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usperson1994

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The only slight "gotcha" is that if you were ever to end your U.S. citizenship then the exemption on your U.S. estate taxable assets falls to US$60,000. But you have reasonable options to mitigate that particular problem if/when it concerns you.

Would you mind elaborating on what options you had in mind here?
 

usperson1994

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I’ve explained in detail how the U.S. estate tax works in previous posts, so I’d refer you to those.

I browsed through the previous posts and it sounds like the advice is to either (a) arrange the Roth IRA such that it holds a basket of individual ADRs for the portion above US$60,000 in value or (b) not die (fingers crossed for this one) before a full withdrawal at age 60 or above.

On a related note of opening a Roth IRA, I tried calling up Schwab International and it seems they are not agreeable to U.S. Citizens opening up accounts from Singapore, even though I have a U.S. mailing address. I'm interested in opening up an account with either Schwab/Fidelity based on your fund recommendations but it appears neither is possible from Singapore. Would you happen to have any other recommendations?
 

BBCWatcher

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On a related note of opening a Roth IRA, I tried calling up Schwab International and it seems they are not agreeable to U.S. Citizens opening up accounts from Singapore, even though I have a U.S. mailing address. I'm interested in opening up an account with either Schwab/Fidelity based on your fund recommendations but it appears neither is possible from Singapore. Would you happen to have any other recommendations?
Try Firstrade. If you cannot open an IRA online, you should be able to open one via postal mail using their paper form, available here.
 

BBCWatcher

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Potentially Interesting Broker: Trading 212 Invest

I see there’s another broker available to residents of Singapore who are not U.S. persons: Trading 212 Invest, not to be confused with Trading 212 CFD.

I should point out up front that Trading 212 Invest has suspended new account opening due to current market volatility, but you can open a practice account to check them out in the meantime. They are U.K.-based, which means they are FCA regulated and offer a little government backstopped FSCS account insurance, up to £85,000 per account. They don’t charge any broker commissions (which means they sell order flow) even for London Stock Exchange trades, and isn’t that interesting! (Exchange fees might apply.) There’s no account minimum, minimum commission, activity fee, or custodial fee. So on the surface this broker seems like a good one for typical VWRA or IWDA monthly investing. They also offer fractional shares for at least some securities, and that’s interesting, too.

They don’t seem to offer any terrific way to start with Singapore dollars and convert them at low cost to U.S. dollars and/or other major currencies for investment. Your best bet appears to be a wire transfer, but your local bank in Singapore will charge a wire transfer fee. Evidently they don’t charge a currency conversion commission, but I cannot tell what their typical currency spread is. Also, there are certain circumstances when assets at a U.K. broker are subject to U.K. estate tax (confusingly called U.K. Inheritance Tax), so just be aware of those rules if you’re concerned about estate tax after you pass on.

It appears they don’t offer all listings in the markets they support, but they should cover everything with decent or better trading volume. They also offer a “light” roboadvisor-like feature called “AutoInvest & Pies.”

Has anyone tried Trading 212 Invest yet?
 

celtosaxon

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There is nothing stopping anyone from opening a Schwab or Fidelity account from their website if you have a U.S. mailing address and SSN. You don’t even need to use a VPN to mask your location.

I opened a Schwab account for my U.S. citizen children who have never resided in the U.S. and I know another U.S. citizen living in Singapore who opened a Fidelity account the same way. This all happened within the last year.

Openly admitting to being a resident of Singapore will open up a can of worms for the broker, and easiest way for them to close that can is to give you the boot.
 
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usperson1994

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There is nothing stopping anyone from opening a Schwab or Fidelity account from their website if you have a U.S. mailing address and SSN. You don’t even need to use a VPN to mask your location.

I opened a Schwab account for my U.S. citizen children who have never resided in the U.S. and I know another U.S. citizen living in Singapore who opened a Fidelity account the same way. This all happened within the last year.

Openly admitting to being a resident of Singapore will open up a can of worms for the broker, and easiest way for them to close that can is to give you the boot.

Both signup forms seem to suggest U.S. residence is required, is there no risk of Schwab/Fidelity finding out and closing the account?
 

BBCWatcher

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If you don’t like Celtosaxon’s suggestion (which is a bit dodgy), try Firstrade or TradeStation. Both offer IRAs, and both serve residents of Singapore.
 

celtosaxon

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If you don’t like Celtosaxon’s suggestion (which is a bit dodgy), try Firstrade or TradeStation. Both offer IRAs, and both serve residents of Singapore.

