Taxable Account in the U.S. vs. Japan
Taxable Account in the U.S. vs. Japan
I am a U.S. citizen and my wife is Japanese and we live in Japan. We are planning on retiring here as well. Currently my wife has a NISA and iDeCo through Rakuten which are maxed out. Since they are maxed out we would like to start a taxable account. I already contacted Vanguard and since I have a Roth IRA through them they said that it is no problem to open a taxable account even living in Japan. Of course my wife would also be able to create a taxable account through Rakuten. My question is what are the pros/cons and tax repercussions of my investing through Vanguard vs. her investing through Rakuten for taxable accounts. Would there be any reason to choose one or the other? Would investing in both simultaneously ever be advantageous? Thank you for your help in advance.
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captainspoke
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Re: Taxable Account in the U.S. vs. Japan
I guess I'd split it about half and half or so between taxable accounts in japan and the US, or along the lines of your respective incomes. One concern about going with only one or the other might be gift tax thresholds. Tho I don't know how the tax office here would look at it.
Pros might be diversification, and keeping you both in the game--paying attention to and discussing what you're doing in those different accounts--how to direct and balance them. If you both had accounts, then if one of you passes, you would each have your usual access to money, without needing to get an estate settled first. That's speculation, as I am not sure how that works here.
You mention retirement. How close is that? Would you maybe be moving/relocating then (and so needing some capital)? That might make a difference.
As an american myself (69), retired here and with a j-wife, I've wondered now and then if there are any concerns about inheriting her funds, which are most definitely PFICs. Maybe immediately liquidate those, or maybe somehow do that before I took possession?
These are just some rambling thoughts, not really advice. It'll be interesting to see what others say.
Pros might be diversification, and keeping you both in the game--paying attention to and discussing what you're doing in those different accounts--how to direct and balance them. If you both had accounts, then if one of you passes, you would each have your usual access to money, without needing to get an estate settled first. That's speculation, as I am not sure how that works here.
You mention retirement. How close is that? Would you maybe be moving/relocating then (and so needing some capital)? That might make a difference.
As an american myself (69), retired here and with a j-wife, I've wondered now and then if there are any concerns about inheriting her funds, which are most definitely PFICs. Maybe immediately liquidate those, or maybe somehow do that before I took possession?
These are just some rambling thoughts, not really advice. It'll be interesting to see what others say.
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RetireJapan
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Re: Taxable Account in the U.S. vs. Japan
Well, you as a US citizen pretty much don't have a choice: your best option is to invest in the US to comply with IRS regulations, etc.graben wrote: ↑Sat Jan 16, 2021 7:53 am I am a U.S. citizen and my wife is Japanese and we live in Japan. We are planning on retiring here as well. Currently my wife has a NISA and iDeCo through Rakuten which are maxed out. Since they are maxed out we would like to start a taxable account. I already contacted Vanguard and since I have a Roth IRA through them they said that it is no problem to open a taxable account even living in Japan. Of course my wife would also be able to create a taxable account through Rakuten. My question is what are the pros/cons and tax repercussions of my investing through Vanguard vs. her investing through Rakuten for taxable accounts. Would there be any reason to choose one or the other? Would investing in both simultaneously ever be advantageous? Thank you for your help in advance.
As long as your wife doesn't need to do a US tax return, it is much easier for her to invest in Japan, as tax reporting is incredibly easy and there is no need to convert yen to dollars, send it to the US, etc.
English teacher and writer. RetireJapan founder. Avid reader.
eMaxis Slim Shady
eMaxis Slim Shady
Re: Taxable Account in the U.S. vs. Japan
Would there be any disadvantage to having her invest all available funds in Japan and myself not investing? I am the only one working so all funds would be coming from my salary in Japan.
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Beaglehound
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Re: Taxable Account in the U.S. vs. Japan
I believe investing money you have earned in her name is Ok as long as you don’t go over the gift tax exemption of 1.1 million yen, as that money would be deemed as a gift.
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RetireJapan
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Re: Taxable Account in the U.S. vs. Japan
As beaglehound said, all the money you give your wife to invest would count as a gift, but the first 1.1m yen a year an individual receives is not subject to gift tax. Anything above this amount would be.
English teacher and writer. RetireJapan founder. Avid reader.
eMaxis Slim Shady
eMaxis Slim Shady
Re: Taxable Account in the U.S. vs. Japan
If he is paying major household expenses, any money his wife gives him towards these expenses doesn't count towards that gift amount.RetireJapan wrote: ↑Sun Jan 17, 2021 1:23 am As beaglehound said, all the money you give your wife to invest would count as a gift, but the first 1.1m yen a year an individual receives is not subject to gift tax. Anything above this amount would be.
Something to keep in mind.