalties, and more. The custodian manages the UTMA account until the child reaches the age of majority, at which point they gain full ownership. This age is typically 18 or 21 depending on the state, just like with a UGMA. Key Differences Between UGMA and UTMA The main differences between UGMA and UTMA accounts come down to the types of assets that can be contributed: UGMA accounts are limited to cash, securities, insurance policies, and certain other financial assets. UTMA accounts have a broader scope and can hold a wider variety of assets including real estate, fine art, patents, royalties, and more. Another key difference is the taxes on the accounts. UGMA and UTMA accounts are both subject to the "kiddie tax" rules, which means the first $1,100 of unearned income (e.g. investment returns) is tax-free, the next $1,100 is taxed at the child's rate, and any amount above that is taxed at the parent's marginal rate. Which is Better - UGMA or UTMA? There is no clear-cut "better" option between UGMA and UTMA accounts. The best choice depends on the specific goals, needs, and asset types of the child's savings and investment plan. UGMA accounts may be preferable if the plan is to contribute primarily cash and securities. UTMA accounts offer more flexibility if the intent is to gift the child a broader range of assets like real estate or intellectual property. Ultimately, both UGMA and UTMA accounts can be useful tools to help save and invest for a child's future. The key is to understand the differences between the two and choose the one that best fits your specific circumstances. DISCLOSURES DUNHILL FINANCIAL, LLC IS A REGISTERED INVESTMENT ADVISER. THE INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. IT DOES NOT PRESENT THE FULL RANGE OF OPTIONS AVAILABLE TO YOU. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN.

When you were in the US, it was commonplace to have a trust in order to avoid probate. But how does this change after you have made the move over to a European country, such as Belgium? If you are a Belgian resident with assets held in a trust or other legal arrangement, they will likely not view a trust in the same way as it would be seen by the IRS in the United States - i.e. they may disregard the structure of the trust and view its contents as taxable on the beneficiary, meaning the trust loses its advantage it enjoys in the states. Therefore, it is crucial to be aware of your tax reporting obligations, as not complying can lead to significant penalties. You should reevaluate the purpose of holding the trust and whether it continues to be fit for purpose if you now live in a different jurisdiction with a different legal system. Why is it Important? Tax Compliance:  Accurate reporting of your assets helps you maintain compliance with Belgian tax laws, avoiding potential penalties and interest charges. Transparency:  By filing appropriately, you contribute to the integrity of the Belgian tax system. Risk Mitigation:  Proper tax reporting can protect you from future disputes with the tax authorities. What should I know about my filing obligations? The Belgian government decided in December 2023 that a taxpayer who declares to either hold a trust or be a beneficiary of a trust (or another similar administrative construction) has to attach a special form to their income tax return, Annex 276CJC.  In this attachment 276CJC the taxpayer has to mention information (figures) about the trust. Annex 276 CJC is a tax form used in Belgium to declare income and assets held through trusts, companies, or other legal entities. It is part of the annual income tax return and is designed to ensure that all income generated by these structures is correctly reported and taxed. To complete Annex 276 CJC accurately, you will need information about: The structure of your trust or legal arrangement. The income generated by the structure. The assets held within the structure. Your beneficial ownership of the structure. Seek Professional Advice While this article is written with the specific view of how a trust should be considered in Belgium, it is worth noting that many European countries regard US trusts in a similar way. Given the complexities of international tax law and the specific nuances of the above and any other filing obligations you may have as a resident in Belgium, it is highly recommended to consult with a qualified tax advisor. They can guide you through the filing process, ensure compliance, and help you optimize your tax position. DUNHILL FINANCIAL, LLC IS A REGISTERED INVESTMENT ADVISER. THE INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN.

Receiving a financial gift can be a generous gesture from family, whether it’s to purchase property, funding education, starting a business, or simply easing the cost of living. However, even as the recipient, it’s essential to understand the tax implications and reporting requirements to avoid any undue surprises from the IRS. Who Pays the Gift Tax? According to tax law, the responsibility for paying tax in the US lies with the gift giver, not the recipient. This applies in specific cases: U.S. Citizens Living Abroad : If the gift giver is a U.S. citizen residing outside the U.S., they are subject to U.S. gift tax laws. Permanent Residents (Green Card Holders) : Green card holders, regardless of their residence, are also subject to these laws. Covered Expatriates : U.S. citizens or green card holders who renounced their status but met certain criteria at the time of renunciation may still be liable for gift taxes. If the gift giver does not fit into any of these above categories, they generally aren’t subject to U.S. gift tax laws. Reporting Requirements Even if no gift tax is owed, there are specific reporting requirements for large foreign gifts: Form 3520: If you receive a gift exceeding $100,000 from a foreign individual or estate, you must report it to the IRS using Form 3520. This form is crucial for compliance and should be kept indefinitely as proof of the gift. Failing to file Form 3520 can result in substantial penalties, up to 25% of the gift's value. Gifts from Foreign Entities The reporting thresholds differ when the gift comes from a foreign corporation or partnership: For 2024, gifts from foreign corporations or partnerships must be reported if they exceed $19,580. Compliance Matters Properly reporting gifts from overseas ensures that you stay in good standing with the IRS and avoid hefty fines. While the process might seem daunting, it’s a small price to pay for the financial support and opportunities these gifts provide. In conclusion, while you might not owe taxes on your gift from overseas, adhering to reporting requirements is essential. Always consult with a tax professional to navigate these rules effectively and ensure you’re complying with regulations correctly.  DUNHILL FINANCIAL, LLC IS A REGISTERED INVESTMENT ADVISER. THE INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN.

