#552 – The Expat Files: Moving with Family to Latin America, Childcare, Safety, and Tax Renunciation

Automatically transcribed from the original recording; names and wording may contain errors.

[00:00] South of the border down Mexico way That's where I fell in love when the stars above came up to play and now I wonder Hello there all you expat wannabes. I'm Johnny Mueller and you're listening to the expat files living in Latin America The show that tells you just what it's like to live work play and or retire down here in Latin America It's a mix of the good the bad the ugly and the great and it's all right here. So let's get started Today we'll start out with an interesting email. That's entitled Consults and curiosities. She says hey Johnny. I'm very interested in moving our entire family to Latin America But and this is a big but I never hear of whole families moving

[00:46] It seems it's always the young single people usually men empty nesters or retirees, etc Anyway, we are a family of four my husband me and two little kids ages three and a half and 18 months We live in a nice suburb of Denver five-bedroom house two-car garage a dog and Ermid homestead Kinda that is we grow a big garden and have chickens. We have nearly everything we need So I rarely drive more than 10 minutes to anywhere seems idyllic, right? Yuck Fact is I'm exhausted from just working constantly feeling like I've got no time and never a vacation Childcare costs more than most people make in a month And I just know there has to be a way to live a more relaxed life and not spend everything we make

[01:32] Question Johnny do people with families move to Latin America to what resources are around for child care What about the schools and what about Latin America? Is it truly safe? My husband and I are both advanced in the martial arts, but we can't be right next to our kids 24 7 I do see the opportunities for us there I have two internet businesses now and a BA in psychology so I could teach English for a while While we were getting situated and building a network. Just listen to that episode you had on the gringo advantage for teaching English My husband is a glazer Meaning commercial glass installation his alter ego is spider-man by the way Not sure if that skilled trade exists there seems it may be just a standard construction job there and here it's a well-paid trade

[02:19] Would love to come to your July seminar But it's out of the question as for now as I'm pouring all into building businesses at the moment It would be great if you had a non first world hotel stay option for your seminars I backpacked in Peru for a month and stayed in a hostel. That was just fine I don't always need to travel fancy anyway I would love to hear an episode on the expat files concerning these issues. Thanks and keep up the fun and no-nonsense show Signed be as in the letter B not as in Aunt B from Andy Griffith Anyway, she sounds too young and feisty to be an old Aunt B. That's for sure Aunt B. Now. There's an image, huh? I don't think she was much of a martial artist, but I wouldn't want to get in the ring with her anyway

[03:05] Let's hit these points here first. Yes. Do people with families move to Latin America? Whoa, I can tell you this I've had some young parents come down to my Latin American insiders seminar and that was the first step in their plan B They went back home got things together and came back down with the family So yes, I personally know a number of families that have moved down here permanently with their kids Of course and one family even came down with the kids and grandma And of course when they came down with the family after the seminar They rented for a while and their main idea was exactly the same as our emailer B To have a nice house some land somewhere outside a big city and have dogs chickens art barks Whatever and grow some of their own food Homesteaders basically in fact if you do come down to my expat insider seminar

[03:51] I'll put you in touch with those people and you can find out exactly what their steps were and how they did it what? to do what not to do and gain some extremely valuable insights and tips firsthand that you'll never get by just Searching the internet and checking out blog sites and that's what's so great about the seminar You get an instant network of friends and expats that have gone through what you plan on going through shortly Which is why by the way John Galt calls his website the new expat comm he came down as a brand new expat And now he's got three and a half years into the venture and guess why he came down that very first time To come to my seminar, which is why fresh green expats could learn a lot from him That's why people say you get a two to five year head start on becoming an expat just by coming down to the seminar

[04:37] I didn't make that up. That's what people are saying so if the best thing about the seminar is meeting all those like-minded people as Well as getting an instant expat and professional network to lean on well That's not all not by a long shot people have told me they think the second best thing about the seminar Is that they learn what not to do how not to make those stupid costly mistakes? So many fresh green expats make when they first get down, but I digress as usual Let's get back to the email then be asked what resources are available in Latin America regarding childcare Whoa practically every gringo and expat family I know has a maid in a gardener and some families with kids have live-in nannies in fact another family That's down here now permanently that first came to one of my expat insider seminars

