Happy Fourth of July! A joyous occasion marked by vibrant fireworks and indulging in a staggering amount of hot dogs, 150 million of them being consumed in the US alone on this day. The Nathan's Hot Dog Eating Contest is one of the highlights since 1916 as the best eaters in the land compete for the mustard belt. Joey Chestnut is favored once again after eight victories in a row, but you might remember our stories of Takeru Kobayashi from our YouTube channel as he efficiently changed competitive eating for all time. Last weekend was far from mundane, as a mutiny in Russia approached eerily close to Moscow, which surprisingly had little impact on the markets, fixed income, equity or commodity. This demonstrates how the market have already factored in such pandemonium and turmoil. Fortunately, Josh kept me informed about the developments while attending the Cubs vs. Cardinals baseball game in London. It turned out to be the most attended MLB game of the season, as the former Olympic stadium was transformed into a lively baseball stadium. On a related note, Josh is actively involved in raising funds for the crisis in Ukraine, putting together and sending care packages of humanitarian aid to folks in critical need of humanitarian aid. I encourage you to support this cause by either donating to British-Ukrainian Aid if you’re in the UK or through your local charity wherever you are. In terms of the equity markets, we have witnessed a decent rebound lately. However, this recovery has been primarily driven by poor earnings growth rather than robust performance. Traditionally, good earnings growth entails companies selling more than in the past, leading to increased profitability. Unfortunately, the current uptick in stock prices is driven by cost reductions, particularly through employee layoffs. This pattern aligns with what we typically expect in this phase of the economic cycle, as central banks aim to curb inflation by raising interest rates. Inflation has been the main conversation in the markets over the last year, and is now fully mainstream as Taylor Swift and Beyoncé concerts have started to hit the news on shifting local inflation. All the while the United States seems to have successfully curbed inflation, Europe is making progress in the same direction. Conversely, the UK is grappling with rampant inflation, while China is focusing on stimulating its economy. As a result, the Federal Reserve has temporarily paused its rate hikes, China has decreased interest rates, and the Bank of England is increasing rates at a faster pace to catch up. These divergent actions underscore the fact that the global economy is now fragmented, with different regions moving in distinct directions. We anticipate developed markets aligning their interest rates with those in the US to combat inflation. Once the interest rates on bonds in these markets converge, rather than solely in the US, we can expect capital to flow out of the US, potentially weakening the dollar. In light of these developments, we are preparing to reallocate some of our fixed income investments to other currencies in the coming months and fine-tune our investment strategies accordingly. Turning our attention to the equities market, the majority of gains can be attributed to a rebound in the technology sector, particularly companies incorporating artificial intelligence (AI). This trend is reminiscent of previous years when buzzwords like the metaverse or cryptocurrency dominated the markets. As before, we anticipate a gradual deflation of this AI "balloon," leading to a differentiation between companies genuinely implementing AI strategies and those whose CEOs simply employ jargon. This was an ideal moment to meet Jonathan Krane, the founder of Kraneshares, for coffee to delve into the topic of China and their investments in the country. Krane exuded unwavering optimism regarding the eventual recovery, emphasizing that it might simply be delayed, and reassured that stimulus measures, such as lowering interest rates, would encourage consumer activity and spending. He highlighted the interference of geopolitics on consumer behavior, acknowledging that it had become a significant factor. Furthermore, he mentioned that Europe is urging China to play a mediating role in resolving the conflict between Ukraine and Russia. Upcoming Events: Dunhill Financial - 2nd Quarter Economic Update - July 5th 2023 at 1430 BST / 1530 CET You can view our full event calendar and country specific webinars here. The windfall elimination provision currently results in a reduction of American social security benefits for individuals who receive a foreign pension. Fortunately, the 118th Congress has taken steps to address this issue through the introduction of House bill H.R.82 - Social Security Fairness Act of 2023, as well as the Senate version, S.597. We are finally relaunching www.df-direct.com this month, our robo advisor for American expats overseas. This low cost solution will offer any client the opportunity to invest into our portfolios through a digitized solution. Please sign up here to get all announcements and promotions here. We will also publish our book on financial planning for American Expats, and you can sign up for the pre-launch of the book here. Please accept my apologies for not writing last month. Unfortunately, I faced a series of personal challenges, including a trip to the US for my Grandmother's funeral and other family issues, which made it difficult to gather my thoughts. However, I'm back with an update on the recent events and market trends that have been shaping our investment landscape. On a positive note, the ESG (Environmental, Social, and Governance) sector has recently achieved significant milestones. Investments in solar energy production facilities have surpassed those in oil exploration in 2023. This shift opens up new opportunities for investment and reinforces the importance of sustainable energy sources in shaping our future. I would like to extend an invitation to our upcoming quarterly economic update, scheduled for Wednesday July 5th at 2:30 BST. We will delve deeper into the topics discussed in this newsletter and provide you with valuable insights into the current economic landscape. We will also discuss our corporate periodic table of returns as can be seen below to reflect why a diversified portfolio outperforms over time. In my preparation for my bike ride from London to Paris, I got knocked off my bike from an opening door of an Uber. I would therefore like to remind everyone of the Dutch Reach! It involves using the arm furthest from the door so that your body must turn towards the window for a better view. I hope you find a way to keep cool in this hot summer (like Nala has) and that you have a wonderful Independence day filled with great hot dogs like the one Isa found at the Cubs game last weekend! Best regards, Brian 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.

“Investing puts money to work. The only reason to save money is to invest it.” - Grant Cardone As an expat investor, there are different approaches you can take to investing. In this article, we'll look at three approaches - Active investing, Passive investing, and Thematic investing. Armed with this information, you’ll be able to make better decisions about your own investments, as well as have a more in-depth conversation with your expat financial advisor. In this article, you’ll learn about: • What is Active investing? • What is Passive investing? • What is Thematic investing? • What is the best investment strategy for expats? What is Active investing? A hands-on approach to investing is known as Active investing. It involves frequently buying and selling securities (stocks, bonds, etc.) with the aim of generating higher returns than average index returns by capitalizing on short-term asset price fluctuations. Successful Active investing generally requires you to have a high-level of skill, knowledge and experience to be able to successfully analyze companies and market trends to be able to accurately decide the right time to buy or sell a security, bond or other asset. As a result, an Active investor must have time to devote to research and analysis. For individual investors, most often this means paying a professional Active fund manager to research and pick investments on your behalf. Pros of Active investing: 1) Active investing gives investors more trading options, as they can pick individual assets as they aim to beat the overall market performance. 2) Active investing also provides more autonomy and flexibility, as you are in control of your investments and retain autonomy and freedom in your investment decisions. 3) When successful, Active investing aims to deliver a greater return. Cons of Active investing: 1) If you’re buying and selling regularly, you may not be able to optimize your trading activity from the point of view of taxes. In other words, you may have a higher capital gains tax bill each year (and more complex US tax reporting). 2) Active investing comes with an increased risk of losses, since it often means a greater exposure to unexpected short-term high volatility. 3) Active investing involves frequent trading, and that is associated with higher costs, such as brokerage fees, platform subscriptions etc. 4) Lastly, successful Active investing requires skill and time that most people don’t have, or otherwise higher cost implications due to paying an expert to stock pick for you. What is Passive investing? Passive investing is an approach that aims to match a specific market index (for example, indices such as S&P 500, Nasdaq 100 and FTSE 100). This is achieved by investing in index funds or ETFs (exchange-traded funds) that track the performance of the chosen index. Passive investors think long term, rather than seeking short-term gains from asset price or market fluctuations. Instead, they seek a steady average return over an extended period to build their wealth gradually over the course of time. Pros of Passive investing: 1) Lower fees - Unlike Active fund managers who Actively pick stocks, investments are made for the long term in Passive investing, hence avoiding recurring fees associated with regularly buying and selling. 2) Lower risk - Increased diversification and risk mitigation - Index funds and ETFs track indexes composed of hundreds of companies, sometimes even thousands of companies. If one company performs poorly, the negative impact on the overall portfolio can be mitigated by the positive performance of other investments: this is a powerful aspect from a risk management perspective. It is possible to obtain exposure to multiple sectors and geographies even with a small amount to be invested. 3) Ease of investment - You don’t require any specialized knowledge or need to perform deep research to choose the right asset to invest in, nor do you have to dedicate time to monitoring your investment regularly. 