The month of June brought an onslaught of economic data releases to which the markets gyrated numerous times only for the overall market to continue its march higher. The US yield curve is a graphical representation of the interest rates on debt for a range of maturities. It shows the relationship between short-term and long-term interest rates of US Treasury securities. A normal yield curve slopes upward, indicating that long-term interest rates are higher than short-term rates. An inverted yield curve, on the other hand, shows the opposite, with short-term rates higher than long-term rates. The shape of the yield curve is closely watched by many economists and investors as it can provide insights into future economic conditions and potential recessions although with a lag. The curve has been inverted since early July 2022. As of today, June 17, 2024, this inversion has surpassed the longest one on record, which lasted 624 days in 1978. While an inverted yield curve has often been followed by a recession, the effects of the FED and policy may have inadvertently warped this indicator, but as always time will tell. Moving onto the wider markets; the US continues its dominant outperformance compared to the international markets on the equity front drive primarily by the magnificent seven technology stocks, with the poster child being Nvidia (NVDA) having benefited tremendously from the artificial intelligence hype. You can check out our NVDA breakdown in earnings/growth in our last quarterly update here. If we take a deeper look at the overall sector composition in the US, it becomes clear that a few select companies are having an outsized impact on not just the sector level but the index level. Technology as a sector is the highest weighted sector we’ve seen for the S&P 500 since records began. Real estate remains the standalone sector seeing negative return on a YTD basis, partly owed due to the ongoing crisis in commercial real estate and higher cost of capital due to rates. Finally moving onto the portfolio breakdown; First Trust NASDAQ® Cln Edge®StGidIfsETF (GRID) was the best performer for the month of June followed closely behind by the overall S&P 500 as markets continued higher after Apple’s recent debut of AI into their suite of products. First Trust NASDAQ Cybersecurity ETF (CIBR) took a slight pull back after having enjoyed a nice run-up earlier in the year. DUNHILL FINANCIAL, LLC IS A REGISTERED INVESTMENT ADVISER. INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN.

Accurately determining real estate value is crucial for informed investment decisions. Unlike readily traded stocks, real estate requires a more nuanced approach due to its unique characteristics. This article explores two fundamental methods used to assess a property's worth: the sales comparison approach and the income capitalization approach. Understanding Real Estate Valuation Real estate markets differ significantly from stock markets. Properties are less liquid, and transactions are less frequent. This lack of transparency necessitates a more comprehensive evaluation process that considers various property-specific factors alongside broader market trends. Method 1: Sales Comparison Approach This approach hinges on the principle of comparison. The value of a subject property is estimated by analyzing recently sold properties with similar characteristics in the same geographical location. Key factors considered include: Location: A property's desirability and value are heavily influenced by its surroundings. Size: The property's square footage plays a significant role in determining its worth. Features: Amenities, upgrades, and overall condition all contribute to a property's value. By comparing the subject property to these recent sales, a reasonable estimate of its market value can be established. Method 2: Income Capitalization Approach This method is primarily applicable to income-generating properties such as rental buildings or commercial spaces. It focuses on the property's potential to generate income over time. Here's the breakdown: Net Operating Income (NOI): This metric reflects the property's profitability after accounting for operating expenses but before financing and taxes. Capitalization Rate: This rate represents the expected return on investment for the specific real estate market, considering inherent risks. By discounting the property's projected NOI using the capitalization rate, a present value can be determined, representing the property's estimated worth based on its income-generating potential. Example: If you expect income of $300,000 over the course of holding the property, and have a required return of 10% on the property, divided $300,000 by 10% means the expected market value is $3 million. Conclusion Real estate valuation is a multifaceted process. Utilizing a combination of the sales comparison approach and the income capitalization approach, along with expert judgment, can provide a reliable assessment of a property's worth. This empowers investors to make informed decisions that align with their financial objectives. DUNHILL FINANCIAL, LLC IS A REGISTERED INVESTMENT ADVISER. THE INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN.

