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Cross-Portfolio Investment Optimization
While non-U.S. investors and non-citizen spouses present obstacles for certain common traditional estate planning tools (e.g., joint ownership), knowledge of U.S. situs rules can be utilized to con-struct family portfolios that are particularly U.S. income tax and U.S. estate tax efficient. Despite its importance, cross-portfolio investment optimization is something that is seldom discussed in a meaningful way, much less implemented effectively.

In addition to optimizing after-tax returns, a holistic approach involving all of the various accounts available to cross-border investors (brokerage, IRA, etc.) can also help with transfer taxes. For example, to return to the aforementioned global family from earlier (U.S. husband, French wife, and child living in Germany, with two U.S. children from husband’s prior marriage living in the U.S.), the tax-conscious financial plan can go beyond the routine suggestion of a QDOT, and actually design investment portfolios that will minimize potential income and transfer taxes in a comprehensive wealth management strategy. The U.S. husband’s portfolios might be over-weighted in certain asset classes including U.S. stocks or ETFs, while his wife’s portfolio might be overweight bonds, international equities, or non-U.S. ETFs).

This approach can allow for superior after-tax returns to help achieve important lifetime goals and greater wealth transfer to heirs. Solutions can even be modified with sophisticated ownership structuring (e.g., the wife might own securities through a trust or offshore company), all designed with the assistance of legal and tax advice from competent consultants in the relevant jurisdictions. Indirect ownership can be a particularly effective means for non-U.S. persons to own U.S. real property, too.