Introduction and Speakers
Peter Calabrese (00:05):
Hello, welcome. My name is Pete Calabrese. I’m CEO of CanAm Investor Services. CanAm is one of the largest and certainly most successful regional centers in the history of the EB-5 program. CanAm Investor Services is our wholly owned broker-dealer affiliate. We have the great pleasure today of being joined by Mr. Paul Fegan and Mr. Jason Auerbach from Navis Wealth. Paul, Jason, welcome. Thank you for joining us.
Jason Auerbach (00:29):
Thank you.
Paul Fegan (00:30):
Great to be here. Thank you.
Why Financial Planning Matters Before Your EB-5 Investment
Peter Calabrese (00:33):
Today we are going to talk about the planning that goes into an EB-5 investment from a wealth advisory standpoint. We talk all the time about how large, personal, and intricate an EB-5 investment is. We often address it from the immigration perspective. What I think is equally important, and does not always get the attention it deserves, are the steps that need to be taken before you make this investment and before you potentially come to the United States. Paul and Jason are here to walk through some of that planning and the steps you can take to be better prepared for your ultimate transition through an EB-5 investment to the United States. Maybe you could start by telling us about Navis and what you do.
Paul Fegan (01:32):
Navis Wealth Management was founded in 2018. We are a multifamily office helping clients with financial planning, investments, taxes, estate planning, insurance, and anything else that touches your financial world. Personally, I have over 20 years of experience in cross-border planning. I have worked extensively with the U.S. tax system and how it integrates with foreign countries, whether or not a tax treaty is in place. That coordination matters enormously because it determines whether you can maximize available opportunities in both the U.S. and your home country tax codes.
Jason Auerbach (02:20):
Given Paul’s background, EB-5 fits naturally into what our firm already does. This was a genuine fit, and we appreciate the opportunity to partner with CanAm.
The Two Critical Issues Before Making an EB-5 Investment
Peter Calabrese (02:38):
There are steps that can be taken once you arrive in the United States, and we will touch on those. But what matters most is the planning that happens before someone moves forward and makes their EB-5 investment. If you had to name the two main issues that prospective EB-5 investors should understand before they apply, what would they be?
Issue 1: Worldwide Income Taxation
Jason Auerbach (03:10):
The first thing someone needs to understand is that when you become a resident alien in the United States, your entire worldwide income becomes subject to U.S. taxation. That is the most important fact. Even a small pension from your home country must be reported in the United States. Your reporting obligations here will be different from what you are used to at home, and you need to understand that from the start.
Issue 2: Overseas Assets and PFICs
Jason Auerbach (03:48):
The second issue is understanding what kinds of assets you hold overseas. If you have a pooled asset, such as a mutual fund or an ETF, that is what the United States calls a Passive Foreign Investment Corporation, or PFIC. If you hold overseas investments, you need to understand the U.S. tax consequences of keeping them. Most pooled assets outside the U.S. do not report income information back to the United States, so the U.S. tax system takes a very unfavorable view of them and assumes more income than you may be aware of. There are reporting requirements, and if you do not comply, you could face significant taxes and penalties. Those are the two primary issues. Beyond them, there are estate planning and other considerations Paul and I can address.
Paul Fegan (05:03):
Even on the income tax side, if you have an operating business in your home country, such as a factory or other operating entity, there are structures we can put in place between the United States and that entity to minimize the tax impact on you personally. If you are not drawing income from the business and the money is staying inside it, we can use a type of corporation to shield that income from U.S. taxes. You would only be liable for taxes on money you actually take out. There are real workarounds available for particular business structures.
Jason Auerbach (05:49):
Paul makes a good point that brings us back to the core message: when you are thinking about coming to the United States, the first thing you should do is plan. What are the impacts on your current assets and income? And what will your financial situation look like once you are here? Planning is the number one priority.
Avoiding Unnecessary Tax Obligations
Peter Calabrese (06:16):
I could not agree more. Everyone wants to come here and be a good citizen, pay their fair share, and do things properly. But what you do not want is to create obligations that have no bearing on your situation and that could have been addressed through proper planning. What are some of the types of income or assets that people may not realize are subject to U.S. taxation, and what can be done to protect against unnecessary exposure?
