Tax and Investing Pitfalls Greet Americans Who Move to Europe

“My business has been exploding. We try to do what a fiduciary advisor would do in the U.S.,” Levitt says. “But we have to work within the constraints of regulatory and investment issues that are different from those in the U.S.”

Levitt, a chartered financial analyst, helps his high-net-worth clients avoid pitfalls. They reside in 14 countries, mainly France. Italy and Germany round out the top three. Total assets under management are more than $550 million.

With many expats in or near retirement, he is focusing increasingly on estate planning.

As an RIA in Boca Raton, Florida, Levitt opened a Paris subsidiary in 2007. Seven years later, he closed the Florida practice and in 2022 moved to Nice and founded his French firm.

In the interview, Levitt, who was a partner in Evensky, Brown, Katz & Levitt for eight years before launching his own wealth management firm in 1998, notes that “certain investing techniques don’t work here.” The numerous differences, often complex, include dual taxation.

Here are highlights from our conversation:

THINKADVISOR: How’s business going with American expatriates residing in Europe?

ROBERT LEVITT: From the day I started my French firm, my business has been exploding. In France alone, there are 300,000 Americans and no other investment advisors who are specialists in U.S. citizens. So the opportunity is enormous.

We’re getting around four to five prospective clients a day. If I do a webinar or other promotion, I’ll get 25 prospects in a day.

THINKADVISOR: Indeed, more people are moving out of the U.S. Has this been prompted by Donald Trump’s presidency?

LEVITT: Yes. They’re finding the situation in the United States to be very divisive and don’t enjoy it there anymore — particularly people who are retired and looking for an opportunity to go overseas and live a little differently in an environment that has less divisiveness.

There has been a real exodus, especially in the last six months. It’s not just to France. It’s to the Netherlands, Portugal, Spain, Germany — anywhere in Europe.

There’s a huge movement of Americans to leave the U.S.

THINKADVISOR: What advisory approach do you use with your expat clients in France?

LEVITT: We try to do what a fiduciary advisor would do in the U.S. But we have to work within the constraints of regulatory issues and investment issues that are different from those in the U.S.

THINKADVISOR: What’s the biggest challenge to American expats?

LEVITT: Certain investing techniques don’t work here.

A trust is pretty much of a disaster in France.

The whole concept of charitable giving isn’t known, nor is the concept of life insurance to pay estate taxes. They think life insurance is annuities.

THINKADVISOR: What are you prioritizing right now?

LEVITT: We’ve been much more focused on estate planning issues because here, after $100,000, the taxes could be as high as 60%.

THINKADVISOR: What are the major financial pitfalls for U.S. expats?

LEVITT: One of the biggest is to have a revocable trust. They can be taxed on the income they earn and also taxed when the money is taken out — the distributions.

This is one of the real problem areas.

THINKADVISOR: What do your expat clients invest in?

LEVITT: Much of what we do is individual stocks. A lot of Americans have gotten used to ETFs and mutual funds. But if you live in Europe, you’re not able to buy ETFs or mutual funds. Those [vehicles] aren’t relevant for living in Europe.

So the second biggest [pitfall] is that people aren’t used to investing in individual stocks. They’re not used to investing in European companies, in trading in euros or Swiss francs.

THINKADVISOR: Please elaborate on why a trust would be “a disaster” in France.

LEVITT: People coming here from the U.S. have planned to put everything in a trust. But if you die in France, where there is no such thing as probate, your trust doesn’t help you; it just hurts you.

THINKADVISOR: Please talk about the income tax scenario for a U.S. citizen living in Europe.

LEVITT: Americans are paying taxes both in the country they live in and in the United States.

The [tax level] depends on the country. If I move to the Netherlands, they tax you as if you earned a 6% rate of return whether you earned 30% or lost 30%. If I move to France and buy U.S. stocks, then I pay taxes in France.

If I move to Denmark, the tax on my investment portfolio is 41% of unrealized gains.

THINKADVISOR: What’s another big difference in investing? 

LEVITT: Generally, if you were to say to someone, “I have a 401(k)” or “I have a Roth IRA,” they would have no idea what you’re talking about. A Roth is recognized only in France and the United Kingdom.

Also, you’ve got to get used to thinking, “I need to make money in euros now because I live in Europe and my bills are in euros” — and not just have your complete focus on the United States.

THINKADVISOR: What if you do have a 401(k) and move to France? What happens to it?

LEVITT: Nothing. You can keep it or roll it over to an IRA.

THINKADVISOR: There certainly are a number of differences nonetheless. But I suppose that helps you as an advisor. Right?

LEVITT: That’s why we specialize only in [serving] U.S. citizens. And the regulations are changing all the time.

For example, right now there’s legislation in Washington by Rep. Darin LaHood [R-Ill.] for changing the entire tax system, called residential-based taxation, which would allow an American abroad to opt out of the U.S. tax system.

Sometimes it would benefit them; sometimes it would be a detriment.

This came about because Trump mentioned that he wanted to eliminate double taxation on Americans abroad.

Whether it happens or not, I’m not sure. I expect it won’t pass now.

THINKADVISOR: You closed your Florida firm in 2014. Are any of those clients now moving to Europe?

LEVITT: A few are in the process. [My recommendation is] if you have a foreign stock, you [should] sell it before [you] move and pay the lower capital gains tax in the U.S. rather than bringing it to France, selling it here and paying a higher gains tax.

And if you have a trust, take out your marketable securities. Maybe it’s OK to leave in real estate, but nothing else.

We work with our clients on these things before they make the move.