4) Delay capital gain tax - Passive investing is typically a “buy-and-hold strategy”, a long-term approach to hold investments for years or even decades. Hence, investors can delay capital gain tax charges until they sell the index fund or the ETF. Cons of Passive investing: 1) Limited investment options and lack of direct control - There’s less choice if you invest in index funds and ETFs. In other words, there is limited flexibility and the inability to respond to individual investment opportunities. 2) Less exciting - Less involvement in day-to-day market activity makes Passive investing more boring compared to Active investing. 3) Exposure to market downturns - During periods of significant market declines, passive strategies may experience losses that are proportionate to the overall market's decline. Passive investors who want to exit their investments at this point will likely crystallize losses. What is Thematic investing? Thematic investing is another dimension of investing: it is not the opposite of active or passive investing. Thematic investing is an investment strategy focusing on predicted long-term trends in the world rather than investing in a specific asset or indices. It allows the investor to capitalize or gain from the changes that happen across an entire industry. Thematic investing allows investors to grab the opportunity created by the market's macro-economic, geopolitical and technological trends. These may be caused by emerging or disruptive technologies, changing value systems, and new ideas, for example. Thematic investing example: BlackRock, the world's largest asset manager, has a Thematic investment philosophy focusing on several ‘megatrends’: 1) Rapid urbanization 2) Climate change and resource scarcity 3) Shifting economic power 4) Demographic and social change Thematic investing is gaining popularity because of the growing influence of technology in businesses and in our day-to-day lives. This innovative approach enables the investors to outperform the traditional way, as it allows an investor the following benefits: 1) Place a bet on the future - Thematic investing allows you to invest in the trends shaping the future global economy and society. 2) Access - This strategy efficiently and effectively includes exposure to megatrends in an investor's portfolio. 3) Engagement and alignment with personal interests - by choosing a particular investment theme, investors feel more engaged and connected with their beliefs. This makes investing more relatable and enjoyable from an emotional point of view. Successful Thematic investing is based on identifying potential structural changes and expected transformations early. Hence, a Thematic investment strategy favors long-term investors as it ensures that their portfolios are taken care of for future growth opportunities. The thematic offering has been expanding quickly, with investment managers making more funds and ETFs for individual investors in recent years. What is the best investment strategy for expats? Expat investors should discuss their goals, time horizon, risk tolerance, and personal investment preference with their expat financial advisor to create a plan that suits them. Everyone is different, and an investment strategy should be personalized to reflect your situation and preferences. Expat investors don’t have to pick and rely on one investment strategy such as Active, Passive, or Thematic investing, but can blend all three in varying degrees if they wish to. 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.

“The biggest risk is not knowing what you are doing,” Peter Bernstein, American financial historian and economist. All investments come with a level of risk. As an expat investor, it’s important to understand your portfolio’s inherent risk, as well as what level of risk you are willing - or what you may need - to take to achieve your goals. As well as general risk levels, expats also have other risks to consider, such as tax implications in multiple countries and cross -border investing currency risks, which we look at in another article. In this article, you'll learn about the following topics: • What is Investment Risk? • Risk-Reward • What is your Risk Tolerance? • What is your Risk Capacity? • What is your Required Risk? • Determining an investment’s risk What is Investment Risk? Investment risk is Investment risk is associated with the uncertainty and/or potential financial loss inherent in an investment decision. Some investment risks are avoidable by choosing safer investments, whereas other investment risks are considered unavoidable, such as: • Market risk - Loss in investment caused due to various macroeconomic and political events that affect the entire market. • Inflation risk - Loss of your money's purchasing power. Usually, safer investments like bonds yield low returns that may be lower than inflation. • Interest rate risk - Central bank interest rate changes can impact bond payments and also company liquidity and markets in general. • Currency risk - Currencies constantly fluctuate in value in relation to each other, so there’s a risk that your investments’ value decreases in relation to the currency you want to spend it in. • Socio-political risk - Political and social movements and changes in the country where you’re investing (or in other countries) can affect the value of your investments. Risk-Reward In theory, risk and reward are directly proportional to each other when investing. That is, the higher the risk, the more the reward, and conversely, the lower the risk, the less the reward. For example, bonds are traditionally considered a safer investment than stocks, as they provide steady interest payments and the return of the capital even if the company (or government) isn’t performing well. In contrast, stocks provide no such guarantee, but the additional risk is compensated in the form of greater expected returns. This view means that more risk-averse investors often hold a higher proportion of bonds compared to stocks in their portfolio, to maintain a lower overall investment risk. Typically investors start their journey by seeking investments associated with high expected returns - why bother with lower expected returns, right? Unfortunately, many investors are not aware that these investments are riskier, and as a result they end up incurring unexpected losses. This is why it is crucial to evaluate before investing what your risk tolerance is, what your risk capacity is, and what your required risk is. What is your Risk Tolerance? Risk tolerance is the level of risk that you’re willing to endure to achieve your investment goals. Your financial advisor will need to gain an understanding of your risk tolerance to be able to advise you in terms of what you invest in. To determine your risk tolerance, you’ll normally consider the following factors: • Your age - Generally speaking, younger people are often more comfortable taking risks in the pursuit of long-term gains, as they have more time to recoup possible losses compared to those closer to retirement. • Your personality - People with a more adventurous nature may have a more aggressive attitude towards their investment portfolio, and so may be comfortable with high volatility and risk levels. • Your investment goals - Your goals should ideally be the most important factor that determines your investment risk tolerance. Box - Risk Tolerance Illustration: Someone in their 30s planning for retirement has over three decades to save, so they have a good degree of freedom to take risks with their investments. Someone in their 40s planning to send their children to college in a few years on the other hand will need to ensure that they have funds available at the right time, as the payments will be required on a fixed date that can’t be deferred. Based on the above factors, risk tolerance is often classified into 3 levels. They go under different names by different firms and advisers, but they can be summarized as: • Aggressive Risk Tolerance- Investors willing to risk losing money to achieve higher gains. • Moderate Risk Tolerance- Balanced investors who want to focus on growing their money but without losing too much. • Conservative Risk Tolerance- Investors willing to take very little risk or accept very low volatility in order to preserve their capital. What is your Risk Capacity? Risk tolerance is how much risk you want to take, while risk capacity is how much risk you are able to take to achieve your goals. The following factors determine risk capacity: • The time horizon of investment - When you will want to start drawing down your investment • Investment size, additions and withdrawals - The size of your investment portfolio relative to future additions and withdrawals. • Investment income vs other sources of income - How much of your future income depends on your investments. An example to help you assess your risk capacity: If a couple have saved $40,000 as the down payment for a house they plan to buy in 2 months, their time horizon is short and the future withdrawal is large (100% of the investment), so they therefore have zero risk capacity. But if the same couple saved more, say $75,000, and they don’t plan to buy the house for another few years, then they have a higher risk capacity and so might decide to look for higher returns in the meantime. What is your Required Risk? Required risk is how much risk you will need to take in order to achieve your investment goals. The greater the return you need to achieve from your investment, the higher the risk you will have to take to achieve it. This means that sometimes there can be a disparity between your risk tolerance (how much risk you want to take) and the required risk (how much risk you need to take); if so, you will either have to reevaluate your goals, or accept a higher investment risk than you would normally feel comfortable with. Determining an investment’s risk All investments have a degree of risk, and it can be measured in different ways depending on the asset class involved. For example: when investing in stocks, a metric called "beta" is used to measure the volatility of a stock in relation to overall market movements. If a stock’s beta is greater than 1, then the stock is considered more volatile than the market in general, whereas if the beta is less than 1, the stock is less volatile, and so is a safer investment. Other factors that can help you evaluate an investment’s risk level are • Its historical profitability • Its historical growth rate • Its current value compared to its historic average value • Its dividend history • Probable sustainability Winding Up Every investor needs to assess their risk tolerance and capacity and seek professional advice before making investment decisions. Risk can be mitigated by strategies such as diversification and natural hedging to create a balanced portfolio with risk levels you’re comfortable with to achieve your goals. While it’s been said that if you subtract your age from 110, you can use the resulting figure to determine what proportion of your portfolio should be in riskier stocks, this doesn’t take into account your personal risk tolerance or goals. Your financial advisor will help you make a better balanced and more holistic assessment. 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.

