Customized financial advice

A tax lawyer recently called me to ask if I could help one of his clients who is inheriting “all sorts of stuff from America.” That “stuff” turned out to be brokerage accounts at two different firms and a retirement account (IRA). “To make matters worse, Doug,” the lawyer told me, “the client’s Israeli bank advised him to simply liquidate everything and wire the proceeds to Israel so that he could invest in mutual funds.”

Who gives you customized financial advice?

An individual retirement account “IRA” receives special tax consideration from the IRS. In general, the earnings inside the account will not be taxable in America, as long as it stays in the account. Taxes are paid when the funds are withdrawn from the account. It’s a huge benefit to leave money inside an IRA as long as possible in most cases. When the Israeli banker told the client to withdraw the money immediately, he was creating a situation where the client would have to pay taxes today and miss out on decades of tax-deferred growth.  American-Israelis have special considerations relating to dual tax codes and investing. It is imperative that they receive financial and tax advice from someone licensed in both countries.

Financial advice should reflect your citizenship

Along with giving remarkably generic advice (“liquidate everything”), the banker’s proposal to use Israeli mutual funds as investment vehicles for a dual American-Israeli citizen would have created a huge tax burden for the American. As a general rule, it’s very problematic for American citizens to buy non-U.S. mutual funds.

You deserve customized financial advice

When dealing with American assets, start by talking with an American brokerage firm that can handle both retirement and regular accounts. Unfortunately, as this lawyer pointed out, many bankers simply do not understand the nuances of cross-border investing, and do not provide customized financial advice.

Can you see any other mistakes the banker made?

Send me an email if you see problems that the banker created for the client, doug@profile-financial.com

Douglas Goldstein, CFP®, investment advisor is the Director of Profile Investment Service, Ltd., which specializes in helping people who live in Israel with their US dollar assets and American investment and retirement accounts. He helps olim meet their financial goals through asset allocation, financial planning, and using money managers.

Published June 20, 2019.

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