"We have what it takes to take what you have." - Suggested IRS Motto Countless Americans living abroad own and run their own business. They may be digital entrepreneurs, exploiting global connectivity to reach new markets, or many have simply settled overseas and own and run a business where they live. There are certain US tax and reporting factors that American citizens should be aware of when owning a business abroad. These include the US tax implications, US reporting requirements, business structure, and where to register the business, which may not necessarily be the country where you currently reside. As US citizens are taxed on their worldwide income, your business will still be taxable in the US, even if it’s registered abroad. In an ideal scenario, it is better to be aware of the rules before starting out, so that you plan and set up your overseas business to minimize your US reporting and taxes. In this article, you’ll learn about: • Choosing a country for your overseas business • Choosing a corporate structure for your overseas business • Foreign business account reporting Choosing a country for your overseas business When choosing which country to register your business, the first consideration is often whether your business will have a physical premises and employees in the country where you live. If so, it will often make sense to register it in that country. If you are the only employee and your business trades online though, it may make more sense to register it in another jurisdiction. You can do a certain amount of research yourself, such as looking at which countries have lower corporation tax rates. Some countries in fact have no corporation tax, including: • Anguilla • Bahamas • Bahrain • Bermuda • Cayman Islands • Turks and Caicos Islands • The British Virgin Islands Furthermore, several European countries have low rates of 9% - 12.5% (e.g. Hungary, Montenegro, Bulgaria, Gibraltar, Cyprus, and Ireland). The best course though is to consult your financial and tax advisors at the outset to discuss your options, as investing in advice in this preliminary stage will allow your venture to start out on the best possible trajectory. Choosing a corporate structure for your overseas business The factor that can affect your US reporting and tax obligations most, though, is the corporate structure that you choose for your business. Foreign corporations For American expats, a foreign corporation is a company that has been registered outside of the United States. American owners of foreign corporations are required to file Form 5471 every year along with their federal tax return if they meet the following criteria: • They own 10% or more in a foreign company • They are an officer or director of a foreign corporation that is at least 10% owned by Americans • They control a foreign corporation for at least 30 days in a year "Along with Form 5471, a US citizen is also required to file Form 926 with their individual return if they made any transferred property to a foreign corporation during a financial year, including transfers of cash over $100,000 if the transfer resulted in owning more than 10% of the corporation." - Benjamin Pik, Expand CPA Furthermore, owners of foreign corporations are taxed on the corporation’s profits in many cases, especially if the corporation is registered in a low tax jurisdiction. There can be workarounds though, such as tax reductions if the foreign corporation has a US parent company. The type and size of the business are important considerations when looking at what structure to use (and where to incorporate), so it’s best to always seek advice on these matters. Foreign partnerships Even if a business is classified as a partnership in the country in which it operates, it doesn’t necessarily mean that it will qualify as a foreign partnership for US tax purposes. A business is considered a foreign partnership by the US if it has more than one owner and at least one partner’s liability is unlimited. American citizens are required to file Form 8865 along with their individual tax return if they own more than 50 percent in a foreign partnership, or more than 10% per individual and more than 50% total is owned by Americans. The requirement to file Form 8865 is also applicable in a year where you have disposed of your stake in a foreign partnership. Foreign LLCs Limited liability companies limit the risk of the shareholders to the amount of their investment in the business. This means that their personal property can’t be liable for any of the company’s losses or debts. A single-owner domestic LLC is said to be “disregarded” for tax purposes, meaning that it may not require any separate filing requirements at all, and the profits can just be included in your annual income tax return. The same treatment can only be applied to a foreign LLC if the American owner does a one-time filing of Form 8832, followed by the annual submission of Form 8858. The advantage of this is that Form 8858 is a much simpler form to file than Form 5471, and it means there’s no separate US corporation tax liability. Self-employed For some expats, if you work alone, it can make more sense to be self-employed rather than incorporate your business at all. The filing requirements are more straightforward than the other options, being simply a statement of profit and loss on Schedule C of your tax return. There are other taxes for self-employed expats though, such as self-employment taxes. As of 2022, you will pay 15.3% of your income as self-employment tax. This breaks down as 12.4% and 2.9%, divided into social security and Medicare taxes, respectively. You may be able to avoid these if you pay foreign social security taxes and live in a country with which the US has signed a Totalization Agreement to avoid double social security taxation though. Deductible business expenses In all scenarios, it’s sensible to ensure you list all your deductible expenses. These are the same whether your business is in the US or abroad, and whatever the business structure, including: • Advertising and promotion • Contract labor • Legal and professional services • Travel • Car/truck expenses • Supplies • Business space and equipment rental • Taxes and licenses • Meals and entertainment Foreign business account reporting Filing a Foreign Bank Account Report (FBAR) is a mandatory filing requirement if you have financial accounts abroad. It was introduced to reduce tax evaders trying to hide money offshore. You are obligated to file Form FinCEN 114 electronically every year before October 15th if the total combined balances of all your foreign financial accounts, including business accounts even if the accounts is registered in the business’ rather than your name, exceeded $10,000 any time during the financial year. The penalties for not filing or incorrectly filing FBARs are high, so it’s one to keep an eye on. Americans of foreign businesses may also have to report their business on Form 8938 under FACTA foreign asset reporting rules. Choosing where you register your foreign business and its structure are incredibly important decisions that can make a big difference to your finances and your US reporting, so always seek advice to ensure you are setting up in the most efficient way possible. Investing in advice at this stage will save you a load of time, hassle, and money later. If you have any questions, don't hesitate to contact us. DUNHILL FINANCIAL, LLC IS A REGISTERED INVESTMENT ADVISER. INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN. Copyright © 2024 Dunhill Financial. All rights reserved.