“Sustainability is no longer about doing less harm. It’s about doing more good.” — Jochen Zeitz, President and CEO of Harley-Davidson. More and more, investors are looking to personalize their investment strategies, sometimes by investing in particular sectors or stocks, or with a focus on companies that maintain rigorous ethical or environmental standards. More investors focusing on these issues has in turn resulted in companies improving their standards in these areas, setting up ethical, social, environmental and governance policies to attract investors. It was also notable that during the Covid-19 pandemic, companies that set these standards experienced less volatility compared to the overall market. In this article, you'll learn about the following aspects: • What is ESG investing? • What are the benefits of ESG Investing? • Personalized and hyper-personalized investing • Considerations for expats What is ESG investing? ESG stands for environmental, social and governance. ESG companies set out policies and operate according to their own behavioral standards in these areas to become more sustainable and minimize their negative impact. Environmental standards can relate to reducing a company’s carbon footprint, reducing waste and pollution, renewable energy use, as well as utilizing green products, technologies and working practices. What that exactly means in practice depends on each company, of course; a mining or international transportation company or industrial manufacturer, for example, will have more to do in this area than an online services startup. Another example is agricultural producers using less chemicals or increasing animal welfare standards in farms. Social factors relate to how companies impact the communities in which they operate, as well as their internal employee welfare. This may mean improving factory conditions, donating to community improvement programs or infrastructure, establishing diversity and equality hiring procedures, or encouraging employees to spend time on charitable endeavors. Governance refers to corporate governance, the way a company is run, to ensure that the company adheres to high ethical management and accounting standards. This might include transparent shareholder reporting and accounting, ensuring good practice and the avoidance of conflicts of interest in the board, and the separation of management roles. What are the benefits of ESG Investing? There are two major benefits of ESG investing (and please note there are some ESG-related terms you may have heard about, such as impact investing, responsible investing, or socially responsible investing). The first is the knowledge for the investor that the companies you are investing in are actively working to minimize their negative impact on people or the natural world. Investing in companies aligned with your beliefs makes the whole process more relatable and enjoyable. The second benefit is often illustrated by the fact that companies that don’t focus on ESG have often blown up and lost money for investors over the last 20 years. There are numerous examples of this, including banks that have used unethical practices; e.g. Wells Fargo was discovered to have been running a fake account scheme in 2016, VW lying about emissions reducing filters in car exhausts, and Tyson Foods was sued in 2020 for wrongful death after employees with COVID-19 symptoms were allegedly told to to keep working. In all these examples, less than ethical behavior caused the share price to nosedive, losing investors money. As a result, ESG investing is believed to provide a measure of security against share prices sharply falling due to bad management, environmental bad practice, or unethical decision-making. Whether or not investors derive a genuine benefit from ESG investing often comes down to whether a company is sincere and effective in its ESG endeavors, or whether it is just creating policies and reports to entice investors without genuinely enacting them. Personalized and hyper-personalized investing Personalized investing is when rather than just investing in generic funds, you can tailor your portfolio to your individual tastes and preferences (often, but not necessarily, incorporating ESG preferences). Doing this while still achieving your investment goals can be challenging. This is where a good expat financial advisor comes into their own. Younger generations in particular expect a personalized experience in all aspects of their life more and more, thanks to having grown up with the sophisticated predictive algorithms that personalize our online experience based on our browsing habits and preferences, and they expect the same personalized experience when it comes to their investments. (Research by financial data company Refinitiv discovered that 64 percent of millennials and 51 percent of investors aged 35-54 are willing to pay more for personalized investing products and services.) In an age of robo-investment tools, It’s also true that if you’re paying for investment advice, you should expect a personalized experience and approach. You may for example have a particular interest in certain countries, companies, or investment sectors (or ESG preferences combined with particular countries, companies, or sectors). While AI holds the key to hyper-personalized investing at scale in the future, there are already great algorithms and platforms that let financial advisors take their clients’ preferences into account when building portfolios. The only limitation is the information that companies provide to allow algorithms to match them with specific investment preferences. For example, algorithms design investment strategies based on carbon emissions published by the companies, however in some cases the published data is not audited and may be inaccurate: so, the end result may be a portfolio not aligned with your beliefs. Another example of the growing trend of a personalized investment experience is how many investors like to be able to track their investments in real time. Such technology often enables this now, too, such as with an online dashboard that can be accessed by the client at any time. Wrapping Up With their international perspective and often cross-border lifestyles and future plans, expats often feel a greater need for personalized investing than the majority of Americans living in the States. Expats’ ESG preferences are also sophisticated, again perhaps thanks to their greater awareness of the wider world. Your expat financial advisor should be able to help you balance these preferences while also achieving your long-term goals. 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.