Real Case: The $20,000 Pension
Paul Fegan (07:18):
People get caught up in these situations very innocently. We had a client who received a small pension from their home country. It was less than $20,000 a year and fell below the reporting and taxation threshold there. He assumed that if he did not pay taxes on it at home, he did not have to pay taxes on it here. He never told anyone about it. He lived in the United States for 10 to 12 years and then mentioned it in passing: I have this small $20,000 pension. His accountant had to tell him they had been preparing his taxes for a decade without knowing. He was not trying to evade anything. He simply did not realize. And in his case, there was actually a tax treaty that would have allowed him to get a credit in his home country, so the net impact would have been manageable. The lesson is: just because something is not taxed at home does not mean it is not taxed here.
Real Case: Indian Investment Properties and Inheritance
Jason Auerbach (08:19):
The most common thing we encounter is not deliberate concealment. People simply do not think about certain assets. We had a client from India whose mother owned several investment properties that he was set to inherit. He never disclosed them because she was still alive and the properties were in her name. He did not think it was relevant. But those properties were going to generate income, and if that income is not properly reported in the United States, the penalties and fines can be severe. The United States takes a very broad view of what must be reported. That does not mean you cannot minimize your tax exposure, but you are still required to report, and that is the critical piece.
Paul Fegan (09:36):
We can only help minimize the tax burden if we know the full picture. With that client, there was a straightforward way to address it through his mother’s planning. But if we had not known in time, once the assets transferred into his name, the problem would have been much harder to fix. Once the government is aware of an asset, they ask a lot more questions. Early disclosure opens options that are no longer available after the fact.
The 20% Overseas Ownership Rule
Jason Auerbach (10:15):
A useful example comes from a Supreme Court case that received significant attention. If you own more than 20% of an overseas corporation, even if you are not receiving any distributions and the company is profitable, you will have a pro rata U.S. tax obligation on the company’s income. You can owe U.S. tax even though you never received a dollar. The details matter enormously. Whatever professionals you work with, give them as much information as possible. Proper reporting and planning does not mean you will face a large tax consequence. It means you can manage it.
PFIC Penalties: Up to 50% of Holdings
Jason Auerbach (11:15):
To illustrate the PFIC issue concretely: imagine you hold a $1,000 S&P 500 Spider ETF. That is a standard, plain vanilla investment that millions of Americans own without issue. But if you hold that ETF as a foreign national and do not properly report it to the United States, your taxes and penalties could reach up to 50% of your holdings. The reporting requirements are strict, and the stakes are high.
Working with Cross-Border Experts
Peter Calabrese (11:59):
This speaks to the importance of working with the right professionals. We make this point constantly with EB-5 clients: you need an EB-5 attorney, not just any immigration attorney, because the petition is highly specific. The same principle applies to financial advisors. If you are coming to the United States, you need someone who specializes in cross-border planning, someone who knows the right questions to ask, including the questions you do not know to ask.
Real Case: Asian Bank Closed Accounts in 30 Days
Jason Auerbach (12:42):
Here is something most people do not anticipate. Paul and I were recently working with a client in an Asian country who informed his bank that he was planning to become a U.S. resident alien through the EB-5 process. The bank told him they could not work with him and gave him 30 days to close his accounts. Many banks have reporting requirements that kick in when they have more than 99 American citizens or resident aliens among their clients. The compliance burden becomes too large. If you are considering EB-5, you need to understand how your banking relationships may be affected.
Paul Fegan (13:32):
In that case, they were personal accounts, which was manageable. But if they had been business accounts with active payments flowing in and out, it could have created a serious disruption. Again, planning is the answer.
Protecting Overseas Assets: Individual Stocks vs. Pooled Investments
Peter Calabrese (14:16):
Are there pathways your clients commonly use to protect their overseas assets as they come to the United States?
