Managing Your Finances While Living Abroad

If you work for a large company that has international locations, at some point you make be asked to move to another country to work there.

As you make preparations, it is important to plan ahead financially, because living overseas will definitely impact your money and taxes.

By the way, just because you leave U.S. soil does not mean you can dodge filing your taxes next April. On the bright side, you will generally receive a tax break on your foreign income. It’s called Foreign Earned Income Exclusion, and you may be able exclude up to $92,900 for the 2011 tax year.

Here is something cool. If your new country does not have any income tax, once you use up your exclusion, your next dollar will be taxed at the lowest income bracket. So your taxes will most likely be lower while you are living overseas. They will also get more complicated, so consult an accountant for the latest information.

Before you pack your bags, make sure that you have up-to-date wills and power of attorney for health care and finances. Also, don’t forget to find out about any special estate planning requirements in the country where you will be living for the next year. Your best bet is to consult an estate planning attorney who is versed in international law.

Next, make plans for maintaining your home while you are overseas. Will you want to rent it out or sell it? If it will remain vacant, make sure someone you trust will be checking the property on a regular basis.

If you decide to rent out your home, find a good property management company. You don’t want to be the landlord long distance. That can turn into a nightmare. Also, ask your accountant about the tax impact of renting out your primary residence. Make sure you have money set aside for paying all property related bills on time in the U.S.
If you would rather sell your home, you better get busy. This is still a tough market for homeowners. Give yourself plenty of time to sell your house.

Another important step before you leave is to designate a wingman to keep an eye on things. This will be someone who can be trusted to prevent disasters — from late payments to unforeseen emergencies.
Finally, think about the best way to communicate with your family and friends in the U.S. It will help your entire family avoid homesickness. Skype, blogs and Facebook are great ways to maintain those important relationships.

Once you have these details taken care of, you will be free to enjoy the unique experience of a year abroad. Safe travels!

Denisa Tova MBA, CFP, CFDP(TM), ChFC, CLU provides divorce financial expertise to divorcing individuals. She is a Certified Financial Planner(TM) practitioner and Certified Divorce Financial Analyst. You can find more information about Denisa Tova at: http://www.denisatova.com
Reprinted with permission of The Colorado Springs Gazette