I don’t recall anything specific during the Schwab signup that made me feel like any deception or dodgyness was taking place. The basic KYC categories for U.S. accounts are USC, LPR and NRA, and any USC/LPR is going to be a “U.S. tax resident” no matter the country of residence.

Honestly, any U.S. broker who claims to be open to residents of Singapore are probably just uninformed and will likely reverse that policy as soon as they realize the can of worms they are opening. So, no matter which one you sign up with, I recommend keeping a U.S. address on the account at all times, which gives the broker some degree of safe harbor from international compliance risks.
 
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BBCWatcher

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As a friendly reminder, “Fear of Missing Out” (FOMO) is practically a religion in Singapore, but it’s deadly as an investment or even trading strategy. Please, just don’t. If you’re going to play games (not recommended, but if), learn to play them well. Consider “DFV,” the person who spotted a massive imbalance in how the market valued GME. DFV is a contrarian, not a follower.
 

usperson1994

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I don’t recall anything specific during the Schwab signup that made me feel like any deception or dodgyness was taking place. The basic KYC categories for U.S. accounts are USC, LPR and NRA, and any USC/LPR is going to be a “U.S. tax resident” no matter the country of residence.

Honestly, any U.S. broker who claims to be open to residents of Singapore are probably just uninformed and will likely reverse that policy as soon as they realize the can of worms they are opening. So, no matter which one you sign up with, I recommend keeping a U.S. address on the account at all times, which gives the broker some degree of safe harbor from international compliance risks.

How would I fund a Roth IRA from Singapore without opening said can of worms?
 

Listopad

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would like to hear your views on using term life insurance for legacy planning purpose. say networth in region of 11-12m (spouse and myself in our mid 40s, retired, port : 50/50 equity index/bonds split).

quotation from insurance firms as below for term life insurance till 99 years of age.
annual premiums for both, approx 45K p.a. for payout of $6m.

any comments , or considerations / pitfalls to above ?
 
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celtosaxon

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How would I fund a Roth IRA from Singapore without opening said can of worms?

You can fund your Roth IRA the same way that I have done every year since 1998... first I transfer money to my U.S. credit union, then log into my brokerage IRA account and make the contribution via ACH deduction from my credit union. If you haven’t made a 2020 contribution yet, you can still do so before April 15th 2021, and you can also make your 2021 contribution as well.

Technically, because my income exceeds the limit for direct Roth contributions, I make a non-deductible contribution to my Trad IRA account, then do the conversion to Roth (known as the back-door method). This also means I need to file one extra tax form each year to declare the non-deductible contribution and the conversion.

The only can of worms you need to be careful of — in order to make IRA contributions, you must have sufficient earned income to cover the contribution, over and above your foreign earned income exclusion and foreign housing exclusions. You can change the exclusions (if needed) to ensure there is enough. Penalties are stiff, so it is important to get that right.
 

BBCWatcher

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would like to hear your views on using term life insurance for legacy planning purpose.
What specific goals are you trying to accomplish?

You can change the exclusions (if needed) to ensure there is enough.
I know there’s at least one tax preparer who claims this technique (taking a partial exclusion) is OK, but I just don’t agree. The IRS very clearly instructs Form 2555 filers to report their “total foreign earned income” in Part IV if they file that form. Total means total; I see no wiggle room.

However, as we’ve discussed previously, the employer’s share of CPF contributions is reportable as part of gross income and is earned, but it doesn’t seem to be excludable (per hints in Form 2555’s instructions and an old IRS private letter ruling). Often that particular income alone will be sufficient for IRA contribution qualification purposes. Another possibility is that you may be able to “engineer” non excludable income via work performed while in the U.S.
 

Listopad

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What specific goals are you trying to accomplish?

i was playing around with my portfolio numbers. thought process is :

1) why not, with the added protection for my kids & dependents. With 45K annual premiums (which i would vest in index funds anyway), say a conservative 5% yield, it would also almost match the 6m insurance payout at age 90 and there is 'protection' throughout the years, as in a win if we die early. it's a "why not" ?

2) greater flexibility in terms of spending more during my lifetime (in the form of giving away to loved ones, supporting charity causes, etc), as i will have the CPF monies and term life insurance payouts of 6m , earmarked as inheritance for my children / dependents.

i can see why those universal life plans don't make sense given the large upfront payments but with term life, much lower premiums, payable annually throughout, may work out v well for legacy purposes ?

am i missing something?
 

celtosaxon

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I know there’s at least one tax preparer who claims this technique (taking a partial exclusion) is OK, but I just don’t agree. The IRS very clearly instructs Form 2555 filers to report their “total foreign earned income” in Part IV if they file that form. Total means total; I see no wiggle room.