Paul Fegan (14:16):
On the investment side, the PFIC issue arises from pooled vehicles. The workaround is to hold individual stocks or bonds rather than funds. You can replicate an index by purchasing the underlying stocks individually in your account. That structure is not a PFIC under U.S. tax rules. There are also a small number of funds, typically with high minimums, that do dual reporting under both their home country tax laws and U.S. tax standards. They exist, but they are not easy to find. The cleanest solution, if you plan to come to the United States permanently, is to bring the bulk of your investment assets here. For assets you cannot move, such as operating businesses, there are other structures we can work with.
The Retirement Plan Problem
Paul Fegan (15:35):
One area that consistently surprises people is foreign retirement plans. In the United States, we are familiar with 401(k) accounts. If you have the equivalent in your home country, it is typically held in a pooled vehicle, and you usually cannot withdraw it without penalties below a certain age. From a U.S. tax perspective, that plan is treated as a PFIC, and you are taxed on the appreciation year over year, not when you take it out. People do not think about it because it is a retirement account they do not intend to touch for 20 years. But it still creates an annual tax reporting obligation, and in most cases it cannot easily be moved to the United States. Careful planning around foreign retirement plans is essential.
“Measure Twice, Cut Once”
Jason Auerbach (16:19):
There is a great quote from construction: measure twice, cut once. That applies directly here. When you are thinking about coming to the United States through an EB-5 investment, you need to check everything and double-check it. There are so many small details that can catch you off guard. That is why we always recommend having an in-depth conversation with a financial advisor and tax planner in the United States before you begin the process.
Real Case: The Oil Executive
Jason Auerbach (17:08):
An oil executive came to us who had always had their taxes handled by their corporation overseas. When they came to the United States, things were fine initially. But then the executive went back overseas while the spouse remained in the United States. The corporation was no longer handling the accounting properly for U.S. purposes, and the spouse had unresolved U.S. reporting obligations. And when the executive eventually returned, there were additional overseas asset implications to work through. The complexity compounds over time. The right question to ask is: what should I know that I do not know?
Estate Planning Considerations
Peter Calabrese (18:06):
We have covered a lot of tax ground, and that is a big part of it. But it is not the whole picture. Estate planning is equally important. You may be coming with your whole family, but the timing of when different family members arrive can vary as people wind down businesses overseas. What are the key estate planning considerations that EB-5 investors should understand?
Coordinating Estate Documents Across Countries
Paul Fegan (19:05):
One of the first things we recommend is carefully reviewing any wills and estate planning documents from your home country. Ideally you have a single document that covers both your U.S. and your foreign assets clearly, so there is never any ambiguity. If that is not possible, you want to make sure the two documents are aligned. If one document says your estate goes equally to three children and another says one child gets 50% and the others 25% each, that creates serious confusion about what you actually intended. Beyond the documents themselves, your estate tax exposure and which assets are included in your taxable estate depend heavily on whether you are classified as a U.S. resident or non-resident at any given point in time. That is why coordinating your accountant, your U.S. estate attorney, and a planner is so important throughout the process.
Green Card Holders Are Not U.S. Citizens
Jason Auerbach (20:29):
Most people assume that once they receive a temporary or permanent green card, they are treated like U.S. citizens for estate and tax purposes. They are not. As a green card holder, you do not get the unlimited marital deduction that U.S. citizens receive. If something happens to one spouse, the assets do not pass free of estate tax to the surviving spouse. There are tools to address this, such as what is called a qualified domestic trust, or QDOT. A QDOT is a legal structure that can replicate some of the benefits a married couple would have if both were citizens. But it requires deliberate planning.
Real Case: The Conference Room
Jason Auerbach (21:30):
I was at a conference once with approximately 30 resident aliens in the room. I asked how many thought that holding a green card was equivalent to being a U.S. citizen for legal purposes. About 90% raised their hands. These were people who had already completed the EB-5 process and were living in the United States on temporary green cards. Even those who had been advised had a mistaken impression about how their estate needed to be structured. We see this constantly. People arrive without realizing the gap, and then we have to work backward to make corrections.