“Successful investing is about managing risk, not avoiding it.” - Benjamin Graham All investments carry an intrinsic risk. Even companies that are considered safe for decades or more can suddenly crash in value, like banks in the 2008 financial crisis. Wise investors understand the inherent risks in different types of investments and mitigate them, balancing risk management with the necessity of realizing their financial ambitions. Natural hedging is a way of managing risk when structuring your investment portfolio. In this article, you’ll learn about: • What is natural hedging? • The advantages of natural hedging • The disadvantages of natural hedging • Examples of natural hedging in portfolios • Other types of hedging • Natural vs financial hedging • Can you use natural and financial hedging? What is natural hedging? Natural hedging is an investment strategy for lowering risk by investing in different assets that share a negative correlation, meaning they are likely to have an inverse performance. So if one investment performs badly, the other is likely to perform well, reducing the losses on the first. For example, typically equities perform well when bonds do poorly, while stocks suffer when bonds do well. It is a simple strategy that doesn’t require sophisticated financial instruments such as futures, swaps or derivatives. As an example, expats could hold assets in different currencies to mitigate the risk of the two currencies’ values fluctuating. Natural hedging as a risk management strategy doesn’t provide 100% risk elimination, but it will help reduce risk when structuring your portfolio. Advantages of natural hedging The main advantage of natural hedging is minimizing losses if a particular investment unexpectedly drops in value. All investments fluctuate in value all the time, due to market sentiment, government policies, company management decisions, and currency movements, among other factors. Natural hedging allows investors to reduce their exposure to losses caused by these factors beyond their control. It is also a cost effective risk-reduction strategy, as, once set up, portfolios don’t need constant monitoring and adjusting. Disadvantages of natural hedging On the flip-side, natural hedging can inhibit portfolio growth, as conversely when one investment experiences gains, it’s probable that the investments bought as a natural hedge will experience a loss. The key to using natural hedging successfully is to seek good advice as to the exact investments that you pick as part of your natural hedging strategy, to ensure that you still achieve your growth goals. Examples of natural hedging in portfolios Finding assets that exhibit a negative correlation with each other requires experience, research, and time-consuming technical analysis. Natural hedges can involve matching assets in different currencies, as already mentioned. Another example is if you hold stocks and government bonds, which are a traditional natural hedge for stock losses because they are inversely related; if one appreciates, the other typically depreciates. Profitable stocks and under-performing bonds, or vice versa, are often used to offset each other's losses. Another often-used hedge is gold against stocks, as when stock markets suffer losses, investors often turn to gold as a safe haven, which causes the price of gold to rise due to increased demand. Finally, some investors who hold riskier investments also choose to keep a proportion of their portfolio in cash, so that in the event of a market fall they are still in a position to invest and so benefit from a subsequent upturn. Other types of hedging Pairs trading Pairs trading involves taking both long and short positions against two highly interrelated assets, most often two stocks in the same sector. Pairs trading is a strategy often used by hedge funds - in the year 2000, out of $137 billion invested in hedge funds in the US, $119 billion was invested in pairs trades. One major hurdle in pairs trading is that it can be hard to identify assets with the required correlation, however your expat financial advisor should be able to help if you’re interested in exploring pairs trading in your portfolio. Financial hedging Financial hedging involves trading in derivatives like futures and options to offset the price movement of a closely related transaction. So if you hold a stock in Apple for example, you could reduce the risk of a share price fall by also taking a position that the stock price will fall. That way, you profit both if the price rises or if it falls, and limit your exposure to the risk of a particular asset decreasing in value. It's similar to buying an insurance policy in a sense, as it covers you against the potential risks of financial losses. Financial hedging vs natural hedging The major disadvantage of financial hedging is that it is more expensive than natural hedging due to the costs of purchasing the positions against an asset price falling. This may mean trading futures, options, and inter-currency interest rate swaps. In general, natural hedging is preferable, as it’s simpler and more cost-effective. Can you use both financial and natural hedging? It’s definitely possible to utilize both financial and natural hedging to reduce the risk of losses when you structure your portfolio. Whereas natural hedging can (and normally should) be used to reduce risks of losses in an asset class, financial hedging could be a good option if you have a high exposure to a single asset, or if you expect volatility with a particular asset. 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.

“I'm a big crier in general. The right life insurance commercial will take me out for a couple of days.” - Ike Barinholtz Having a life insurance policy in place can provide peace of mind for you and your loved ones should you unexpectedly pass away. However, the situation is often nuanced for expats, and should be carefully considered. There are many several types of life insurance available, each with its own advantages and disadvantages. In this article, we’ll outline the different types of life insurance available to expats, and the factors you should consider when choosing a plan as an expat. Specifically, in this article we’ll look at: • The merits of life insurance • Should Americans living abroad purchase life insurance? • Types of life insurance The merits of life insurance The fundamental purpose and benefit of having life insurance is that it provides protection to your loved ones if you unexpectedly pass away. The reassurance that all of your financial commitments would be taken care of, and that they wouldn’t have to deal with any financial challenges while grieving, is significant. Life insurance plans can also provide tax advantages for the policyholder and the beneficiaries, as premiums paid into a life insurance policy are deductible on tax returns, while the payout is typically not subject to taxation, either. Another possible benefit of some life insurance policies is that there can be an investment component. Sometimes known as the ‘cash value’, the investment component allows you to save in a tax deferred way that can either be drawn as income during retirement, or passed on to your heirs, with US tax only payable when withdrawn. However, the first step for expats should be an informed analysis of whether you need it or whether it makes more sense to build your wealth through investing. Should Americans living abroad purchase life insurance? The first consideration when thinking about whether you need life insurance as an expat is how long you will be abroad for. If you are abroad on a work placement with a US employer, they may provide life insurance as part of your package. Or, if you are only planning to live abroad for a finite time before returning to the US, it makes sense to purchase and retain a US life insurance policy before you move abroad. This is because life insurance costs much less in the US (where it is a state regulated product) compared to in most other countries. If you have settled abroad permanently, there may be good life insurance options in your new country. Another option for expats is international life insurance, however this is typically an expensive option. Most often, life insurance is useful to cover a particular cost should you pass away unexpectedly, such as to pay off a mortgage, for example. The merits of this need to be balanced against whether it may make more sense to increase the amount you invest each month, instead. It is certainly worth discussing the relative merits of purchasing life insurance as an expat with your expat financial advisor at the earliest opportunity to determine the best course for you. Should you and your financial advisor agree that it makes sense for you to purchase life insurance as part of your wider financial plan, you will have to consider: The coverage amount: The level of coverage you need is one of the most important choices you’ll have to make. This is the amount that will be paid out if you pass away. You’ll want to ensure that your policy offers enough coverage to fulfill your financial commitments and care for the people you love. The length of the term: The length of the policy's term is another important factor to think about. Life insurance contracts can have many different term lengths, most often between five and thirty years. You should choose a term length that’s compatible with your wider financial goals. Premiums: The amount you pay for your life insurance coverage each month is known as the premium. When selecting an insurance plan, it is essential to consider the current premium cost and also how it will develop throughout the policy, to ensure the policy is affordable for the whole term length. Policy options: Different life insurance plans come with different policy options and features. For example, some plans feature a monetary value component, while others offer the option to change the plan type later. Take some time to think about what options and features are relevant for you. Types of life insurance If you are going to purchase life insurance, there are several different types available. Again, discuss them with your expat financial advisor to ensure that any insurance you purchase will help you achieve your wider financial goals. Term life insurance: A term life insurance plan offers coverage for a set term, normally up to thirty years. Term life insurance is often a relatively inexpensive option, and it is frequently utilized to cover particular monetary commitments, such as a mortgage, or your children’s education expenses. Whole life insurance: Whole life insurance offers coverage for the whole of the policyholder's life and includes a savings or investment component, often known as the cash value. Whole life insurance policies are also known as permanent life insurance. The premiums for this kind of coverage are typically higher than those for term life insurance, as there will definitely be a payout at some point. However, whole life insurance plans come with the advantage of building the cash value, which can then be used to supplement income during retirement. Universal life insurance: Universal life insurance is a type of flexible policy that offers the benefits of both term life insurance and whole life insurance. This is because the policyholder can make changes to the coverage amount and the premium payments throughout the term. Universal life insurance is a good option for expats who wish to have greater control over their life insurance coverage. Variable life insurance: Variable life insurance allows the policyholder to invest the policy's cash value component in one of a number of specified investment options. Expats with a higher risk tolerance who are at ease with the thought of having their cash value invested in stocks might consider a variable life policy, such as younger expats with no health issues, for example. Wrapping up Life insurance can offer peace of mind, however it doesn’t always make sense for Americans living overseas, as the cost as an international individual can outweigh the benefit unless you already purchased it in the States before emigrating. If you’re unsure, seek advice and carefully consider whether it will help you best achieve your financial goals. 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.