However, as we’ve discussed previously, the employer’s share of CPF contributions is reportable as part of gross income and is earned, but it doesn’t seem to be excludable (per hints in Form 2555’s instructions and an old IRS private letter ruling). Often that particular income alone will be sufficient for IRA contribution qualification purposes. Another possibility is that you may be able to “engineer” non excludable income via work performed while in the U.S.

I agree, you are absolutely not allowed to change the amount of foreign earned income exclusion to whatever number you want. However, there is nothing that says you cannot choose the physical presence test even if you qualify for the bona fide residence test... and there is nothing that says you cannot choose a 12 month period that includes days outside of the current tax year... and each day outside the current tax year reduces the exclusion by 1/365th (or 1/366th for leap years). So working the form backwards you can determine the days needed, convert that to calendar dates for your 12 month period and presto - you have your desired exclusion, to the nearest 1/365th of the maximum exclusion.
 

BBCWatcher

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am i missing something?
Yes, at least a few things:

1. Lots of people live to see their 99th birthdays, and that percentage is increasing. If you want a miserable 99th birthday party, this is a great way to do it. (Just think about how much medical science will advance over the next HALF CENTURY.)

2. There’s a small risk the insurer will default.

3. There’s no liquidity with these policies.

4. You don’t control the timing even if the claim is payable.

5. You really, really don’t want to skip a premium payment. That is, you’re adding to your overhead.

6. There’s no inflation defense whatsoever. It’s a fixed nominal payout.

I agree, you are absolutely not allowed to change the amount of foreign earned income exclusion to whatever number you want. However, there is nothing that says you cannot choose the physical presence test even if you qualify for the bona fide residence test... and there is nothing that says you cannot choose a 12 month period that includes days outside of the current tax year... and each day outside the current tax year reduces the exclusion by 1/365th (or 1/366th for leap years). So working the form backwards you can determine the days needed, convert that to calendar dates for your 12 month period and presto - you have your desired exclusion, to the nearest 1/365th of the maximum exclusion.
Well, the IRS reserves the right to knock you out of the FEIE completely with such antics, as I read it. To knock you out unless and until you succeed in getting a private letter ruling to reinstate the FEIE. However, I think you avoid this slight risk if you have some physical U.S. presence.

My recollection is that this stuff is moot in usperson1994’s case due to employer CPF contributions, fortunately.
 

zoneguard

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1) why not, with the added protection for my kids & dependents. With 45K annual premiums (which i would vest in index funds anyway), say a conservative 5% yield, it would also almost match the 6m insurance payout at age 90 and there is 'protection' throughout the years, as in a win if we die early. it's a "why not" ?

Why not use CPF as a bequest vehicle?
1. 45K can be split between the two of you and VC into CPF 3 accounts under the annual limit 37,740. At 50 onward, the ratio flowing into SA is higher.
2. Compounded over 45 years, it turns into 5.6 mil assuming 4% yield. Could be lower depending on whether both of you manage to execute SA shield at 55.
3. It rides on CPF and the nomination scheme so no fees to pay to insurer and no need to pay the lawyer for drafting the will.
4. Default risk is lower than insurer's default.
5. ERS is raised every year so there's another avenue to stash more money into CPF for yourselves/children/dependants.
6. Enhanced Nomination Scheme means the bequest can even be in the form of CPF transfers to your children's accounts.
7. You can stop the VC anytime and the monies don't stop compounding inside CPF.

Am I missing anything?
 

BBCWatcher

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Am I missing anything?
Yes, a little. An "all three account" Voluntary Contribution won't yield as high as 4% since much of the VC ends up in the CPF Ordinary Account earning 2.5% interest.

However, you're on the right track I think. What's wrong with keeping MA maxed out, keeping RA maxed out, and prudently investing the rest? (And where is this $45,000/year coming from anyway?)
 
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zoneguard

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Yes, a little. An "all three account" Voluntary Contribution won't yield as high as 4% since much of the VC ends up in the CPF Ordinary Account earning 2.5% interest.

However, you're on the right track I think. What's wrong with keeping MA maxed out, keeping RA maxed out, and prudently investing the rest? (And where is this $45,000/year coming from anyway?)

45K is the premium Listopad needs to pay for the term insurance.

I got another idea if you want to push the yield closer to 4%. Do cash top-ups to the children's SA from the 45K starting today. Once FRS is reached, resume the VC to parents' accounts.
 
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