Jason Auerbach (22:22):
Consider someone who arrives on an F-1 student visa, transitions to EB-5, receives a temporary green card, then a permanent green card, gets married, and has children. If they have not been working with the right advisors throughout, three to seven years can pass with an estate that is not properly structured. The risk accumulates unintentionally.
Issues Upon Arrival in the United States
Peter Calabrese (22:52):
These are all broad concepts, and every investor’s situation is unique. But for those who have made their investment and are now preparing to come to the United States, what are the biggest issues they will face on arrival?
Banking Relationships and KYC
Jason Auerbach (23:32):
The most immediate question is: who will work with you? Which banks will accept you as a foreign national? U.S. banks are required to perform Know Your Customer (KYC) and Source of Wealth (SOW) verification. Establishing source of wealth when the money originates overseas is difficult for many institutions, and some banks simply choose not to work with foreign nationals. You need to identify the right banking partners before you arrive. Similar questions apply to mortgages, car financing, life insurance, and other financial products. The U.S. financial system offers tremendous access and opportunity, but it requires finding the right counterparties within it.
Life Insurance for Foreign Nationals
Jason Auerbach (24:52):
If you are a foreign national seeking life insurance in the United States, only a small number of companies will be willing to underwrite a policy for you. They need to verify your assets, your net worth, and your income, and most cannot do that easily for someone whose financial history is overseas. Finding those firms requires specialized knowledge. Your situation will also change significantly over time: someone arriving as a family unit on day one has very different needs from someone who transitions from a student visa to EB-5 to permanent residency over several years. Each situation is highly individual, which is why working with advisors who understand foreign nationals specifically is so important.
Paul Fegan (25:48):
There is a lot that can be done ahead of time. There are very few things you can do after the fact.
The U.S. Financial Ecosystem
Peter Calabrese (25:56):
Our clients are some of the most sophisticated high-net-worth individuals you will encounter anywhere in the world. But the U.S. financial ecosystem is enormous and highly diverse. The products and structures available here are largely unfamiliar to people arriving from other countries. That is not a criticism. It is simply a different market. There are products and institutions within it that are very much available to foreign nationals, and learning which those are, and who within those markets will work with you, is a critical part of your preparation.
“Dropped in a Foreign Town”: The Financial Language Barrier
Jason Auerbach (27:05):
I like to think of it as being dropped in a town where you do not speak the language. How do you find a place to sleep? How do you find a meal? In the financial context, the language is U.S. tax law, estate rules, and banking requirements. Most Americans do not fully understand their own financial system. Imagine what it is like for someone arriving from another country. The right advisors serve as translators.
Closing: Ask the Questions You Do Not Know to Ask
Peter Calabrese (27:47):
The worst thing to live with is avoidable regret. We are all human and we all make mistakes. But for people coming to the United States as foreign nationals, many of the pitfalls are predictable. Prior planning and proper management can eliminate most of them. Paul, Jason, are there any final points you want to share?
Paul Fegan (28:30):
Stay flexible. When you come here, your circumstances will evolve. Your children may have plans that differ from what you anticipated. You will likely have a foot in two countries for many years. Build a structure that can adapt to changes in either place.
Jason Auerbach (29:11):
Transparency and openness are the most important things. The more you tell your advisors, the more they can help you. Some people hold back information because they fear a tax consequence, but that fear is often unfounded. Reporting something does not necessarily mean you will owe more. It means you can plan properly. We cannot plan for what we do not know.
Peter Calabrese (30:00):
Fantastic. There are still many questions our audience will have. But the core message is this: go into this process knowing that you need to ask the questions you do not know to ask. What are my tax obligations when I arrive? How can I protect my estate? How do I plan for this transition properly? CanAm is always here for questions, and Jason and Paul are equally available. We are grateful for your time today.
Jason Auerbach (30:53):
We appreciate this opportunity. This is a tremendous program that creates real opportunity for people who come to this country. We are proud to be part of it and proud to be part of the CanAm team. Thank you.
Peter Calabrese (31:11):
Thank you both. Thank you, Paul. Thank you, Jason. We look forward to speaking again soon.
Jason Auerbach (31:17):
Thank you.
