*Official* BBCWatcher club

[manlymanly]

Many thanks for your kindness BBCW... greatly appreciate it!

 

[BBCWatcher]

Am I right to say if I continue the same investment amount with the same frequency i.e. $1500 bimonthly, It is more cost effective to invest with Standard Chartered in the long run unless I increase my investment to above S$1000/month

Yes, but only to a certain point. S$9,000/year is very roughly US$6,500/year. At that pace (even if fixed), and assuming some growth in your chosen fund's value, it'd probably take about 12 years for you to reach US$100,000 of total global stock index fund value. Once you reach that level Interactive Brokers no longer levies a monthly minimum commission of US$10. So IB then overtakes Standard Chartered to be less expensive in terms of costs (foreign exchange conversion, brokerage commissions).

So if you wish to start with IB even though it's a little more expensive initially, go right ahead. That'll still work out fine. (You don't save very much during that ~12 year period.) But with IB you would buy your global stock index fund monthly since it costs no extra to do that. You'd pay US$10 per month no matter what, because that would cover your foreign currency conversion commission and your fund purchase commission. There's no need to "batch up" your monthly purchases.

Of course this is all based on today's charges. Occasionally Standard Chartered runs some special promotion, and likewise Interactive Brokers may lower its commissions.

 

[beefjerky]

Do any of you know why the returns for the SGD class and USD class are so different? Comparing the 1,3,10 years, all of them fair poorly on a compounded basis when we compare with the USD class. This is for the LionGlobal World Index. Another question is, why is the benchmark different? Aren't they both tracking the Vanguard World Index just with different currency? And from my understanding, currency shouldn't matter, only the underlying stocks the ETF hold matter?



https://ibb.co/1TCHFg7

 

[BBCWatcher]

Do any of you know why the returns for the SGD class and USD class are so different?

Well, you’d expect to see something like that if the Singapore dollar has appreciated relative to the U.S. dollar. And/or if the exchange rate didn’t work out so well when dividends were reinvested. I’d also look whether there are any differences in sales charges, expense ratios, and tax impacts.

 

[Sweetangtang]

Yes, but only to a certain point. S$9,000/year is very roughly US$6,500/year. At that pace (even if fixed), and assuming some growth in your chosen fund's value, it'd probably take about 12 years for you to reach US$100,000 of total global stock index fund value. Once you reach that level Interactive Brokers no longer levies a monthly minimum commission of US$10. So IB then overtakes Standard Chartered to be less expensive in terms of costs (foreign exchange conversion, brokerage commissions).

So if you wish to start with IB even though it's a little more expensive initially, go right ahead. That'll still work out fine. (You don't save very much during that ~12 year period.) But with IB you would buy your global stock index fund monthly since it costs no extra to do that. You'd pay US$10 per month no matter what, because that would cover your foreign currency conversion commission and your fund purchase commission. There's no need to "batch up" your monthly purchases.

Of course this is all based on today's charges. Occasionally Standard Chartered runs some special promotion, and likewise Interactive Brokers may lower its commissions.

Got it! Thank you BBCW!

 

[celtosaxon]

Ok BBC, here is one that might possibly stump you, but I kinda doubt it.

I’ve been searching online and simply cannot find a definitive answer — if something happens to me and my nonresident alien spouse ends up inheriting my Roth IRA, would a 30% tax withholding apply? All of the generic information and forms pertaining to this seem to indicate there would be. But in my mind that would only make sense if it was a Trad IRA. Note that I’ve already had the Roth well over 5 years.

I also understand that despite my spouse being non-US, the unlimited spousal exemption applies on estate tax coming from a US person. I suppose that means she would have to file a 1040-NR in order to get back said withholdings.

I’m thinking about changing the beneficiary to one or both of my kids who are US persons to keep it simple. What would you suggest?

 

[arcaninx]

HI BBCW, is there any shield like insurance for people who have pre existing condition like cancer?

thanks

 

[BBCWatcher]

I’ve been searching online and simply cannot find a definitive answer — if something happens to me and my nonresident alien spouse ends up inheriting my Roth IRA, would a 30% tax withholding apply? All of the generic information and forms pertaining to this seem to indicate there would be. But in my mind that would only make sense if it was a Trad IRA. Note that I’ve already had the Roth well over 5 years.