In the realm of American expatriates, the complexities of navigating social security benefits can be daunting. One particular issue that has stirred considerable debate and frustration among expats is the Windfall Elimination Provision (WEP). This provision, embedded within the Social Security Act, affects the retirement benefits of individuals who receive a pension from work not covered by Social Security, including many Americans living abroad. So, what exactly is the WEP, and why is it causing such uproar among American citizens overseas? The Windfall Elimination Provision was introduced in 1983 by the Ronald Regan administration to ensure fairness in the Social Security system. However, its impact on expats has been anything but fair. Under WEP, individuals who receive pensions from jobs not covered by Social Security, such as certain government positions or work abroad, may see a reduction in their Social Security benefits. This reduction is calculated based on a formula that often results in a significant decrease in retirement income for affected individuals. For American expatriates, many of whom work in countries with robust pension systems or for international organizations, the WEP can have a profound impact on their financial security in retirement. They may find themselves receiving substantially lower Social Security benefits than they had anticipated, despite having paid into the system through other employment. Recognizing the inequity of the Windfall Elimination Provision, American citizens living abroad have been actively lobbying for its elimination or reform. Advocacy groups such as the Association of Americans Resident Overseas (AARO) and American Citizens Abroad (ACA) have been at the forefront of this campaign, pushing for legislative changes to address the challenges faced by expats in accessing their full Social Security benefits. Among the proposed solutions is the introduction of a new formula for calculating benefits under WEP, one that takes into account an individual's entire work history and contributions to both Social Security and non-covered pensions. This approach would provide a fairer outcome for expats who have diligently paid into retirement systems both in the United States and abroad. Furthermore, advocates argue for greater awareness and education regarding the implications of WEP for American expatriates. Many individuals are unaware of the provision until they reach retirement age and are dismayed to discover its impact on their benefits. Increased transparency and guidance from the Social Security Administration could help expats better plan for their financial futures and navigate the complexities of the U.S. retirement system. In conclusion, the Windfall Elimination Provision poses a significant challenge for American expatriates seeking to secure their retirement finances. As the expat community continues to mobilize and advocate for change, there is hope for reform that will alleviate the burdens imposed by WEP and ensure fair treatment for all individuals contributing to the Social Security system, regardless of their location or employment history. Get a complimentary copy of the American expat guide at https://www.dunhillfinancial.com/american-expat-financial-guide for more information about the financial planning process as an American expat. You can also visit www.dunhillfinancial.com or www.df-direct.com. DUNHILL FINANCIAL, LLC IS A REGISTERED INVESTMENT ADVISER. INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN.

“You don’t pay taxes - they take taxes.” - Chris Rock As an American expat, it’s important to file your federal return every year to avoid issues with the IRS. Due to the FATCA law, the IRS can access Americans’ finances and contact details via their banks around the world, so despite being possibly thousands of miles from the USA, you’re never beyond Uncle Sam’s reach. Some Americans have nevertheless been living abroad but not filing, often because they weren’t aware that they had to file from overseas. Fortunately for these expats, there are some IRS amnesty programs which allow them to catch up, and if they genuinely weren’t aware that they should have been filing, they should avoid all penalties. Some even end up receiving IRS refunds. It’s important to take advice from an expat tax advisor before attempting to use any of these programs, though. This can’t be stated strongly enough. In this article, you’ll learn about several different IRS amnesty programs for expats: • The Voluntary Disclosure Practice • The Streamlined Procedures • The Delinquent FBAR Submission Procedures • The Delinquent International Information Return Submission Procedures • The Relief Procedures for Certain Former Citizens • What to do if the IRS writes to you The Voluntary Disclosure Practice The Voluntary Disclosure Practice program is for expats who know they should have been filing, but haven’t been. If you know you should be filing but haven’t filed, this is known as ‘willful’ non-filing, and without using the Voluntary Disclosure program, you can be liable to criminal prosecution. This is because unless you file and claim either the Foreign Tax Credit or the Foreign Earned Income Exclusion, the IRS assumes you owe US back taxes on your worldwide income for the years you haven’t filed, even if you’re paying taxes abroad. The Voluntary Disclosure Practice lets you catch up on your filing without facing criminal penalties, though you will still be liable to civil penalties, which can be substantial, depending on your situation. Most expats are ‘non-willful’ non-filers though, in which case there is a better program available called the Streamlined Procedures. The Streamlined Procedures The Streamlined Procedures is a very useful IRS amnesty program for expats who are more than a couple