Imagine if your brokerage firm called you up and told you that they were going to sell out all of the positions in your brokerage account within the next 60 days.
“Why?” you ask them. They respond that due to increasing regulatory restrictions they will no longer service your account. They give you two options:
1. Transfer your assets to another financial institution,
2. Distribute the assets directly to you.
Believe it or not, many people in Israel are receiving such a call. This is because they are U.S. citizens, and due to tough regulations regarding Americans living abroad originally intended to prevent money laundering, many U.S. financial institutions no longer want to work with any non-resident Americans. Though it may be disconcerting to receive notification that a long-standing relationship with a brokerage firm is about to end, there is no need to panic. Americans living in Israel who have U.S. brokerage accounts have a solution to this issue.
Don’t cash out your American account
Instead of cashing out your American account (which could trigger an unwanted tax bill), find a cross-border-friendly firm that specializes in opening brokerage accounts for U.S. citizens who have a foreign address. Then you can transfer your assets “in kind” to the new account. This new account can even be an exact replica of the old one, unless you specifically want to change your investment structure. In most cases, everything can be transferred without selling, unless you are holding certain proprietary funds of the current firm or bank that are non-transferrable. Best of all, by moving everything over in kind (without selling), there are no tax consequences or reporting requirements.
To find out more about opening a U.S. brokerage account from outside the United States, click here.
Douglas Goldstein, CFP®, financial professional, 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 October 6, 2016. Updated July 2019.