It does apply, unless a lower treaty rate applies. There’s a slightly dodgy method to avoid the withholding on a Roth if she has a U.S. Social Security Number, there’s a U.S. mailing address on the account, and she keeps that address on the account. In that case the IRA custodian might not withhold, and since no tax is owed on the Roth (if it’s a qualified withdrawal) there’s no tax, interest, or penalty. But if the custodian ever asks for a W-9/W-8BEN, game over, so this isn’t reliable. And she wouldn’t want underwithholding on the Traditional side since that’d be costly.

I also understand that despite my spouse being non-US, the unlimited spousal exemption applies on estate tax coming from a US person.

Nope. She falls into the single US$11.58 million exemption just like everyone else.(*) However, one particularly special privilege she enjoys in this general area is that you can give her up to US$157,000 (2020 limit) per year without clawing into your estate tax exemption. That’s roughly 10X the general gift limit. I cannot remember off hand if someone has to file a gift return, but that’s the limit from a U.S. citizen to his/her nonresident alien spouse.

I suppose that means she would have to file a 1040-NR in order to get back said withholdings.

Yes.

I’m thinking about changing the beneficiary to one or both of my kids who are US persons to keep it simple. What would you suggest?

Well, the first point is that she’s not required to withdraw from a Roth IRA. And she probably wouldn’t (not first anyway) if there are other assets and a Traditional IRA (and/or Traditional 401k) in the mix with withholding tax, 1040NRs, and RMDs. (The RMDs start at age 72 now.) Also, if your child or children inherit the Roth, they now have 10 years to drain it. (The 10 year rule started in 2020.) So if she inherits the Roth then passes it on, that 10 year period is shifted out (by the amount of time her lifetime exceeds yours), allowing the Roth to grow bigger U.S. tax free. For these reasons it’s generally wise to draw from the Roth last.

I believe she can still hold the Roth IRA intact for the rest of her life (no 10 year rule) since she’s a spouse (even though a nonresident alien one), but please double check that to see how the tax writers wrote the rule. My quick check is that it’s “spouse” (without limitation), for what it’s worth.

The only possible wrinkle I can think of here is if there’s a foreign jurisdiction that has other ideas — if she has foreign gift, inheritance, income, wealth, and/or remittance taxes that undermine the U.S. tax advantages. Or your children do for that matter, although that probably matters less since they have a 10 year clock anyway. Roth IRAs and Roth 401(k)s seem to be alien concepts in many U.S. tax treaties since they were invented after a lot of treaty writers completed their work. So treaty protections are spotty, and of course many countries don’t have U.S. tax treaties.

(*) It’s the other way around. The U.S. has no general inheritance tax, so U.S. persons can inherit unlimited foreign estates without direct U.S. tax consequences. For this reason it’s generally advisable for a well to do couple with one U.S. citizen spouse and one nonresident alien spouse to pump the annual gift limit in the direction of the nonresident alien, and for the U.S. citizen to pay all nongift expenses. Just watch out for other jurisdictions that might have their own gift limits. (Japan is a somewhat notorious example, and with a 10 year lookback to prior residence.) If you’re particularly clever you might be able to manage capital gains/losses via in kind transfers. There’s one exception: inheritances from “Covered Expatriates,” who are ex-U.S. persons who had a decent or better amount of wealth when they renounced or relinquished U.S. citizenship or long-term U.S. permanent residence.

 

[BBCWatcher]

HI BBCW, is there any shield like insurance for people who have pre existing condition like cancer?

Yes, MediShield Life. You might also have employer-provided group medical insurance that covers preexisting conditions.

There are a few exotic, expensive, “expat style” global medical insurance policies that cover preexisting conditions. Check with Pacific Prime since they have a nice Web site to compare various policies of that sort.

 

[arcaninx]

Yes, MediShield Life. You might also have employer-provided group medical insurance that covers preexisting conditions.

