Maxim Knowledge Library

The use of hedge funds for average investors

Given that hedge funds are an increasingly talked-about investment class, we thought we should provide you with our thoughts on hedge funds and the challenges of finding good ones...especially for the merely wealthy with less than $10m in assets.

U.S. investment bias for Americans living internationally

We at Maxim believe strongly that while the U.S. is still a very strong and important economy, it's standing as the dominant economic engine of the world is eroding and therefore all investors should begin to view the U.S. as simply one component of a globally diversified portfolio.

An explanation of structured investments

Given the popularity of structured investments (also called notes or products) in Europe and Japan, and their growing use in the U.S., we thought it would be important to explain them to our readers.

Our take on market timing and speculation vs. investing

We thought you would like to know our philosophy related to market timing and speculation. In short, no thank you!

Six Keys to Successful Investing

A successful investor maximizes gain and minimizes loss. Here are six basic principles that may help you invest more successfully.

Do I pay double tax if my income exceeds the Foreign Earned Income Exclusion?

I frequently get questions about what happens when your wages exceed the amount of the Foreign Earned Income Exclusion ($87,600 for 2008). A common misconception is that you will then need to pay "double" tax - to the US and also to the country where you are living.

Reporting Foreign Bank Accounts to the IRS

If you had a foreign bank account or any combination of foreign bank accounts in 2007 that exceeded $10,000 (in total) at any point in the year, you need to submit Form TDF 90-22.1, Report of Foreign Bank Accounts.

How is the Sale of a Foreign Personal Residence Taxed in the US?

One of the most common issues I see (and probably the one with the most impact) is the taxation on the sale of a foreign personal residence.

Offshore Pension Basics

Many expats end up with a bit of savings while living outside the US. In addition, moving around to different countries and working for many different companies can leave expats feeling left out (or at least confused) when it comes to pension plans and social security benefits.

IRS and Tax Treaty Partners Target Liechtenstein Accounts

The Internal Revenue Service is initiating enforcement action involving more than 100 U.S. taxpayers to ensure proper income reporting and tax payment in connection with accounts in Liechtenstein.

The sad truth about retirement withdraw rates

There has been much research conducted on the recommended withdrawal rate from a nest egg once in retirement. Most research points to a maximum acceptable annual withdrawal level of between 4%-5% of net financial assets (excluding primary residence).

U.S. Expatriates: Two Sets of Needs, Two Sets of Investment Goals

For Americans abroad, investing can be especially complicated. In addition to the usual asset-allocation calculus, expatriate Americans must consider the consequences of two tax systems each of them likely to apply different rules to earned and investment income, capital gains and pension savings - and two currencies, the dollar and whatever they pay their bills in at the moment.

Is a Foreign Mortgage Worth the Risk?

Anyone who has asked me knows I am no fan of investing in real estate in Western Europe at the moment. One of the biggest risks I see (aside from the fact that real estate prices have not "corrected" yet in many cities) is a little-known IRS law concerning taking out a mortgage in foreign currency.

Should I be Investing in Currencies?

"Investing" in currencies is a non-starter. It is more correct to call it speculating. Currency fluctuations are notoriously hard to predict and can move very fast in any direction. Unlike stocks, which have a natural upward trend due to steadily rising economic growth (except maybe right now!) and corporate profits, currencies can have decade-long stretches of movement in one direction.

Death and Taxes Respect No Borders

For multinational families, advanced planning teams look for global solutions.

Let's say you have long-time clients - a Boston-area couple in their early 60s - who plan to retire soon from their respective Fortune 100 executive positions and spend most of their time overseas at their second home in the south of France. They also want to be closer to their children: a son living in Madrid who is married to a citizen of Spain and a grown daughter now residing in London.

Exit Tax for U.S. Expatriates to Become Law

Giving up your U.S. passport will now come at a very high price. A new law signed by President Bush on June 17, 2008 (H.R. 6081) will subject certain people who decide to expatriate or turn in their green cards to an immediate exit tax.

Moving Money: A Guide to International Wire Transfers

The best and most common way to move currency from country to country is through a wire transfer. Wire transfers are electronic bank to bank transactions. They can be initiated directly from your bank or other financial institution, such as your investment brokerage house.

5 Financial Steps to Take Before Moving Abroad

Planning a move to another country is an exciting, but daunting undertaking which requires significant planning and preparation. There are many things to consider; where you'll live, where your children will go to school, arranging compensation agreements, and so on. So it's not surprising that new expats often fail to arrange their financial lives properly before making their move. This can be a costly mistake.

Where to Hold your Investment Assets While Living Abroad

We advise American expats to hold their investment assets at a large, reputable US brokerage firm. There are several reasons why we recommend this, including:

The World of Estate Planning for US Expatriates

None of us is immune to the challenge of trying to understand the ever-changing tax picture that confronts U.S. Citizens living, working and investing domestically. The nuances and burdens of Alternative Minimum Tax, evolving State tax laws and the estate tax landscape in flux are all but examples of this phenomenon. U.S. expatriates, however, remain subject to all such basic rules while abroad (based upon the principle of taxability founded on U.S. Citizenship), but are also impacted by rules specific to their status as expatriates, in addition to being subject to foreign tax laws. In this way, an already complex tax profile can become thoroughly confusing! Understanding the interaction of these various tax rules, however, is critical to managing tax exposure and to avoiding double taxation.

IRS Highlights ‘Dirty Dozen’ Tax Scams

WASHINGTON - In an update of an annual consumer alert, the Internal Revenue Service urged taxpayers to avoid falling victim to one of the "Dirty Dozen" tax scams and a variety of other schemes.

