Expatriates or expats are individuals who live and work outside of their home country. They may relocate for work or personal reasons and often face unique financial challenges. One of the biggest challenges is choosing a good jurisdiction for savings. Capital market controls and death in country systems can cause probate and estate planning issues for expats. This blog post will discuss the reasons why expats should choose a good jurisdiction for savings, with a focus on the risks and challenges faced by expats working in emerging markets. The article will reference Brazil, the UAE, and Malaysia as examples of emerging markets where expats may face specific challenges.
I. Risks Faced by Expats in Emerging Markets a. Capital Market Controls
- Emerging markets often have strict capital market controls that limit the ability to move money in and out of the country. This can make it difficult for expats to access their savings when needed.
- Capital market controls can also limit investment opportunities, making it difficult for expats to diversify their portfolio and achieve their financial goals.
- Examples: Brazil, which has strict currency exchange regulations, or the UAE, where the Central Bank imposes limits on foreign currency transfers.
b. Death in Country Systems
- In many emerging markets, the legal and regulatory framework for inheritance and estate planning may not be well-established.
- Expats may face additional challenges because they may not be familiar with the local laws and procedures.
- Examples: Malaysia, where Islamic inheritance law applies to Muslims, or Brazil, where probate and estate planning can be complex and time-consuming.
II. Choosing a Good Jurisdiction for Savings a. Access to Capital Markets
- A good jurisdiction for savings should offer access to a range of investment opportunities, including stocks, bonds, and mutual funds.
- It should also have a well-established regulatory framework that protects investors and ensures transparency.
- Examples: The US, which has one of the largest and most well-regulated capital markets in the world, or Singapore, which is known for its strong investor protections and regulatory framework.
b. Estate Planning and Inheritance Laws
- A good jurisdiction for savings should have clear and well-established laws and procedures for inheritance and estate planning.
- It should also recognize and enforce foreign wills and trusts, to ensure that expats’ assets are distributed according to their wishes.
- Examples: The UK, which has a well-established legal framework for inheritance and estate planning, or Switzerland, which recognizes foreign wills and trusts and has a well-developed private banking sector.
III. Mitigating Risks in Emerging Markets a. Seek Professional Advice
- Expats should seek professional advice from a financial advisor, lawyer, or tax expert to understand the local laws and regulations.
- They should also consider working with a wealth manager or private bank that has experience working with expats in emerging markets.
- Examples: A Brazilian lawyer or tax expert who can advise expats on probate and estate planning issues, or a Singapore-based wealth manager who can provide access to a range of investment opportunities.
b. Consider a Jurisdictional Arbitrage Strategy
- Jurisdictional arbitrage is a strategy that involves taking advantage of the differences in regulatory and legal frameworks across jurisdictions.
- Expats can consider holding their savings and investments in a jurisdiction that offers better access to capital markets or more favorable estate planning laws.
- Examples: A UK-based expat who chooses to hold their savings in a Swiss bank account, or a Malaysian expat who invests in US-based mutual funds.
Conclusion: Choosing a good jurisdiction for savings is essential for expats who want to mitigate the risks of capital market controls and death in country systems. Emerging markets present unique challenges.