A person doesn't know how much he has to be thankful for until he has to pay taxes on it.” - Ann Landers Americans with foreign trusts have to report them to the IRS. Foreign trusts are often set up by expats to protect an investment, gift, or bequest overseas. Furthermore, some foreign retirement accounts qualify as foreign trusts and have to be reported, and some direct gifts and bequests from non-US persons also have to be reported on the IRS foreign trust reporting form. In this article, you’ll learn about: • What is a foreign trust? • When do expats have to report a foreign trust? • How to file Forms 3520 and 3520-A • Reporting receipt of a foreign gift • What happens if you don’t file Form 3520 and Form 3520-A? What is a foreign trust? A US trust is a trust that US courts have primary jurisdiction over and which is controlled by US persons. (Note that ‘US persons’ refers to US entities such as companies as well as American individuals). Any other trust is considered to be a foreign trust, so trusts registered outside the US are normally foreign trusts, as US courts don’t have jurisdiction over them, even if the trust is owned by an American. Similarly, a US-registered trust controlled by non-US persons has to be reported, too. Some foreign retirement plans are considered to be foreign trusts by the IRS, such as many Australian and New Zealand Superannuation funds, if they are set up in the name of the saver but with a fiduciary controlling them for the saver’s benefit. Understanding the US reporting requirements relating to foreign trusts is important, as expats can incur heavy fines if they don’t file the right forms both on time and correctly. When do expats have to report a foreign trust? There are several scenarios in which expats may have to report a foreign trust. Firstly, income received from distributions from foreign trusts should be reported on Form 1040, along with income a trust makes if you’re the owner of the trust. Secondly, some foreign trust accounts will need to be reported on an FBAR (Foreign Bank Account Report), while assets in foreign trusts may have to be reported on Form 8938 under FATCA reporting rules. In both cases, it will depend on whether the total value of your foreign account balances and assets exceeds the minimum reporting thresholds. Thirdly, any US individual who is considered an owner of a foreign trust must file Form 3520-A annually to confirm their status with regard to the trust. Lastly, any American who either receives a distribution from a foreign trust, or who transfers assets (e.g. property, stocks, or money) to a foreign trust, should file Form 3520. Both Form 3520 and 3520-A are typically required to be filed on an annual basis. Form 3520 is required annually for US persons who, during the current tax year, are treated as the owner of any part of the assets of a foreign trust under the rules of Sections 671 through 678. US owners are required to complete Form 3520 Part II even if there have been no transactions involving the trust during the tax year.” - Shannon Meyer, Aspyr Group How to file Forms 3520 and 3520-A Many expats with foreign trusts have to file both Form 3520 and Form 3520-A annually. Both forms are complex, and it’s highly advisable to ask an expat tax professional with experience filing these forms to help you out. Form 3520-A is for reporting American trustees and beneficiaries, and to provide a financial statement for the trust’s assets and income. Form 3520 is for reporting distributions and other financial information. Forms 3520 should be filed with your annual federal tax return, by June 15th for Americans residing abroad, or April 15th for those resident in the US, unless you request an extension until October 15th. Form 3520-A has a different filing date: it is due on the 15th day of the third calendar month after the end of the trust’s tax year. So, for a trust that uses a calendar year, Form 3520 would be due by March 15th. Reporting a foreign gift Expats who receive a gift or bequest from a foreign individual or estate may also have to file Form 3520, depending on the size of the gift or bequest. Recipients of gifts from a foreign individual or estate of amounts of less than $100,000 annually don’t have to report them. If gifts or bequests do exceed $100,000 on the other hand, the IRS requires that you report the total you received, and also separately identify each gift in excess of $5,000 on Form 3520. The threshold for reporting gifts from foreign companies, partnerships or corporations is much lower: Americans must report any gift over the amount of $16,815 (in 2022). You must also report each gift separately, and identify who gave them to you. What happens if you don’t file Form 3520 or Form 3520-A? Filing the right forms on time is important to avoid fines. Penalties for not filing Form 3520-A are the higher amount of either $10,000 or 5% of the trust’s assets owned by the American owner in question. An additional 5% penalty can be levied if you don’t also provide statements to the trust’s US owners each year, or for incorrect reporting. Penalties for not filing Form 3520 are similar: failing to submit all information required or filing incorrectly can result in a penalty of $10,000 or 5% of the gross value of the trust’s property, assets, and distributions that weren’t reported. The fines don’t stop there though, as failing to report creation of a trust or transfer to a foreign trust may result in a whopping 35% fee of the gross amount of the value of the amount transferred. Similarly, failing to report distributions from a foreign trust can result in another 35% fee of the gross amount of what was distributed. These are worst case scenarios, and if there’s a genuine reason why you haven’t filed, leniency is at the IRS’ discretion. As with all financial reporting, if you keep your account records and related paperwork and provide the relevant info to your tax professional, keeping up with your obligations needn’t be too strenuous. Summary Whether or not you establish a foreign trust will be part of your wider financial planning. Doing so doesn’t open you up to any new US taxation (you’re never taxed on ownership, only on income), but it does create new US reporting requirements, and not reporting can have significant consequences due to possible penalties. 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.

“A person doesn’t know how much he has to be thankful for until he has to pay taxes on it.” - Anonymous Americans living abroad have additional reporting requirements that most people living in the States don’t. One of the most common additional reporting requirements for expats is having to report your foreign financial accounts and assets. In fact, there are two separate reporting requirements for foreign accounts and assets, and many expats have to report the same information on both. These are known as FBAR and FATCA reporting. FBAR and FATCA mean more form filing for expats, but no additional tax implication. There are stringent penalties for not filing them, though. They are intended to help combat money laundering, so, like video cameras in public spaces, they seem inconvenient at first but soon fade into the background of life abroad. It’s also important to be aware that the US Treasury and the IRS are able to check whether you’re reporting all of your foreign accounts and assets, and they can verify your foreign account balances. In this article, we’ll look at the reporting requirements, how they came about, and how the IRS can enforce them. In this article, you’ll learn about: • What is an FBAR? • Who has to file an FBAR? • What is a foreign financial account? • How to file an FBAR • FinCEN Form 114 instructions • FBAR filing deadlines, and penalties for not filing • What is FATCA? • FATCA foreign asset reporting requirements • Filing IRS Form 8938 instructions • FATCA enforcement and penalties • FBAR and FATCA differences summary What is an FBAR? An FBAR, or Foreign Bank Account Report, is a form the US government requires Americans with overseas accounts to file annually. It was introduced in 1970 to help prevent offshore tax evasion. Don’t forget that FBAR filing doesn’t carry any new tax implications as it’s just a reporting requirement, though an important one, as penalties for not filing FBARs are significant! Who has to file an FBAR? Any American who has over $10,000 in total at any moment in a year in financial accounts registered in foreign countries is required to submit an FBAR. The figure stayed at $10,000 since 1970, rather than rising with inflation, so it now catches many more expats in the FBAR reporting net. It doesn’t stop at individuals though, as any American-owned tax-paying entity such as a trust or company is required to submit the same form under the same guidelines. This maximum balance can exist in one account or across multiple accounts, but once an American individual or entity crosses the $10,000 threshold, they’ll need to file or risk a penalty. FBAR Filing Example: Jason lives in France working remotely for a US employer. He’s paid into a US bank account, but has a local bank account in France for his day to day spending needs, with a balance that doesn’t normally exceed $10,000. However, he decides to buy an apartment in France, and transfers the deposit across, which exceeds the $10,000 FBAR filing threshold, even though it’s just in his account for a few hours, making him liable to file an FBAR and report his French bank account. Sue meanwhile relocated permanently to Italy, where she opened checking, savings, and brokerage accounts. While none of the individual account balances exceeded $10,000 in the first year, the combined balances do, so Sue has to file an FBAR to report all three accounts, too. What is a Foreign Financial Account? The term ‘foreign financial account’ covers several different types of accounts. While many people would correctly assume that a foreign checking or savings account qualifies, so do: • Foreign stock and brokerage accounts • Individual retirement accounts • Mutual funds • Joint accounts • Any other bank or investment accounts you have signatory authority over even if it isn’t registered in your name, such as company, charity, or trust accounts, as well as any accounts you may have opened for your children, where you currently hold custodial and signature authority. Expats often wonder whether you have to report