....but I have a few questions at the back of my mind because of my unique spousal situation.
It's not unique. Plenty of non-U.S. persons are married to U.S. persons.
I am a true blue Singaporean, non-US person. I've spent too much time studying and working in the US and married a US person.
How much time is "too much time"? I'm asking for a specific, tax-related reason.
1. For my situation, for someone who might move back to the US, how would you advise my ES3 vs IWDA allocation? Should it remain a 50/50 or a heavier tilt towards IWDA 60/40 or even 70/30?
If the odds are that you'll retire in the United States, there's no compelling reason to have much ES3 at all. Keep in mind that IWDA includes a dash of Singapore listed stocks already, and, moreover, Singapore listed stocks include what amounts to an Australian telco. (Singtel's revenues are more Australian than Singaporean, and that's the largest stock in the STI.)
Just before you move to the United States -- that's
before, please note -- you'll want to come out of IWDA and move into SWISX, for example. Under current U.S. tax rules, a new immigrant (that'd be you) becomes subject to U.S. capital gains tax when stepping foot in the U.S. (ordinarily), and the cost basis is set to
when you acquired the asset, not the date of entry into the U.S. So you very much want to reset the cost basis on any appreciated assets before you land, and switch over to on shore analogs. IWDA maps to SWISX quite nicely, and you should be able to make that shift via Schwab's office in Singapore
before you get on the plane to immigrate.
Off shore funds are not appropriate for U.S. persons, and I could probably use stronger language. Your spouse should avoid them, and you should come out of them before immigrating.
2. For having a US spouse, is there any advantage or disadvantage investing in IWDA using IB?
Yes, for tax optimization reasons across the household you should be assuming the potentially highest yielding assets, so piling into IWDA (or VWRD) makes sense. Your spouse might want to take on the more conservative elements of your household investment portfolio...except for her U.S. Individual Retirement Account (IRA) contributions.
OK, I need to explain that one. I'm assuming she files her U.S. taxes as "Married Filing Separately." You actually have the option to join up with her and file a joint U.S. tax return ("Married Filing Jointly"), but it's a little complicated and let's leave that aside. If you're real curious about it, I can explain it later. OK, assuming she's Married Filing Separately and living in Singapore, she'll undoubtedly take what's called the "Foreign Income Exclusion." If she's getting a relatively high, or higher, income from work that's above her Foreign Income Exclusion (and her Foreign Housing Exclusion), then she is eligible to make at least nondeductible Traditional IRA contributions. And she should. Traditional IRAs can be rolled over into Roth IRAs, and most probably she should also do that. Her IRAs should also hold the potentially highest yielding assets, since those IRAs are U.S. tax advantaged.
If she has a relatively high income from work and is starting to surpass the Foreign Income Exclusion, then it's a really good idea if she pays housing expenses, specifically things like rent and the electricity bill. That's the stuff that boosts her Foreign Housing Exclusion, and that's helpful.
Your wife is subject to an annual gift limit of US$152,000, excluding her payment of your medical, educational, and some other expenses which are generally unlimited. Meaning, if she gives you US$152,000 (or more), or some equivalent, then she has to file a U.S. gift tax return. She isn't taxed on that gift, but it does dig into her lifetime estate tax exemption. But the U.S. estate tax exemption is US$11.2 million currently, and that's a lot. She can leave up to that amount to you (or to anyone), estate tax free.
What else....? If she's a CPF member, let me know since that's really odd for U.S. persons. If she's getting life insurance from her employer then the portion of the life insurance benefit above US$50,000 -- the premium value for that part of the insurance -- has to be treated as U.S. taxable, earned income, unless she puts a letter on file with her employer indicating that the life insurance benefit in excess of US$50,000 be paid to a U.S. IRS qualified charity. I think employer-provided life insurance is also taxable in Singapore, at least to some extent, so maybe that's not a problem.
She'll want to check her U.S. Social Security earnings history. In particular, she ought to check whether she's hit the 10 year/40 quarter credit mark and is qualified for Medicare. If she has reached that point -- if she sees in her online statement that she has qualified for Medicare -- then that's good news for both of you. That'll mean, in addition to U.S. Medicare eligibility at age 65, she qualifies for a future Social Security retirement benefit (perhaps a modest one). And even if you don't have enough quarter credits to qualify for retirement benefits on your own, you will still qualify for a spousal benefit which is ordinarily half her monthly benefit. (See how it pays to marry an American?
)
I would hang onto any low cost U.S. financial products, if possible. If she has a low cost U.S. credit card, she can add you as an additional/supplemental card holder, and that's probably a good idea since that'll keep a U.S. credit history going for you, if you otherwise don't have a U.S. financial footprint.
If you were assigned a U.S. Social Security Number (probably), it's yours for life. Don't forget it. SSNs are useful.
It takes several months, and often a year or more, for a U.S. citizen to bring his/her spouse into the United States as a permanent resident. If you think you might need to move back to the U.S. with your spouse on a shorter timeline than that, then your spouse could file a USCIS I-130 petition to sponsor you for immigration, now. Then, when the I-130 is approved (after a few months), all she needs to do is contact the U.S. National Visa Center at least once every 12 months (every 11 months works) to keep the approved visa application "on ice," and stop the NVC from automatically closing the file. That can be done indefinitely. When you're ready to move to the U.S., you then use the approved I-130 and proceed to the visa processing stage.
If you have an approved I-130 "on ice," and if you travel to the U.S. for a short stay with ESTA visa waiver privileges, you might get a question when you enter about that status. Something like, "Are you moving to the U.S. today?" You just need to be clear that you're NOT entering the United States with the intent to immigrate
on that trip, but, sometime in the future, only after your visa is approved, you will immigrate. As long as you can keep all that straight and answering truthfully (if that's the truth), you're fine.
If you decide to buy a home in Singapore, or anywhere else for that matter, you have to give some thought whether your spouse should be co-owner or not. Sometimes you and she don't have a choice, with a mortgage lender and/or the U.S. IRS deciding that ownership question for you. But just be aware that U.S. persons are subject to U.S. capital gains tax, and that includes real estate gains. Fortunately there's often a US$250,000 capital gains exemption on a primary home, and that's calculated net of costs. Stamp duty, remodeling, closing costs, etc. are legitimate costs. Half a primary home means the after cost gain would have to be above US$500,000 to drive some taxable capital gains, and that's a lot, but it's not an astoundingly high number.
3. Is there any tax issue if I passed on that my US spouse should be aware of if I invest in IWDA with IB?
I don't think so, but she'll want to move IWDA into the U.S. in the event you predecease her and your estate passes to her, simply because off shore funds are not appropriate for U.S. persons. (The U.S. tax treatment is less favorable, and I'm being a bit kind.) The U.S. does not have an inheritance tax, so no tax is owed with the transfer itself. I believe the cost basis is reset when the estate passes from you to her, so that's good. She will have to file a piece of paper that simply reports the gift/inheritance from a foreign person (you), but that's all it is (a report).