of years behind with their filing because they weren’t aware of, or didn’t fully understand, their US filing obligations as overseas US citizens. If you’ve missed three or more years though ‘non-willfully’ (i.e.unintentionally), and the IRS hasn’t contacted you yet, then you may qualify for the Streamlined Procedures. BOX - The Streamlined Procedures was introduced in its current form in 2014, as a response to the backlash over the 2010 FATCA law. FATCA essentially gave the US government the ability to enforce US tax compliance globally, leaving millions of American expats who hadn’t previously been aware that they should be filing from abroad open to back taxes or even criminal prosecution. The Streamlined Procedures offered these expats a path to compliance without facing any penalties. The program involves filing your last three federal returns (even if you’ve missed more than three years), and your last up to six FBARs (to report your offshore financial accounts, if applicable), and also file Form 14653 to provide a statement explaining why their failure to file was non-willful. When you file using the Streamlined Procedures, you can claim the Foreign Tax Credit or the Foreign Earned Income Exclusion for the missed years, which means most expats don’t end up owing any US back taxes. You can also claim any other credits that you’re entitled to, such as the refundable Child Tax Credit for parents, which is how some expats end up receiving a refund when they catch up. Once accepted, the Streamlined Procedures lets expats avoid IRS penalties entirely. The Delinquent FBAR Submission Procedures Some expats have been filing their US tax returns from abroad, but not FBARs, because they weren’t aware of this additional US reporting requirement. Expats who have over $10,000 in total foreign financial accounts at any time have to file an FBAR. This includes bank, investment, and many foreign pension accounts. The $10,000 doesn’t apply to one account though, but to your combined foreign financial account balances. This includes any account you have signatory authority over, even if it’s not your account, such as business, joint, and trust accounts. Because it’s not as simple as more than $10,000 in one account, many expats don’t know that they have to file. For these expats, the Delinquent FBAR Submission Procedures is a way to catch up without paying FBAR penalties, which are very high, starting at $10,000 a year for non-willful cases. To use the program, you need to file your missed FBARs and provide a statement explaining why you filed late. The Delinquent International Information Return Submission Procedures The Delinquent International Information Return Submission Procedures is for expats who are up to date with their filing from abroad, but who wish to amend a past return. This may be because they realized there was an error, most often in the sense that they failed to file a form they should have and so would otherwise be liable to a significant late filing penalty, such as Forms 5471, 5472, 8865, 8858, or 8938. The program isn’t available If you have already been contacted by the IRS, or if you are already under investigation. To use the program, you must file the amended returns, attaching a reasonable cause statement explaining why you’re amending each one The Relief Procedures for Certain Former Citizens The Relief Procedures for Certain Former Citizens is for ‘Accidental Americans’ - people who are inadvertently American citizens and who wish to renounce their US citizenship. Accidental Americans are people who have the right to US citizenship but have never used it, such as if you have an American parent, for example, or if you were born in the US but moved abroad permanently as a child. In this scenario, you are still technically a US citizen and so liable to file US taxes. To renounce your US citizenship though, you have to first be up to date with your US tax filing, creating a Catch 22 situation. The program provides a way around it. To qualify for the program, you must have a net worth of less than $2 million, and a US tax liability of less than $25,000 per year for the current year and the previous 5 years. You must also provide a statement demonstrating that your previous failure to file was non-willful. The program exempts you from having to obtain a US social security or tax identification number and file before renouncing your US citizenship. What to do if the IRS writes to you The IRS audits around 10% of expats’ tax returns, a much higher proportion than for Americans living in the States. The focus is on higher earners with more complex financial situations. If you receive an IRS notice or letter, don’t panic - and don’t immediately contact the IRS without seeking advice. The first step you should take is to carefully read the letter or notice, noting the IRS code it contains, as this will indicate what the IRS is writing about and what the possible implications are. You should then liaise with your expat tax preparer. The best course of action may simply be an explanation of an error and an amended return. In more serious cases, it’s best to seek the services of a specialist attorney to help you with your response. In all scenarios, stay calm, ensure that you understand what is required, seek assistance and plan your response carefully, and respond by the date the letter or notice indicates. It’s always sensible to keep up with your obligations as a US citizen, and if you fall behind, to catch up voluntarily. Always seek advice to plan the best approach to catching up based on your situation. If you have any questions, don't hesitate to contact us. DUNHILL FINANCIAL, LLC IS A REGISTERED INVESTMENT ADVISER. INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN. Copyright © 2023 Dunhill Financial. All rights reserved.