[05:25] They've got one kid around two years old and the wife's pregnant again They live in a very nice guarded gated community and they have a gardener come in once a week They've got a maid that comes in two times a week and they've got a full-time live-in nanny Now the mom said she tried it both ways She had a nanny come in every day from around 7 in the morning to 4 or 5 at night with Sunday being the nanny's But eventually the mom decided to have a full-time live-in nanny that way the kids is taking care of 24 7 by the way The expat lady said that her husband was not involved in the nanny selection process until the very end Only after she interviewed and selected some ugly and homely ones was he involved in the final selection process? Smart lady huh now get this she pays her live-in nanny around 250 bucks a month

[06:13] And of course the nanny gets room and board now B says in Colorado Childcare costs more than most people make in a month So be how does 250 bucks a month sound to you oh and by the way down here in Latin America If you wish your nanny will double as a cook and housekeeper, too In fact, they're so used to doing all three you probably won't be able to stop her from cooking and cleaning now about schools I've talked a lot about that in past shows But just to mention that you could send your kids to one of those high-end Private helicopter schools as I call them. They're completely bilingual and sometimes trilingual Usually around 25 to 50 percent of the teachers are from the states by all accounts kids get a terrific education and classes are so Small you won't believe it in fact a friend of mine gringo expat with the family down here

[07:00] Told me that his kid is in a class of 14 and they have four teachers at all times Two who speak in Spanish all the time and two who speak nothing but English because well they're gringos and their Spanish sucks But that's what they're there for to teach in American-style English So what are these schools cost well the very highest most elite schools will run around three to five hundred dollars a month Now remember your kids will be rubbing elbows with the kids of the rich and famous and the movers and shakers in Latin America They're the one or two percent that can afford to send their kids there Whereas for a gringo of three to five hundred dollars a month to send your kid to the most elite school is not a deal-breaker However, your kid will be friends and best buddies with many spoiled entitled rich kids with bodyguards, etc Which is both good and bad on the positive side with the gringo advantage

[07:48] Your kid will certainly be a superstar at that school not to mention. He'll be socially positioned in the stratosphere forever Why because your kid will be friends with and connected forever with the movers and shakers in his Latin country On the other hand those little rich kids tend to be racist classes and elitist just like their parents. Hmm sound familiar Anyway, you've got those high-end helicopter schools then in every market There's maybe another dozen or so middle priced private K through 12 schools The difference is they don't have gigantic luxury campuses Just a few first-world gringo teachers and not nearly as many it entitled rich kids They're a hundred percent bilingual, of course and of good quality yet They only cost between maybe two and three hundred dollars a month Oh, and by the way, there are more options

[08:35] For example, another expat family whose father attended one of my expat insider seminars They moved down permanently about a year ago and they're very intelligent mother home schools They're three kids and she did that when they were back in the states, too She's an expert at it So all you expat gone to be someone to be some families up in the states That mother is definitely a person you want to network with if you come down here to Latin America So you can see there are lots and lots of options and then be asked in her email Is it truly safe in Latin America? Well, I always like to say that there are really two Latin Americas The one you see on TV up in the states with the gangs and the tattoos and the scummy Disgusting neighborhoods that house the people with nothing to lose who eventually end up in the states and then they become your problem

[09:20] Then there's the Latin America that smart expats live work play and or do business those places that are nearly first world In fact, if the signs weren't all in Spanish and the people were a bit taller You'd think that you were in a nice upscale neighborhood in your own community So yes in every Latin big city There are a lot of places you want to keep away from but there are just as many nice clean safe places, too By the way, you've been to Harlem the south side of Chicago East st. Louis or Atlanta, Georgia lately How about East LA Cleveland Philadelphia or New Orleans? In fact, did you know that New Orleans has a higher murder rate per capita than the majority of the cities in Latin America? But let's move on. So then B says her husband is a skilled glazer That's a commercial glass installer kind of a real-world spider-man and sure there's big construction projects going on all over the place down here

[10:10] In fact, it's a great big bubble Meaning that very shortly when it busts there won't be much construction work or architectural work for anybody So unless he's got some particular extraordinary skill, I wouldn't put my eggs in that basket By the way, the other day I got an email from a contractor up in Canada. Yeah those Canadians again Asking me how they could build houses so cheap in Latin America As I mentioned if you know what you're doing You could easily build the first world style house for 25 to 35 bucks a square foot Whereas up in the States the national average is a hundred and twenty five bucks a square foot That's four or five times as much. So how can it be so cheap to do the same thing down here? Well, first of all, there's no basements here Construction is all cement block rebar and plaster real plaster by the way