There are a few exotic, expensive, “expat style” global medical insurance policies that cover preexisting conditions. Check with Pacific Prime since they have a nice Web site to compare various policies of that sort.

thanks!thanks!thanks!

 

[celtosaxon]

Thank you once again BBC. My spouse has a SSN and could keep the U.S. address on the account. Good thought on her letting the account grow until passing along to our kids... however if she is still a NRA at that time, wouldn’t the 40% estate tax apply between her and our USC kids for amounts above $60k? I’m assuming an IRA is considered U.S. situs.

This Roth is about 10% of our net investable assets, and there are no other tax advantaged accounts in the mix. If estate tax will be an issue for our USC children, maybe having them inherit from me is the way to go. They would definitely want to spread the RMDs over 10 years for maximum tax free growth in the account.

 

[BBCWatcher]

Thank you once again BBC. My spouse has a SSN and could keep the U.S. address on the account. Good thought on her letting the account grow until passing along to our kids... however if she is still a NRA at that time, wouldn’t the 40% estate tax apply between her and our USC kids for amounts above $60k? I’m assuming an IRA is considered U.S. situs.

Yes, the IRA generally holds U.S. situs assets, but hypothetically it could be structured (or restructured) as U.S. estate tax immune. The typical way would be for the assets within the account to be repositioned into direct holding of individual bonds. Obviously those wouldn’t be municipal bonds (since tax free bonds within a tax advantaged account don’t make sense), but corporate and government bonds are fine for these purposes. I don’t think the IRA “wrapper” matters for these purposes. This kind of defeats the idea of longer tax free/tax deferred growth, though.

Could an IRA that survives you be repositioned into offshore funds like VWRA? I don’t know, but that seems contrived. Maybe Interactive Brokers could pull it off. They’d then presumably need to be re-repositioned into onshore funds when your children inherit the IRA. (Or would they?) Mitt Romney evidently had/has all sorts of crazy things inside his IRA, so maybe offshore funds are possible right now. Something to check I guess.

Can your spouse benefit from an estate tax treaty? There are something like 16 countries that have estate tax treaties with the U.S.

This Roth is about 10% of our net investable assets, and there are no other tax advantaged accounts in the mix. If estate tax will be an issue for our USC children, maybe having them inherit from me is the way to go. They would definitely want to spread the RMDs over 10 years for maximum tax free growth in the account.

The SECURE Act (passed in December, 2019) threw a wrench into some inherited Roth plans, so I suppose you cannot be too clever for too long. The rules can change, and in this case they did.

To some extent you might be able to make your estate plan “IRS proof.” For example, you include instructions in your will that your spouse will inherit up to (cite part of the tax code) or (fixed figure), whichever is lower, of assets that are subject to (cite other part of the tax code). This gets a little complicated of course, but I did a little bit of this in some instructions I left in another obscure area of tax considerations. Also, I believe you can split the Roth IRA between heirs if you wish to do so.

 

[CarlJung]

I was checking the FSM fees

• buy EFT/stock 0.08%
• holding of equity UT 0.0875% per quarter

0.0875% per quarter means 0.35% p.a.?
If so, considering the higher management fees of a UT, you also have to add 0.35% on top?

Am I missing something? I don't understand why they price UT in such expensive way. What market are they targeting? Who would buy a UT with such fees? And why?

 

[BBCWatcher]

Am I missing something? I don't understand why they price UT in such expensive way. What market are they targeting? Who would buy a UT with such fees? And why?

The simple answer is they can, that there isn’t enough competitive market pressure and aren’t enough informed investors to lower these fees yet. Why do people buy high cost ILPs? Why are personal care products are so expensive in Singapore? It’s the same basic reason.

 

[Kaypohji]

Hi, u mentioned to have international health insurance for those with pre existing conditions. Are international health insurance more lenient to accepting ? I’ve never heard of such method to get insured

 

[BBCWatcher]

Hi, u mentioned to have international health insurance for those with pre existing conditions. Are international health insurance more lenient to accepting ? I’ve never heard of such method to get insured

A few of them are, yes. Here's what Cigna says in their brochure, for example:

Pre-existing conditions

There may be some medical conditions that we agree to include at an additional premium. Our Underwriters will determine whether we are able to include a medical condition that would normally have been excluded. Where applicable, we will present you with a quote with the option to include the condition.