“You call it madness, but I call it love.” – Don Byas, Jazz Saxophonist Love is among the top reasons that Americans move abroad, so it’s no surprise that millions of Americans living abroad are married to a foreign spouse. Living abroad while married to a foreigner throws up some interesting tax and financial planning questions. Does your foreign spouse have to file US taxes? Is it more advantageous to hold assets in your name, their name, or jointly? And, what about estate planning? In this article, we’ll try to answer some of these questions. Specifically, in this article, you’ll learn about: • Does your foreign spouse have to file US taxes? • Should you file jointly or separately? • Whose name should your assets be registered in? • Estate planning considerations Does your foreign spouse have to file US taxes? Whether or not your foreign spouse who lives abroad has to file US taxes will depend on whether they have a Green Card. If they do, then they will have to file a US tax return every year as long as they retain their Green Card. If they have a Green Card because they used to live and work in the US, but they don’t plan to live and work in the US in the future, they might consider renouncing their Green Card to avoid having to file US taxes on their worldwide income. If your foreign spouse doesn’t have a Green Card, then the IRS considers them a non-resident alien, and they normally won’t have to file US taxes in their own name. However, if you choose to file jointly rather than separately on your US tax return (and there are certainly situations where this can be beneficial), then despite not filing their own return they will be liable to US taxes on their worldwide income. Should you file jointly or separately? If your foreign spouse doesn’t have a Green Card, it’s normally preferable for you to check ‘married filing separately’ in the filing status field on Form 1040. However, there are some situations where ‘married filing jointly’ can be the better option. If you choose married filing jointly, your spouse will need to obtain a US Individual Tax Identification Number (ITIN), and they’ll be liable to US income tax on their worldwide income. It also means that they’ll be liable for US capital gains tax, reporting their non-US assets and bank and other financial accounts, and all the other reporting requirements that come with being a US taxpayer. If they have their own income and assets, then it’s normally preferable to keep them outside the US system to reduce hassle, reporting costs, and sometimes having to pay US taxes, too. If on the other hand they don’t have their own income or assets, then it may make sense to file jointly, as this will increase your allowances. Bear in mind also your foreign spouses future finances. Perhaps they don’t have income now, but will they in the future? Or, will they inherit assets from their parents perhaps at some point? If so, and if they’re a US taxpayer, then they will become liable for US tax and reporting on their future income and capital gains etc. Whose name should your assets be registered in? If your foreign spouse is outside the US tax system, it might make sense to register some of your assets either jointly or solely in their name. For example, if you register your home jointly and your spouse isn’t a US taxpayer, when you come to sell it, only half of the gain will be liable to US capital gains tax. The same applies to investment assets. It may be that capital gains taxes are higher in the country where you live, and if so you can claim US tax credits that will reduce the US tax to zero anyway, so it depends on your individual circumstances. Transferring assets to just your spouse’s name also reduces US reporting, as well as potential US tax liability. For example, owning foreign registered trusts, companies and mutual funds either in just your name or jointly all mean filing complex additional forms when you file your taxes. If the same assets were in your non-US taxpayer foreign spouse’s name, you wouldn’t. Estate planning considerations If your foreign spouse isn’t a US taxpayer, you lose the unlimited spousal exemption on bequests, meaning that US estate taxes could be payable. There is still a lifetime exemption of currently $13.61 million however (in 2024), although the figure is due to revert to $6 million in 2025. There are two ways around this. The first is to gift assets to your non-resident foreign spouse in the meantime. You can gift up to $185,000 a year (in 2024) to your foreign spouse, which over a number of years can add up to significant sums. The other way is to establish a Qualified Domestic Trust (QDOT). Establishing a QDOT lets your assets be transferred to a trust for the support of your spouse. The income from the trust can be used to pay for their living expenses, including healthcare and maintenance. A QDOT only defers your estate tax liability until the demise of your spouse though, so it’s not always an ideal solution. Estate planning for mixed US / non-US families living abroad is complex, as normally you’ll need both a US will and another will in the country where you live. Both should be created after seeking advice from a cross border estate planning specialist who has experience of the two countries involved. Winding up If you’re one of the millions of Americans living abroad and married to a foreign spouse, it’s important to seek advice and make good decisions in partnership with your financial advisor and accountant to ensure you minimize your tax bill and US reporting requirements. There will also be tax and financial planning considerations in the country where you live, so it’s important to balance these with your US planning. Your expat financial advisor should have the experience to answer these questions and guide you. If you have any questions, don't hesitate to contact us. DUNHILL FINANCIAL, LLC IS A REGISTERED INVESTMENT ADVISER. INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN. Copyright © 2024 Dunhill Financial. All rights reserved.