crypto accounts on an FBAR, and the answer (as of 2022) is yes, if a crypto account is held in an offshore exchange, account, or fund, but no if held in a private wallet at home. How to file an FBAR (FinCEN Form 114) Filing an FBAR means filing FinCEN Form 114. You can file your FBAR on the FinCEN website directly, or ask your tax professional to do it for you. "The information you’ll need to provide includes the account name and number, the type of account, the maximum balance of the account during the year, and the name and address of the financial institution where your accounts are held. You’ll need to provide this information for every foreign financial account you have." - Joshua Reeve, Moore DM When providing foreign account balances, you have to convert foreign currencies into their closest whole number dollar values. FBAR filing deadlines, and penalties for not filing FBAR filing deadlines for expats are slightly different to tax return deadlines. Whereas tax filing is due on June 15th for expats, with an extension to October 15th available on request, the FBAR (FinCEN Form114 ) deadline is April 15th with an automatic extension to October 15th. In practice, most expats file both their tax return and FBAR at the same time. The penalty for not filing an FBAR unknowingly is $10,000 a year, and the penalty for not filing when you do know you can be $100,000! Mistakes on the form carry the same penalties. The US government is receiving the same information reported on FBARs from foreign bank and investment firms directly, so it’s able to check FBAR filing accuracy, globally. What is FATCA? FATCA, or the Foreign Account Tax Compliance Act, was passed by congress in 2010 to address some of the same issues as the FBAR, albeit in a different manner. FATCA created a new reporting requirement for many expats, though for reporting foreign financial assets to the IRS, rather than financial accounts to FinCEN. There is often overlap in practice, though. FATCA also created the means for Uncle Sam to check on both by compelling foreign financial firms to report their American accounts holders’ information. How can a US law compel foreign companies, you might think - the answer is by imposing a tax on those that don’t comply when they trade in US dollars, which all foreign financial firms need to. FATCA foreign asset reporting requirements FATCA reporting means filing IRS Form 8938 when you file Form 1040. One small piece of good news for some expats is that FATCA has higher minimum reporting thresholds than FBAR. These thresholds are also higher for expats than for Americans resident in the US. For expats, FATCA reporting is required for any American living abroad who has a total of $200,000 of offshore financial assets at the end of the year, or $300,000 at any given time during that year. Like FBAR, the thresholds are per person, not any individual account. If you are married and filing a joint tax return, then that threshold is bumped up to $400,000 on the last day of the year and $600,000 at any point in the year. Note that currently (as of 2022), the IRS considers crypto held in an offshore account to be reported on Form 8938. Filing IRS Form 8938 instructions Form 8938 isn’t a simple form to fill out, and it’s always worth asking your tax professional for assistance. Similarly to FBAR, you’ll need your foreign account and brokerage records for the year to hand, so you can provide information about where your accounts are held, and your balance details. FATCA enforcement and penalties The penalties for not following FATCA guidelines are not as severe as the FBAR’s, but neither are they insignificant, ranging from $10,000 to $50,000, depending on the situation. If you haven’t been filing FBARs, there is a voluntary amnesty program available if the IRS hasn’t contacted you yet, so consult a tax professional as soon as possible if this is you. FBAR and FATCA differences summary FATCA - for reporting offshore financial assets. Higher minimum reporting thresholds for expats of $200,000 at the end of the year or $300,000 at any time in the year, per person. Form 8939 is filed to the IRS as part of your tax return, due by June 15th (unless you request an extension). Spouses can file jointly (with doubled thresholds). FACTA reporting requirements also apply to accounts held in US overseas territories (i.e. Puerto Rico, Guam, American Samoa, the US Virgin Islands, and the Northern Mariana Islands). FBAR - for reporting offshore financial accounts. The reporting threshold is just $10,000 per person (or entity, such as an American-owned corporation). Form 114 is to be filed to FinCEN by October 15th. Spouses must file separate FBARs. You must include any account that you have signatory authority over. FBAR doesn’t include US overseas territories. 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.

“Estate planning is an important and everlasting gift you can give your family. And setting up a smooth inheritance isn't as hard as you might think.” - Suze Orman With two jurisdictions’ tax rules to consider, tax efficiency is a prime concern for Americans investing when living abroad. Investing through a limited company or trust can, in certain circumstances, be advantageous. As with most sophisticated tax saving strategies though, the devil is very much in the details of your circumstances and goals. What assets are you investing in? Which country are you investing in? When, or whom, do you want to receive income from your investments? In this article, you’ll learn about: • When expats might invest through a trust • When expats might invest through a limited company • Where should expats register a trust or LLC? • Taking income from a trust or LLC When expats might invest through a trust Investing through a trust can be advantageous in two potential ways: tax efficiency, and retaining control of assets that you want to benefit someone else. The two most common scenarios when you might invest through a trust are either to reduce estate taxes as part of your estate planning, or to retain control of assets that you want to gift for the benefit of others during your lifetime. Trusts all have three legal parties, the grantor, or person setting up the trust, the trustees, who manage the trust, and the beneficiaries, who benefit from it. The grantor can also be a trustee. There are also two types of trusts: revocable, or irrevocable. Irrevocable trusts are normally used for estate planning purposes, as once set up, it is hard to amend them. A revocable trust on the other hand could be used to gift assets to grandchildren while retaining control of how the assets, or the income generated by the assets, can be used during your lifetime. So an irrevocable trust might be used to leave assets to your heirs while reducing estate taxes, if certain conditions are met, because the assets are already deemed to be outside of your estate once gifted to the trust (although gift taxes may apply at the time you set up the trust). Trusts also avoid the probate process, also because assets gifted to a trust aren’t considered part of your estate any more. When expats might invest through a limited company Similarly, there are some scenarios when investing through either a US LLC or an equivalent limited company in another country can be beneficial. The most common scenario is when investing in real estate such as rental properties, as investing through a limited company structure limits the owner’s liability in the event of a lawsuit by a tenant. A lawsuit is much less common when investing in other types of assets such as stocks though, reducing the benefit of investing in an LLC. There can also be tax benefits to investing in a limited company, but the devil is very much in the detail, as while corporate tax rates may be lower than personal tax rates, a US LLC is considered a pass-through entity anyway (so company income is taxed as personal income), and in any case you will always be taxed again when you take money out of the company. Though if for example you are planning to just reinvest the company income in the company until you sell it, rather than ever take money out of the company, it may make sense. Where should expats register a trust or LLC? If, after consulting with your expat financial advisor, you conclude that it does benefit you to invest through a trust or an LLC, you’ll also have to consider whether to register the trust or LLC in the US or in your country of residence. It will depend on your long term plans among other factors, such as where you see yourself living in the future, where the beneficiaries of the trust will be, where the assets you’re looking to invest in are, and also the relative tax advantages and disadvantages of registering in the US or abroad. A foreign-registered LLC isn’t automatically considered a pass-through entity, so unless you elect for it to be, it will trigger additional US reporting requirements (as will all foreign registered trusts). Foreign registered financial accounts and assets also trigger FBAR and FATCA reporting. Where your investment vehicle is registered may also impact what countries and assets you can invest in. The best strategy is to always consult your expat financial advisor when considering where to register an investment company or trust. Taking income from a trust or LLC The income from investments in an LLC may be liable to corporation tax, depending on whether the LLC is considered a pass through entity or not. Then, when you take distributions, you will have to pay either income or dividend taxes. In the case of a trust, income tax will just be due on distributions paid to the beneficiaries. As American citizens living abroad have to file US taxes as well as taxes in the country where they live (depending on the tax rules of that country), there is a risk of double taxation when receiving income from a trust or LLC, however you can normally claim tax credits to offset this, meaning you’ll end up just paying the higher tax rate of the two countries. In this article, we’ve outlined some of the different scenarios and considerations relevant when considering whether to invest through a trust or LLC, however everyone’s situation is different, and it’s imperative that you seek advice from your expat financial advisor to explore whether it makes sense within your overall financial plan and goals. 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.