Without a pre-existing condition a 40 year old male citizen of Singapore living in Singapore buying Cigna's standard "Silver" plan with a 20% co-pay (up to a maximum US$2,000 out of pocket cost for covered services) would pay US$225.21 per month for worldwide coverage excluding the U.S. (Since it does provide near worldwide coverage you probably wouldn't need any travel medical insurance.) It's an excellent policy compared to Integrated Shield plans, though -- rather more comprehensive -- but as you can see it's also more expensive, and you cannot use MediSave dollars to pay for any of it.

Pacific Prime, the large health insurance broker in Singapore (and elsewhere), dedicates a portion of its Web site to pre-existing condition coverage. However, I would call or write them directly to explain your situation, see if anyone could provide coverage, and get a quotation. Their Web site's quotation engine isn't going to help too much except to give you an idea of minimum premiums (without pre-existing conditions), not actual.

 

[CarlJung]

What I never understood is, you buy a "local" IP for your health. You buy young to cover in case you lose your employer coverage and whatnot.
Then you develop a condition and at 50 yo you decided to go live in Thailand or any other country.
How do you cover yourself? How do you switch insurance to cover you in the new country if you have a condition?

 

[Kaypohji]

International health insurance but I think local one still can reimburse u? As long as u remains as sg pr or citizen and that the claim is within ur limit

This part I’m not sure

What I never understood is, you buy a "local" IP for your health. You buy young to cover in case you lose your employer coverage and whatnot.
Then you develop a condition and at 50 yo you decided to go live in Thailand or any other country.
How do you cover yourself? How do you switch insurance to cover you in the new country if you have a condition?

 

[celtosaxon]

Yes, the IRA generally holds U.S. situs assets, but hypothetically it could be structured (or restructured) as U.S. estate tax immune.

That is a good point, it probably does depend on the investment. I have read that being in a brokerage account versus bank account can also impact U.S. situs as well.

I need to keep things as simple as possible for them. They won’t understand any of this.

Can your spouse benefit from an estate tax treaty? There are something like 16 countries that have estate tax treaties with the U.S.

Nope, ASEAN country.

To some extent you might be able to make your estate plan “IRS proof.” For example, you include instructions in your will that your spouse will inherit up to (cite part of the tax code) or (fixed figure), whichever is lower, of assets that are subject to (cite other part of the tax code). This gets a little complicated of course, but I did a little bit of this in some instructions I left in another obscure area of tax considerations. Also, I believe you can split the Roth IRA between heirs if you wish to do so.

I have to face reality. My wife would probably just take the entire distribution in full the first year she got it, since it’s a smaller piece of our NIA. If they withhold 30% there is a real chance she would never claim it back.

My kids have the aptitude to do the RMD properly for 10 years, but may not have the patience or inclination... at least they wouldn’t have to worry about 30% withholding or estate tax avoidance.

 

[BBCWatcher]

What I never understood is, you buy a "local" IP for your health. You buy young to cover in case you lose your employer coverage and whatnot.
Then you develop a condition and at 50 yo you decided to go live in Thailand or any other country.
How do you cover yourself? How do you switch insurance to cover you in the new country if you have a condition?

International health insurance but I think local one still can reimburse u? As long as u remains as sg pr or citizen and that the claim is within ur limit.

Integrated Shield plans cover emergency care outside Singapore up to Singapore’s limits. They don’t cover medical evacuations or repatriations. There are a couple carriers that offer optional riders that start to expand the international coverage.

In my view the generally sensible approach is to maintain an “as charged” public hospital B1 ward Integrated Shield plan back in Singapore then insure in your country of residence. Keep the Integrated Shield plan in force while there’s any possibility you might return to Singapore — and you have to assume that if you don’t have a clear, durable, legal right of abode elsewhere.

That is a good point, it probably does depend on the investment. I have read that being in a brokerage account versus bank account can also impact U.S. situs as well.

I need to keep things as simple as possible for them. They won’t understand any of this.

Makes sense.