So you are moving abroad? You have decided to move abroad for a new adventure but what should you do financially? A new job, retirement, or other exciting ventures may lead you to make the final decision. However, do not forget that the US is a “citizen-based taxation” system, or in other words, you are required to file your US taxes each year, even if you live abroad and pay taxes to another country. You may be leaving with a new job and your company is paying your tax preparation services, but stay informed. Or retiring overseas, but do not forget to file! 1. File US Tax Returns All US citizens must file their tax returns each year to the IRS. You may not have to pay any additional income taxes if you qualify for the foreign earned income exclusion or foreign tax credit. However, to obtain these benefits, you must file your tax return. Reminder, you may also be required to file your state income tax returns as well. 2. Foreign Bank Accounts Any non-US financial account that you open abroad may have to be reported to the US Department of Treasury. The Form FinCEN 114, or the FBAR, is required to be filed if your combined value of your non-US accounts exceeds $10,000 at any day during the year. Also, there is a FATCA requirement of reporting specified foreign financial assets that collectively exceed a certain threshold at the end of the year. This reporting is completed with your tax returns directly to the IRS. Reminder: these are for reporting purposes only and no tax is assessed on the balances. However, disregarding to file can bring on substantial penalties. 3. Managing Your Financial Accounts Planning Because of the FATCA requirements, foreign banks may limit the services they provide to US citizens. Also, US financial institutions may also curb their services to US expats. Research the various institutions. Obtain a financial advisor with expertise of handling US expats and the tax implications. Perhaps find that financial advisor before you move abroad, but it would be great to find a “local” US expert. 4. Do Not Invest In The “Intriguing” and “Interesting” Foreign Instruments! Did you find your financial advisor with the expertise of US tax implications to US expats? You will need that person to advice on what financial instruments to avoid investing your money. Many “tax-free” plans in foreign institutes could possibly NOT be tax-free for US persons. Look for financial plans that qualify as pension plans in the United States and are covered by tax treaties between the countries. Some foreign financial investments could result in higher US taxes as well as foreign taxes. Make sure that your financial professional is licensed and knowledgeable in the jurisdiction that you're moving to. 5. Social Security Coverage and Contribution It is important to understand how social security is affected when working abroad, even with a US company. Are you going to continue to contribute to your social security funds in the US through your company? Are individual contributions from you necessary? Are you employed by a foreign company that will contribute to that country’s social security funds? If so, you may not want to also contribute to the US Social Security Administration. Be wary of double contributions unnecessarily, especially for the self-employed. For the self-employed, choose which country you will contribute and obtain a certificate from that country. Overall, enjoy your adventure of living abroad as an expat but understand the facts that could affect you and your family financially. Remember this applies to all US citizens (and green-card residents) living abroad, whether you are working or retired. Contact your financial advisor and US tax experts to ensure your protection and enjoy the cultures! 6. Totalization Agreement The nations listed below currently have agreements with the US to avoid double taxation of income with respect to social security taxes. When planning in regards to US Social Security/ Medicare tax, you should take these into consideration. Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, Luxembourg, Netherlands, Norway, Poland, Portugal, Slovakia, South Korea, Spain, Sweden, Switzerland and the United Kingdom. 7. Make sure you convert money effectively You have many alternatives when considering a large money transfer. You can talk to your bank, but cross-border transfer is big business for financial institutions—so don’t expect affordable rates there. But at least you can get a benchmark on what the market is offering. You also can contact a currency conversion company like Wise or Revolut, but again you might have to cope with stringent transfer limits and weighty paperwork that ultimately could delay the transfer. The third option is a foreign exchange broker, and this type of company typically offers better rates, with discounts that often are 3-4% lower than bank rates. Getting a discounted transfer rate can save you money — lots of it. For example, say you want to buy European-based real property valued at 200 000 Euros. A 2% or 3% rate reduction saves you 2 000 – 3 000 Euros, extra cash you can use to pay for other costs related to the acquisition. 8. Protect your credit score While living abroad, your credit score back in the US is probably one of the last things on your mind. But it’s important to protect, otherwise, if you do ever move home, you’ll be starting from scratch, and a low or damaged score could prevent you from qualifying for a mortgage or car loan, among other things. Luckily, a credit score is fairly easy to maintain with just a few steps. If you are still unsure and need advice, don't hesitate and contact us, one of our advisors would be more than happy to help! DUNHILL FINANCIAL, LLC IS A REGISTERED INVESTMENT ADVISER. THE INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN.