"Taxation with representation ain't so hot either." - Gerald Barzan Amidst all the challenges and excitement of moving abroad, taxes are typically at the back of the minds of most expats. For Americans however, moving abroad doesn’t mean leaving your IRS reporting obligations behind, as you’ll still have to file a US tax return. Furthermore, US reporting from abroad is different, as there are more forms to file, often foreign currencies to be converted into US dollars, and there may be a foreign tax system to take into account, too. In this article, we’re going to provide an overview of the rules for reporting US taxes for American citizens and Green Card holders living overseas. In this article, you’ll learn about: • The US tax system and citizenship based taxation • Tax systems in other countries • US filing and reporting overview for expats • US self-employment taxes for expats • Finding an expat tax accountant The US tax system and citizenship based taxation The reason why American expats have to file US taxes from abroad is because the US tax system is different compared to other countries. The US has what is called a Citizenship Based Taxation system, which means that all US citizens (and residents, including Green Card Holders) are taxed on their global income, wherever in the world they are. BOX - CBT Origins The system was first introduced in the 1860s, when the federal government was short of funds during the Civil War and hit upon the idea of continuing to tax US landowners who had moved abroad to avoid the fighting. After the war, it never got reversed, as it wasn’t considered enforceable - until the age of the interconnected international digital banking in the 21st century, that is. CBT has been challenged in court, particularly with non-US income also being taxed, however the challenge was overruled on the basis that Americans living abroad still enjoy the benefits of US citizenship, such as voting rights and the right to return and live in the US. Most Americans who move abroad either don’t know about the requirement to keep filing US taxes or ignore it, assuming that the IRS can’t enforce it anyway. In the twenty-first century though, the interconnected international digital banking system means that the IRS can look at expats’ finances globally. Tax systems in other countries Almost every other country has either a residency based tax system, which means just taxing those people who live in the country, or a territorial tax system, which means just taxing income generated in the country. This means that most Americans living abroad will also have to pay taxes in the country where they live, depending on the rules and residency qualification in that country. Furthermore some countries have a different tax year, including: • The United Kingdom: April 6 - April 5 • Australia (and Pakistan): July 1 - June 30 • South Africa: March 1 - February 28 • New Zealand, India, Barbados, Belize, Botswana, and Jamaica: April 1 - March 31 Not all countries require residents to file a return though, as many, particularly in Europe, deduct income tax from wages at source before it's paid. This means that if you don’t have any other income, you don’t need to file an annual tax return in that country. US filing and reporting overview for expats All Americans, including those living abroad, have to file Form 1040 every year reporting all of their worldwide income, if their total income exceeds the Standard Deduction amount ($12,950 for tax year 2022 for individual filers, $25,900 for joint filers), or if they have any self-employment income, or if they are married but file separately to a foreigner who isn’t a US citizen or Green Card holder. In general, if you’re married to a foreigner who isn’t a US citizen or Green Card holder, it might not be advantageous to file jointly. This is because if you file jointly, you’ll need to obtain a US Taxpayer Identification Number for them and you will effectively render all their current (and future) income and assets liable to US reporting and tax! If you have income earned in currencies other than US dollars, you have to convert it into USD using either the Treasury published rates, or a reputable currency conversion source before reporting it in your US tax return. The IRS cites X-rates, Oanda, and xe as reputable sources on the IRS website. Most expats have to file other forms additionally, such as: • IRS Form 2555 to claim the Foreign Earned Income Exclusion • IRS Form 1116 to claim the Foreign Tax Credit • FinCEN Form 114 to report foreign financial accounts • IRS Form 8938 to report foreign financial assets • IRS Form 5471 to report a foreign registered corporation There are specific rules relating to all of these forms that are covered in other articles. Americans living abroad have to pay any US tax they owe by April 15th, however if you live abroad, you don’t have to file until June 15th. Any expat who earns under the FEIE limit or who pays more foreign income tax at higher rates than the US rate won’t normally owe any US tax anyway if they claim the Foreign Tax Credit or the Foreign Earned Income Exclusion when they file their US return (note that this assumes they don’t spend time working in the US during the year). If you live in a country like the UK or Australia, which follow a different tax year, and you need more time to file your UK/Australian taxes first, you can file Form 4868, giving you until October 15th to file. If you’re still not ready to file by October 15th, you can apply to the IRS in writing for a discretionary extension until December 15th, explaining why you need the extra time. The deadline for reporting foreign registered financial accounts on FinCEN Form 114 is currently October 15th (thanks to an automatically applied extension from April 15th). All other filing deadlines are the same as in the US, such as US S-Corp, C-Corp, LLC, and Partnership filing, and quarterly, estimated self-employment tax payments. US self-employment taxes for expats Americans living abroad have to report their self-employment income on Form 1040 and pay US self-employment taxes. These consist of 12.4% social security tax and 2.9% Medicare tax (for a total of 15.3%). Unfortunately, US social security taxes can’t be reduced by claiming the Foreign Tax Credit or the Foreign Earned Income Exclusion. That being said, the US has signed double social security tax treaties (called Totalization Agreements) with around 30 other countries. Finding an expat tax accountant Due to the additional rules and forms for Americans overseas, most expats choose to find an accountant to help them file, as the IRS has a global reach and the consequences for getting filing wrong can be significant. In 2010, the US passed the Foreign Account Tax Compliance Act (FATCA). FATCA requires foreign banks and investment firms to report their American account holders to the US Treasury, including their contact details and account balances. FATCA has given the IRS the ability to snoop on US expats’ finances globally in the name of reducing tax evasion, as well as check whether expats are reporting their foreign account balances correctly on FinCEN Form 114. In general when filing from abroad, you have 4 options: • DIY - doing it yourself is only advisable if your financial situation is very straightforward, such as if you are posted abroad working for a US firm for a year still paid in the US (so with no foreign accounts or income) and just have to file Forms 1040 and 2555. • A US-based tax professional - It’s important to find an accountant who has experience with expat filing. As most accountants in the US with no expat clients don’t have experience with tax treaties, foreign tax systems, and other expat issues, they normally won’t be able to ensure that you file from abroad in the way that is in your best interest. • An expat tax software - If your situation is relatively straightforward, there are some great online expat tax filing softwares available. • Expat CPA or EA - Most expats choose to work with an experienced expat tax accountant who has either an EA (IRS Enrolled Agent) or CPA qualification. 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.