[10:58] Not drywall unless you go really cheap, which is not recommended. Then there's no Insulation used here not in walls attics doors or even around water pipes The houses have almost no air conditioning or heating ducts Why because the climate's so nice, of course, and here's something very few people know They don't have screen doors in Latin American houses Just one main solid decorative door and as far as window screens. Well, they're just starting to come in now They never had them before five years ago Oh and as far as windows and such almost no one has double or triple pane glass. It's all single glazed That goes for skylights too. And since your average grunt worker on the job makes only around 300 bucks a month that's why you could build a 2,000 square foot house down here for under a hundred grand or one of a thousand square feet for under 50 grand not

[11:48] Including the lot of course. Okay, and finally B says regarding my expat insider seminar She would love to come but she says it would be great if there was a non first world hotel option She said she backpacked through Peru for a month and stayed in a hostel. That was just fine Well, I guess she's referring to the fact that we stay at rather first world hotels at the seminar basically I settled on first world hotels because a lot of people have never been out of the US or never been to a Latin Country because so many of them are stepping into the unknown and don't know much Spanish I'd like them to have a nice soft landing from the start and thus we stay in three and four star hotels However at one of my very early seminars, I gave people the option to stay at a hotel that was called the Quetzalru It's a highly rated hostel in Guatemala City close to everything safe and I believe for a single

[12:39] It's less than 20 bucks a night Whereas the three and four star hotels run close to a hundred bucks a night Now as much as I like to keep the group together at the same hotel Because then we're always running into each other all the time and it's a great place to network There is still that option out there for anyone who wants to come down and do it backpackers In which case I can discount the seminar fee by about 500 bucks So there is a backpacker option if you don't mind sharing a bathroom with a bunch of people You don't know if you've ever done the backpacker thing, you know what I mean That said if you want to go backpacker style, I can recommend a hostel That's been rated number one in the whole country by TripAdvisor I've seen it and it is rather nice except for that shared bathroom thing I guess it's like how people feel about saliva your own

[13:24] Well, that's perfectly okay, but someone else's yuck Anyway, the point is to get your plan be underway before it's too late And you can do that with me and my expat insider crew Saturday, July 9th through Thursday, July 14th Just go to www.thenewexpat.com click on Johnny's 2016 seminar link at the top of the page for full info and sign up details and Remember if you sign up before May 1st, you get a $500 per person early bird discount When one more thing if you do decide to come down make sure you make some time immediately before and or after the seminar For those two amazing pre and post seminar trips that John Galt is organizing again Okay. Now as promised here's part three of my interview with Vince Wilhelmina the online tax man calm

[14:12] So direct from Medi in Colombia. Let's talk about expats and their taxes All right, Vince, let's start off by talking about some mundane things like for example What are the filing dates for expats? First off for the 2015 season, it's actually pushed back to April 18th. Oh, that's just because the 15th falls on a weekend April 15th 18th is is when normal people file But if you're an expat and you owe money to the IRS, you know, maybe through pension You would have to pay by the 15th of April, but you're actually filing deadline is June 15th And that's an automatic extension. There's no sort of filing that you have to do or extension You have to fill out and if you do not make the June 15th deadline, then you could apply for another extension through October 15

[15:00] Those are the three deadlines And the only other thing I was going to say was for the FFR for reporting your foreign bank accounts That's actually due June 30th. That deadline is actually set to change next year There was a rule passed that said that it could be filed either April 15th to June 15th or October 15th Starting next year the deadline of the FFR will actually correspond to the deadline of when you file your taxes Now I noticed you mentioned earlier something about when normal people file their taxes And we know most people up north think expats are kind of crazy. Not me I like to think we're slightly ahead of our time I say just give it a year or two and we'll see who's still dancing on the deck of the Titanic and who's waving from that tropical paradise onshore Anyway Vince an interview like this wouldn't be complete without asking what you charge for basic tax preparation for expats

[15:51] Just to give you an idea. I mean everything's flat fee. It's really just based on Forums and schedules need to be filled out if you have enough bar if you have real estate Whatever if you have questions, feel free to ask I'm obviously here to help and then based on kind of my understanding of your situation Then we would give you a flat fee. The first step is a free consultation. There's no obligation It's just a matter of us talking you asking questions me asking questions and then I'll give you a quote Then you would I assume direct them to download all the necessary forms, etc. Right? Yeah So then if they were to sign up we have like questionnaire they would upload all the forms onto our secure portal So you say first is a free console then what about for later questions?