State of the world Taiwan’s elections are now done, with a result of the Democratic Progressive Party winning. That’s significant as they are pro-independence, which naturally mainland China is not happy about. The biggest of the next 70 elections this year is of course the US election, however even after Iowa and New Hampshire results, it’s too early to tell what will happen in November. A strong economy and strong market is helpful for Biden, while any potential weakness/recession will be favorable for Trump. If you’re curious how these races can change over time, Trump this time in Jan 2016 was slightly lagging behind other Republican candidates Marco Rubio and Ted Cruz before gaining support over the following months, so while the economy is one of the variables to watch in the states, the important thing is that nothing is set in stone. There are 68 other elections still to take place this year elsewhere around the world. Russia and India will likely be the ones with the most media attention, however both are likely to have known outcomes, given Modi’s popularity & recent growth in India and a lack of viable opposition against Putin in Russia. But the elections with the most implications will likely be for the EU Parliament (which for instance could affect European support to Ukraine) and the UK (with a possible swing to Labour). Global chokepoints As for the state of the world, right now there are 22 armed conflicts which are ongoing. The most talked about one at the moment is the crisis in Gaza between Israel and Hamas. Now, what’s going on there is horrible and both sides need to find a way to resolve this latest chapter in the violence, but it is not ultimately consequential on the global market. This contrasts with what’s going on further south in the Red Sea, given the Houthis in Yemen, who continue to interrupt global trade die to their proximity to the Suez Canal. With about 15% of world shipping traffic (including roughly 30% of global container trade) passing through Suez Canal, they stand uniquely positioned to interfere with global supply chains. The big question mark is on how long they can continue with so much global trade going through Suez, especially with 8 military bases from various nations across the strait in Djibouti – incl. US/UK/Germany/Spain/Japan/Saudi Arabia/China – keen to put a stop to the difficulties facing international trade as a result of their actions. DUNHILL FINANCIAL, LLC IS A REGISTERED INVESTMENT ADVISER. INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN.

A Resilient U.S. Economy Faces Uncertainties The close of 2023 witnessed an intense rally in the bond markets, spurred by a resilient U.S. economy and a cooling inflationary environment. The fluctuations in the yield on the 10-year U.S. Treasury throughout the past year have been nothing short of dramatic, reflecting a complex interplay of economic data, Federal Reserve actions, and global market dynamics. While the recent rally has eased concerns about soaring interest rates, investors are now faced with the challenge of discerning the path forward in the coming months. The Rollercoaster Ride Over the last 12 months, the bond markets have experienced a rollercoaster ride, with the yield on the 10-year U.S. Treasury exhibiting significant volatility. Fears of a sustained period of elevated interest rates pushed the yield to decade-plus highs, only to witness a subsequent decline as stress on the banking system and a Federal Reserve pivot influenced market sentiments. The yield, which breached the 5% mark in October for the first time in 16 years, has since fallen by a full percentage point. This alleviated concerns that the rising yields would adversely impact the economy by increasing borrowing costs for mortgages, corporate loans, and other forms of debt. The question now looming is whether the optimism surrounding a soft landing is warranted or if there are hidden challenges waiting to unfold. Optimism and Concerns Many investors and economists are cautiously optimistic about the outlook for the bond markets in 2024. The expectation is that inflation will subside without triggering a rise in unemployment or plunging the economy into a recession. However, this optimism is tinged with a recognition of potential challenges that could disrupt the current tranquility in the bond markets. Challenges Ahead: Fiscal Deficit: The growing fiscal deficit is a looming concern that could impact the bond markets. The need to finance government spending is expected to lead to another surge in the issuance of U.S. Treasurys, potentially putting upward pressure on yields. Corporate Debt Refinancing: As interest rates fluctuate, more companies may face the need to refinance their low-rated debt. This could pose challenges, particularly for companies with weaker credit profiles, and potentially lead to increased market volatility. Fed's Inflation Fight: The final stages of the Federal Reserve's efforts to curb inflation are anticipated to be the most challenging. Striking the right balance to control inflation without causing disruptions in the financial markets requires a delicate touch, and any missteps could reverberate through the bond markets. As we enter 2024, the bond markets face a delicate balance between the optimism generated by a resilient U.S. economy and the potential challenges that could disrupt this newfound stability. Investors must remain vigilant, closely monitoring economic indicators, government policies, and global market dynamics to navigate the uncertainties that lie ahead. The resilience displayed by the bond markets in the face of previous challenges serves as a reminder that adaptability and a nuanced understanding of the evolving landscape are crucial for success in this complex financial environment. DUNHILL FINANCIAL, LLC IS A REGISTERED INVESTMENT ADVISER. INFORMATION PRESENTED IS FOR EDUCATIONAL PURPOSES ONLY AND DOES NOT INTEND TO MAKE AN OFFER OR SOLICITATION FOR THE SALE OR PURCHASE OF ANY SPECIFIC SECURITIES, INVESTMENTS, OR INVESTMENT STRATEGIES. INVESTMENTS INVOLVE RISK AND UNLESS OTHERWISE STATED, ARE NOT GUARANTEED. BE SURE TO FIRST CONSULT WITH A QUALIFIED FINANCIAL ADVISER AND/OR TAX PROFESSIONAL BEFORE IMPLEMENTING ANY STRATEGY DISCUSSED HEREIN.