“The best things in life are free, but sooner or later the government will find a way to tax them.” - Anonymous Unless you’re living abroad on a short term contract, or you’re a digital nomad, exploring the world while working remotely, as an expat, you might consider buying property overseas at some point. Expats most often buy foreign real estate as a home, but many also buy foreign property to provide them with rental income. It’s important to understand the IRS tax implications though, when you’re buying, owning, selling, or renting foreign property. In this article, you’ll learn about: • Tax considerations when buying foreign real estate • Tax considerations when owning foreign real estate • Tax considerations when owning foreign rental properties • Tax considerations when selling foreign real estate Tax considerations when buying foreign real estate In general, the US treats real estate ownership abroad similarly to in the US. This means that there are no US taxes to pay when you buy real estate overseas. However, the transaction may trigger a reporting requirement, and you may be liable to pay foreign taxes. Many foreign countries impose a tax when you buy a property, such as Stamp Duty in the UK, so always find out about local property purchase taxes in the country where you’re buying to avoid being caught unawares. There may also be charges relating to transferring money into a country to buy foreign property, both from foreign banks (and there will always be transfer fees, of course) and foreign governments. Lastly, before calculating how much you have to spend on a property abroad, if you are transferring money from the US, don’t forget to factor in currency exchange costs. It’s always worth talking to an international currency exchange specialist, who will obtain the best exchange rate and minimize fees, and they may be able to lock in an exchange rate for you in advance to minimize the risk of negative fluctuations (though you risk not benefiting from positive fluctuations too in this scenario). While the IRS doesn’t require you to report the fact that you’re buying real estate abroad, if you transfer money from the US into a foreign bank account, having the money in a foreign account, even momentarily, triggers FBAR and FATCA reporting (FinCEN Form 114 and IRS Form 8939, respectively). These are reporting forms for Americans with foreign accounts and assets that are required if you exceed $10,000 and $200,000 (respectively) in total in your foreign financial accounts. - Nathalie Goldstein EA, MD at MyExpatTaxes Tax considerations when owning foreign real estate Similarly, while the IRS doesn’t tax ownership of a foreign home, the foreign country where the property is might do so. There are different types of foreign taxes on real estate ownership, depending on the country, including local property taxes, and wealth taxes imposed on your total assets, including foreign real estate, in some countries. Always seek reliable local advice to ensure that you understand your local obligations. Once you own foreign real estate, if you haven’t already, you’ll need to do some estate planning. If you don’t have assets in the US, you may only need to do estate planning in the foreign country where you live, however if you do have assets in the US, you should seek advice and create wills in both the US and in the foreign country. You may want to deduct your mortgage interest on your US tax return if it is more than your standard deduction, if you owe any after claiming either the Foreign Earned Income Exclusion or the Foreign Tax Credit. From 2017 and until 2025, you can deduct the interest that you pay on the first $750,000 if you file jointly, or $375,000 if you’re single or married and filing separately. After 2025, it is due to revert to $1 million. Another consideration (which also applies to rental property abroad) is that if you own foreign real estate in a foreign company or trust rather than directly, you will have a US reporting and sometimes tax liability related to the foreign company or trust. This could mean filing Form 5471 or Form 8858 for foreign companies, and Form 3520 and/or 3520 for foreign trusts. Note that foreign real estate doesn’t have to be reported on Form 8938 under FATCA rules. Tax considerations when owning foreign rental properties Many of the same considerations apply for owning foreign rental properties as for owning a home abroad. There are also some additional ones. So you still need to be aware of local property taxes, both when buying and once you own, you still need to do estate planning, and you need to be aware of US reporting rules if you own foreign rental properties through a company or trust. Additionally, you will have to report your foreign rental income, along with all your global income, on Form 1040 Schedule E every year assuming you're not in the business of renting. You can deduct your rental expenses though, and you may also have to pay foreign income tax on it. If so, you can claim US tax credits to avoid being double-taxed. In general, the same deductions can be applied as for rental property in the US. For depreciation however, you have to use a 40 year schedule for foreign rental properties purchased prior to 2018, otherwise a 30 year schedule, rather than 27.5 years for rental properties in the US. Some foreign countries don’t allow depreciation as an expense, so you may end up with a higher foreign tax liability on your rental income (or a taxable profit for your foreign taxes and a loss for your US reporting). In this scenario, you can claim US tax credits for the foreign taxes you pay as a carryover Tax considerations when selling foreign real estate When you sell real estate abroad, there may be a foreign and a US capital gains tax liability. The IRS usually grants a $250,000 exclusion from US capital gains tax per person ($500,000 if you’re married filing jointly) if you are selling your primary home (See Section 121 Exclusion Rules) Above this, the rate you pay depends on your taxable income, so it will be 0% if your income level is less than $40,400 ($80,800 if filing jointly), or otherwise 15% or 20%. Keep in mind, when selling a rental property, your cost basis must be decreased by any rental depreciation recapture. Essentially when you claim rental depreciation as a deduction against rental income, you have to reduce your cost basis by the same amount. Many foreign countries impose capital gains taxes too on the sale of property, though some don’t charge it when you sell your home (so just on rental real estate). When Boris Johnson was mayor of London, several years before he was UK Prime Minister, he decided to sell his London home. In the UK, you don’t pay capital gains tax on the sale of your home. However, he had been born in the US while his father was working there for a short time, which meant he had the right to US citizenship. This in turn meant that he had to pay US capital gains tax when he sold his UK home. So don’t be surprised like Boris Johnson if you receive a US capital gains tax bill when you sell your home abroad, even if you don’t have a local capital gains tax liability. If you have to pay foreign and US capital gains taxes, you can normally claim tax credits to offset the double taxation risk. If you sell rental property and immediately buy other rental property abroad, you may be able to avoid US capital gains taxes under Section 1031 like-kind exchange rules, but this is only possible if you sell abroad and buy abroad, or sell in the US and buy in the US, and not if you sell abroad and buy in the US or vice versa. 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.

Many expats have to transfer funds to and from the US from time to time. This could be because you make regular payments from abroad to support dependents or pay bills back in the States, or you may be paid in the US and transfer regularly to support your life abroad. You might also have to transfer larger sums occasionally, such as when buying a car or real estate. Whenever you transfer money internationally, you are exposed to what is called foreign exchange risk due to the currency value fluctuations between the US dollar and the foreign currency you’re transferring from or to. Currencies fluctuate all the time, and these fluctuations can make a significant difference to the amount of target currency you receive after your transfer. Expats have options when it comes to mitigating foreign exchange risk. Strategies such as future contracts, forward contracts, options, and swaps can help you transfer money internationally while reducing both the cost and risk of loss. In this article, you’ll learn about: • What is foreign exchange risk? • Mitigating foreign exchange risk What is foreign exchange risk? Whenever you send money internationally, you have to sell one currency and buy another, and the risk that as an expat you will lose out from an unfavorable exchange rate when making these transactions is known as currency exposure, or sometimes FX or foreign exchange risk. The larger the amount of money you are transferring, the greater the risk. You might for example receive a quote from a broker for a significant transfer for a deposit to buy some real estate abroad, but then if either of the two currencies changes in value you would suddenly find the cost of the transfer changes. If the exchange rate fluctuates significantly, you may even find you can no longer afford the purchase. Many expats own a business that operates across borders, and there are three different types of foreign exchange risks that businesses that operate internationally can encounter. These are known as transaction risk, translation risk and economic risk. Transaction risk occurs when a currency fluctuation changes the forecast value of the exchange transaction, exposing you to a possible negative financial outcome. This is the most common risk that individual expats experience. Translation risk is when a domestic (i.e. US) company has a foreign subsidiary and they report revenue from the subsidiary in the parent company’s currency and so potentially lose out due to currency exchange rate fluctuations. Economic risk is when a company trades in other countries and its market value is affected by exchange rate fluctuations that alter the reportable value of its overseas revenue. Many expats have foreign companies with US parent companies due to the tax advantage in paying less US corporate GILTI tax since the 2017 Tax Reform, so some expats will encounter all of these risks. Mitigating foreign exchange risk Luckily, there are ways for expats transferring money internationally to mitigate foreign exchange risk. Future contracts Future contracts are legal agreements between two parties looking to buy or sell a security or investment at a specified price at a predetermined time in the future. These contracts are bought and sold on a futures market and so have set standard sizes and amounts. When someone buys a future contract, they pay in advance and they agree to receive the asset when the contract expires. Forward contracts Like a futures contract, a forward contract is an agreement on a price and future date for the transaction. Where forward contracts differ from future contracts is that a forward contract is privately agreed, customizable and settled at the end of the agreement. Options Options are financial derivatives that give buyers the right to purchase an asset such as foreign currency at a predetermined price. As buyers aren’t obligated to exercise these options, this can give expats an added layer of flexibility. Swaps Currency swaps are another derivative instrument that let you secure a pre-agreed currency value ahead of time by agreeing an exchange rate with someone looking to transfer in the other direction. If you need assistance, currency specialists can provide their expertise, so reach out to one if you’re in need of advice. Winding up Foreign exchange risk can be a significant factor for American expats transferring funds internationally. Some currencies are more volatile than others, of course, increasing the risks of fluctuations in transfer values. Currency exposure risks can’t be avoided though, and so they will need to be mitigated. By using strategies like future contracts and options, expats can create a predetermined price and date and so minimize their currency exposure risk. 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 © 2022 Dunhill Financial. All rights reserved.