Caution for continent-hoppers

It's essential to find the right guide, a global financial planner who knows how to make the complexities of international asset management work for - and not against - you.

"Too few people realise that planning allows them to take advantage of opportunities - and avoid problems," says Bob Barbetti, executive compensation advisor at JP Morgan Private Bank.

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For global nomads, the first step to making finances more manageable is finding an adviser to help them navigate through the baffling maze of regulations. While many hurdles still exist, it is becoming easier as national banks go global, enabling individuals to maintain their accounts with a single financial institution regardless of where they reside or how often they move. A case in point is HSBC, whose "Premier" service includes features such as an instantly portable credit history and dedicated relationship managers. The number of legal and accounting firms with multinational relationships is growing rapidly, while the advent of a single currency in much of the European Union (news - web sites) has been a boon.

Specialist providers are booming, such as Donald Reilly, founder of Donald Reilly Advisors, a San Diego-based financial advisory firm whose client list is composed almost exclusively of current and former US expats. Some have returned to the US to live; others live and work in countries like Saudi Arabia or Indonesia; still others have retired to other countries, such as Greece, to live for their retirement. "I'm registered to do business in Prague, and am now looking to hire someone to serve the growing number of US expats in Eastern Europe," says Mr Reilly, who will establish US investment accounts for his clients, develop a financial plan and steer them away from the scam artists who plague expat communities.

Two areas where global expats without a plan routinely run into trouble are taxes and real estate. With the help of a global advisor, a few simple adjustments can make a world of difference. For instance, a European executive recruited to run a US company might exercise stock options before arriving in the US.

"Now you are holding stock, and you don't dispose of anything until you are no longer a US resident, so you aren't subject to capital gains tax," Mr Barbetti explains.

Income tax considerations loom large for any professional expatriate. But professionals warn against neglecting other tax-related issues, notably estate taxes that could wreak far more havoc on an individual's assets. Any non-US citizen who dies with a Monet hanging on the wall of his New York apartment - even if he dies in Hong Kong or Paris - will have left a hefty US estate tax bill to his heirs along with the painting.

The same is true of the apartment itself - unless it and the painting have been placed in some kind of offshore trust. "You think that's a minor issue - until the government takes 50 per cent of the value of the $10m Park Avenue co-op you had intended to leave to your children," says Rob Elliott, senior executive vice-president at Bessemer Trust.

Many wealthy nomads tend to accumulate real estate at a rapid clip in countries in which they live, in which they enjoy spending vacation time, in which their children study or live and in which they do business.

"My typical client will have multiple homes; then there are the boats and the cars," says David Dubrow, managing partner of the New York office of Withers Bergman LLP, a law firm dedicated to serving the needs of wealthy multinational citizens.

Mr Dubrow's first step with a new client is to have them compile a list of assets. Sometimes, he says, a family's holdings are so dispersed the client can't come up with a reliable list - let alone tell Mr Dubrow how those assets are insured. "I had one client who, if he had died, I don't think his heirs would ever have located his assets," he says.

That same client, the CEO of a large US corporation, carefully monitors the number of days he spends on US soil to avoid paying US tax - but still had fresh fruit delivered to each of his several residences and boats in case he happened to drop in, Mr Dubrow bemoans.

Some tasks confronting expats and their advisers are straightforward. For example, a European or US executive moving to Japan may have all their investment income and salary in their home currency, while their spending is now in yen. "It's easy enough to hedge that currency risk nowadays - that should be automatic," says David Darst, chief strategist at Morgan Stanley.

Then there is the issue of how assets are held, he adds. For instance, US citizens or those who have to file US tax returns should avoid investing in any offshore funds, because the accounting methodology makes it too difficult for an accountant to determine what tax is owing on income.

For many global citizens, family issues are the toughest nuts to crack - both financial and non-financial. In some cases, children may have been born overseas, and hold multiple citizenships. They may marry spouses from different countries, and make their lives scattered around the world. That means a global citizen who wants to bequeath a family business to his three children may need to consider three or four different sets of inheritance and gift tax laws - and their impact on the other children. There's no easy answer to that one, says Gavin Leckie, managing director of international tax and estate planning at JP Morgan Private Bank. "It's like a Rubik's Cube; every time you move one piece, the whole picture changes on all sides."

For Mr Darst, who started his banking career with a six-year stint in Zurich in the 1970s, the best advice is found by just talking to peers. "One well-timed and well-placed question about real estate or taxes or schools can save you tens of thousands of dollars," he says. "Just ask someone leaving the country what he wishes he had known when he arrived." That is how Mr Darst found the right lawyer to help property in Switzerland - and how he got the advice he swears by. "With all the moving around, you have to pick one place that you're going to call home, and stay committed to that home base regardless of where you travel."

While that sounds easy, many citizens of the world find navigating their finances without a guide too difficult. "I once encountered a potential client who divided his time between his two yachts", one in the Eastern hemisphere, the other in the Western hemisphere, recalls Bessemer's Mr. Elliott. "He sailed from one port to the next; flew from one yacht to the other and could legitimately claim to be a citizen of nowhere."

Source: Financial Times UK