[16:37] You do those by email or by Skype or what? I mean it can like the fall stuff Like I said, it's all included in that initial price But most of it is on email just cuz generally it's one or two questions, etc So it's kind of easy for both of us if somebody is doing something complicated, right? Like maybe they're starting a business. I'm fine with getting on the phone I think it all just kind of depends on the level of complexity. Most stuff could be answered via email, but some stuff can So do you want to be called Vince or Vincenzo or possibly Vinny? Hey, it worked for Joe Pesci, right? I mean, whatever happened to my cousin Vinny. I was thinking about the other day. Like what happened to Joe Pesci? I'm always a classic. Yeah, I agree. But just talking about it kind of shows our age, doesn't it? Now Vince, there's one question that's been coming up more and more lately about Americans renouncing their citizenship

[17:27] And of course the tax consequences for doing so and the odd thing is Before five years or so ago Nobody really talked about it once in a while You'd read about some high-profile case in the newspaper like Tina Turner or the guy from Facebook who had dual Citizenship Brazilian in the US and he renounced and save what half a billion dollars in taxes something like that But now it seems with fat guy and all the extra reporting requirements Some Americans and people with dual citizenship have just had it and they're announcing now It's not like they're renouncing in great droves either I mean before five years or so ago only maybe a thousand or two would renounce a year, but now it's going up Exponentially and mostly it looks like with people who've got dual citizenship Let's say you've got US and Canadian citizenship

[18:14] If that's the case the US government can and will pry into your financial affairs and often surprise you with a heavy tax assessment And you know if you do renounce, there is a stigma attached to that People think you're unpatriotic and view it as kind of a slap in the face to the US government or worse However, I can't think of anyone who deserves a slap in the face more than the US government or at least all of its greedy puss-brained bureaucrats and politicians anyway Oh, and by the way, I saw a Latin with a cool t-shirt the other day. It said the meek shall inherit the gulag I'm sure he had no idea what it meant that said in your own tax practice Have you any clients that have renounced and what kind of crap does the government put you through in order to achieve that? I mean as far as the process is concerned. It's actually it's pretty straightforward

[19:01] You have to go to the embassy you set an appointment with the embassy Yeah, and I understand while you're there you fill out a questionnaire with one of the points being why are you renouncing? And then this year anyway, you pay a twenty three hundred dollar fee. Is that right? It actually used to be free Then it used to be like a few hundred dollars and then once the renunciations became quite popular Then the United States government decided to say hey, it's privileged to renounce. So you're gonna have to pay us for it So then what so you have to go to the embassy submit the paperwork showing that you you're renouncing and it's not because of taxes It's not related any sort of financial means, you know Maybe having a closer connection to the country where you live feel a closer connection to us. You don't have relatives or something there I mean, there's a number of reasons for doing so I think the biggest thing to know is to not say you're doing it for financial

[19:50] purposes Say what so even if you are renouncing for tax purposes, and I'm sure probably most people renounce for that reason You're supposed to tell them that you're not renouncing for tax purposes So then what happens if someone and does write on that form that they're renouncing for tax purposes or because they don't want to file Suppose they're brutally honest on the form and say they've just had it with blood-sucking IRS parasites Suppose they say on that form. They just want out of a terribly rotten system I've never seen a person because I've always schooled people appropriately In fact, I know a couple people who've renounced and they were also told the same thing Never to say on the form that it's for tax purposes and they were advised to keep their mouths shut to and be civil

[20:35] So again, you have to play their game to the very end. It looks like so now they charge a $2,000-some-dollar fee and of course you have to be compliant up to that point, right? What are some of the other details? We should know about yeah, I mean again You have to be compliant the last five tax years for the most part technically if you're not compliant You can still renounce, but then you would be a covered expat And so what a covered expat is if you have over two million dollars in assets It's as if you have to sell all of your assets the day of renunciation So you have to value all the assets of that day Which is easy if it's stock or mutual funds or whatnot because you can easily see the value But if it's some sort of real estate Etc and you literally have to get an appraiser and get a value for it and the point being is you do a fictitious sale

[21:24] Of these assets and then you pay an exit tax on that sale that exit taxes like capital gains And so this only applies to people that have over two million dollars and the first two million dollars is quote-unquote tax-free Anyone upwards of that two million pay tax of those assets that are hypothetically sold Now after one renounces I understand you get a certified piece of paper from the State Department saying that you're no longer a US citizen You've renounced and that's the paper you show banks when you open up a bank account Proving you're no longer a US citizen and thus are able to open up a foreign bank account Since in the last few years practically all foreign banks have refused to accept US citizens as clients Yeah, you get a loss of citizenship document which you can present that says you're no longer US citizen