Questions to Ask When Hiring an Investment Advisor

Who you hire to manage your money is one of the most important decisions you'll make in your life, so take it seriously. We recommend you interview more than one advisor, and listen to your gut. Below are some interview questions you may consider asking when interviewing a potential advisor. We've also included some guidance on what sort of answers to listen for.

US Taxation of Foreign Currency Gains or Losses

U.S. tax treatment of gains or losses from exchanging U.S. currency for non U.S. currency (and back) is that the gain or loss on the currency exchange will be taxed the same as the underlying transaction.

How the Emergency Economic Stabilization Act of 2008 Affects Individual Taxpayers

On Oct. 3, 2008, the President signed into law the Emergency Economic Stabilization Act of 2008. Although virtually all of the press coverage of this law has concentrated on its hotly debated $700 billion financial industry bailout plan, the legislation also contains scores of tax changes, mostly beneficial, for individuals and businesses alike.

Real Estate: Tax Deferred Exchanges

When your tax deferred investments reach the point where there is a need to sell them, you may be able to defer taxes even longer with a tax deferred exchange. This tax benefit does not apply to all types of investments, but it's worth considering if you own real estate, life insurance contracts or some types of hard assets.

Some Tips for Investing Offshore

U.S. persons who venture offshore for better investment opportunities are also subjected to more complex and costly tax accounting. In some cases, the added costs of accounting for foreign investment transactions can wipe out the gains in a small or modest size account and can greatly reduce the rate of return on larger accounts.

Offshore Tax Evasion

Foreign persons often find it difficult to understand the concern of U.S. taxpayers and tax professionals regarding tax evasion because the U.S. is reputed to be one of the few major countries in the world where tax evasion is a criminal felony. In many or most other countries it is a misdemeanor and tax evasion is commonplace.

Offshore Investments

One of the most common reasons for investing outside the U.S. is to have access to foreign investments. In addition, those who seek asset protection through foreign entities will need to consider investing some of their assets offshore. However, there are numerous special tax rules in the U.S. tax law that are intended to deter U.S. investors from venturing outside the U.S.

Asset Protection Scams and Schemes

A common assumption about protecting your assets from judgment creditors is that you can somehow just hide your assets somewhere. First of all, that clearly won't work for immovable assets such as your home, your business, your pension plan and any investment real estate. Secondly, if you attempt to hide movable assets such as cash, stocks, bonds or other securities, you will have to commit perjury under oath.

Reporting Secret Offshore Accounts

For those who have waited until now to decide what to do with old-time offshore secret accounts, is the "handwriting on the wall?" Is it time to declare the previously secret income and pay the taxes, plus interest and penalties?

Offshore Accounts: Secrecy versus Privacy

Sometimes financial secrecy and privacy can be achieved with the same device, but most of the time, the use of some asset protection entities will reduce your privacy and create more exposure of your financial affairs. Most of the lawyers who actually do a lot of asset protection work advocate full disclosure to the various tax agencies and any other regulatory agencies.

Tax Rules for Offshore Banking

As far as the U.S. tax law is concerned, U.S. citizens and permanent residents are required to report any income from foreign bank accounts. The fact that the income is not reported to the IRS on an information return does not alter the legal duty of the U.S. citizen/resident.

Taxation of Foreign Mutual Funds

One of the most confusing aspects of foreign investing is the difference in the treatment of foreign investment companies, mutual funds and unit investment trusts as compared to U.S. based mutual funds. To understand the problem, it helps to begin with a basic explanation of the tax treatment of U.S. shareholders of a mutual fund in the U.S.

Foreign Earned Income and Housing Exclusions for U.S. Expatriates Abroad

The TIPRA Act of 2005 changed the rules regarding the claim of the Foreign Earned Income and Housing Exclusions for expats. The Housing Exclusion claim has been scaled back, and the housing cost limits are now customized by location. We have found that given these new rules, there are situations where the taxpayer is better off without claiming any exclusion tax relief at all.

New Rules for Taxing Gain on Former Second Home or Rental Home – 2008 HERA

The 2008 Housing and Economic Recovery Act (HERA), H.R. 3221, included a provision that modifies the application of the $250,000/ $500,000 exclusion, but ONLY in situations in which an individual who owns a second home or rental home converts it to use it as his/her principal residence. When the former second/rental home is sold, some portion of the gain may be taxable, even when the owner has lived in the home for the required two of the previous five years.

Foreign Nationals in the U.S. Real Estate Market – Know Your Ground

Many foreign nationals living in the U.S. are attracted to investing in residential real estate. Before purchasing property in the U.S., however, it is important to plan carefully in order to avoid a series of tax and legal traps. This article seeks to outline the key planning issues and junctures that the sensible foreign national investor should consider before purchasing property in the U.S.

Do Your Homework Before Choosing an Advisor

In the aftermath of the financial-market crisis, investors are leaving Wall Street to sign on with independent investment advisers. Investors seeking to repair their damaged nest eggs say the chief lure of independent advisers is more-objective guidance. To hire an independent who suits your needs, you should consider how much you have to invest, how much you can afford to pay and whether you want someone to oversee your entire financial life, or just pieces of it.

Avoiding Tax Traps with Short-Term Assignments

If you go on overseas assignment and stay in the host country for less than 183 days, you don't have to pay tax in that country, right? Well, actually the answer is: sometimes.

Many folks will remember the 183-day rule, but often they do not quite know why or how. But it sure lulls many international short-term business assignees (and their managers) into a false sense of security that as long as they are in the other country for less than that magic number of days, thinking they will be exempt from that country's tax.