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Michael Bradley
Michael Bradley,
Category: Business Law
Satisfied Customers: 544
Experience:  Owner at The Protection Group LLC
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I am a Belgian citizen and I have a US card which I have to

Customer Question

I am a Belgian citizen and I have a US green card which I have to give up since I now will live outside of the US. I have a 401K which I am told I will have to liquidate since legally I cannot hold a 401K after giving-up my residency. What are the tax ramifications? Can I convert the investment into a tax deferred annuity?
JA: What state are you in? And have you consulted a local attorney?
Customer: I used to live in NY state, but now live in the Caribbean. I am in contact with an international lawyer
JA: Has anything been officially filed? If so, what?
Customer: no, not yet. I have my assets with Merrill Lynch, but they contacted me to tell me they will close my accounts since they no longer want to handle expat accounts.
JA: Anything else you want the lawyer to know before I connect you?
Customer: no, I think that's basically it
Submitted: 1 month ago.
Category: Business Law
Expert:  Michael Bradley replied 1 month ago.

You can roll over your IRA, 401(k), 403(b), or lump sum pension payment into an annuity tax-free. Annuities funded with an IRA or 401(k) rollover are "qualified" plans, enabling an insurance company to create an "IRA annuity", into which you can deposit your retirement funds directly.

Additionally, you can have your employer roll over your 401(k) funds into an annuity without withholding any taxes since no mandatory withholding requirements pertain to funds directly transferred into an annuity by an employer.

Expert:  Michael Bradley replied 1 month ago.

If you decide to roll over your IRA, 401(k), or lump sum pension payment into an annuity, will you be hit with a distribution tax?

A. NO. The reason you're permitted to roll over these payments into an annuity tax-free is because when you buy an annuity with IRA or 401k money the first thing the insurance company does is create an IRA holding account to receive your transferred funds.

So really buying an annuity with IRA money is the same as moving your money from its current IRA or 401k trustee to another IRA trustee. This kind of transaction is considered a "direct transfer" or a "direct rollover" which is tax-free. You will owe taxes on the monthly income you receive but not on the transfer.

Customer: replied 1 month ago.
But I am told by the broker that since I no longer am living in the USA I cannot keep a tax deferred account. Are you sure that I can legally hold a tax deferred annuity as a non US resident.
Expert:  Michael Bradley replied 1 month ago.

U.S. taxation of non-resident aliens’ U.S. brokerage accounts is sufficiently benign so as to make them comparatively attractive and globally competitive. Non-resident aliens are not taxed in the United States on capital gains in their brokerage accounts. They are also not taxed on non-U.S. source income, which includes almost all publicly traded bonds and the stocks of foreign companies. The income which is subject to tax is subject to federal withholding at a standard rate of thirty percent (30%). However, in many of the income tax treaties that the United States has negotiated with approximately seventy foreign countries, the treaty eliminates or provides a lower withholding rate for its tax residents. Even in countries with which the United States does not have such a treaty, the foreign investor may be able to apply a tax credit at home for the amount of tax withheld in the United States.

Expert:  Michael Bradley replied 1 month ago.

I am not seeing anywhere where you can not have such an account

Customer: replied 1 month ago.
Thank you
Expert:  Michael Bradley replied 1 month ago.

please rate my advice. While I do not do this for ratings, my compensation is tied to the rating system.

Thank you.

If I an assist further, please let me know.

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