[22:14] And you're right that could be used to open up bank accounts, etc Now I understand once you're issued that document you better hold on to that thing Maybe get it laminated and make some very good copies because if you were to lose it somehow It's murder getting that thing replaced. The US government really has no obligation anymore to put you on any kind of priority list In fact, I've heard because you renounced anything you have to do with the US government from then on you pretty much get the brush off So you say you have clients that have renounced did that act to present any particular problems for them? There was one guy that did have an issue given getting back in the States once you renounce But that actually had to do with the fact he had committed a crime before like when he was still a citizen With being a convicted felon, but obviously that's a very unique situation. Most people again

[23:03] They're allowed to get their visa to go back. They're allowed to see their family, etc So on this case where this guy had a felony I suppose they don't have to let any felons into the US right unless of course a few hundred thousand wanna sneak through The southern border. Oh, no, that never happens In fact, just saying that could be construed as profiling or even a racist statement Just ask Bernie Sanders or Hillary, but I digress. Anyway, what happened to that guy? Now as mentioned previously when someone renounces They actually have to get a visa to enter the US after that That means they have to go to a US embassy or consulate in a foreign country and apply for a visa

[23:49] Tourist or otherwise like everyone else now There are rumors that when you renounce and you go for that visa to see grandma or go to a funeral or something Your friendly US embassy immigration officers aren't quite so friendly anymore They look at you with a jaundice eye as if you spit on or burn the American flag or something It's a tough decision for a lot of people right and it's emotional decision Some of that works for the embassy that represent our country abroad You know, maybe feel a resentment for somebody that gave up this citizenship. I could see them not improving with this So then what is your feeling on where this is heading and what are your recommendations? I think this is definitely heading in that direction I think more more people are announcing again more more inquiries, etc And of course people will lean on expect tax guys like you for advice on whether to renounce or not

[24:39] I'm sure oh and here's a question. Can you legally avoid paying that exit tax if you have more than 2 million bucks in assets? Let's say they do have over 2 million dollars in assets. They might be able to renounce and Invite the exit tax into a foreign trust Etc. So then there is a way to avoid at least some of the exit tax if you put it in a foreign trust But you have to do that way ahead of time. I suppose right right up to 5 million That's 3.4 million dollars of exit tax savings. So if you have a lot of dough like that Are you taxed strictly on the capital gains? It's capital gains. Well, it depends on the asset. It is a straight corner from capital gains rate But obviously they're long-term capital gains. They're short-term capital gains

[25:26] There might be other tax rates if people have their assets like collectibles and gold and all that sort of thing So we have to kind of pro-rata calculate per asset what the tax rate would be and submit the 8854 form the day of Renunciation and their values to calculate the size of tax So then if a person is gonna renounce do recommend they divest themselves of everything up in the states You know pay the tax and all that but not own anything anymore up there. Just vote with your feet and get the hell out Yeah, man. I think if you have a business in the states, you know You might not want to renounce just yet because obviously you're gonna go back to states You know if you have a lot of investment in the states, you know real estate, etc Because actually as a foreigner quote-unquote someone's gonna be a foreigner if they're announced the foreigner having a business in the states or having

[26:13] Certain in compressing as it's like real estate. You actually have inheritance tax if the property is over $60,000 So you're saying when you're announced now, you're a foreigner So you may have to pay inheritance taxes if your own property worth over 50,000 bucks in the states again I mean, you know put someone at risk for inheritance tax if they're not residents So people have to really look at their situation both tax-wise and figure out Okay, how much money am I gonna be saving how am I gonna be receiving the reporting requirements what the potential exit tax might be Consult your your tax advisors, you know Make sure that you're you understand the tax applications and even some sort of tax planning Like I said with potentially a foreign trust a foreign trust So yeah, you folks with real dough out there. You're what he said a foreign trust

[27:01] So Vincent that kind of wraps things up and if we have any more questions We'll get a hold of you for whatever new tax situations for expats that might come up. Okay, sounds great. Thanks Vince No, I enjoy it So again his website the online taxman.com Okay, we're at the end of the show now So let me remind you to go to my youtube channel Just plug in expat files or the expat files to see the slides that go along with the audio and don't forget to subscribe It's free south of the border You've been listening to the expat files living in Latin America coming to you twice a week from somewhere south of the border email me the expat files at gmail.com and if you want me to help you sort out your own Latin American plans schedule a

[27:50] One-on-one consult with me. Just send an email and let me know at the expat files at gmail.com. Nos vemos