In the November 2025 issue of Trusts & Estates, Joan K. Crain, global wealth advisor at J Crain Consulting, offers a thorough explanation of the complexities involved when your client is considering a second home abroad. Below, we’ve distilled the most actionable insights for financial advisors.
Your client is dreaming of owning a second home abroad. Whether a Parisian apartment, a Tuscan villa or a jungle hideaway in the Yucatan, as their financial advisor, you’re committed to creating a plan to help her reach that goal.
But its complexities are real. From immigration rules to tax obligations, policy hurdles, financing issues and estate-planning considerations, navigating them requires a multidisciplinary approach. You’ll need to assemble a team of experts, including an immigration specialist, local tax counsel, a U.S. international tax advisor, estate-planning legal counselors on both sides and a local real estate professional with the right reach and reputation.
Renting vs. Buying Abroad
Suggest clients try renting to test the location before committing capital. This can be a wise choice, given that foreign real estate markets can be opaque: listings might not be online, neighborhood dynamics shift seasonally and infrastructure (that is, parking or air conditioning) might disappoint.
Assist clients with screening jurisdictions early to identify potential regulatory hurdles. For example, many countries restrict foreign buyers or impose surcharges. Switzerland enforces federal quotas; Australia, New Zealand and Canada limit existing home purchases and add taxes. Mexico requires coastal properties to be held via a bank trust (fideicomiso). Some jurisdictions penalize part-time owners with vacancy fees or entity-based taxes.
Residency vs. Citizenship
Help clients distinguish between expatriation and extended stays. Expatriation involves renouncing U.S. citizenship and can trigger exit taxes and long-term consequences. Most clients opt to retain citizenship and seek legal ways to spend time abroad.
Short stays often fall under tourist visas, with limits like 90 days in any 180-day period in Schengen countries or six months in the United Kingdom. Longer stays typically require residency visas, which often necessitate proof of income, health insurance and a background check. Some countries offer digital nomad visas for remote workers, but the employment rights associated with these visas vary.
Tax Implications
Remind clients that they are subject to U.S. income tax on worldwide income and must comply with foreign reporting requirements. While tax treaties and foreign tax credits offer partial relief, gaps remain, such as the inability to offset the net investment income tax with foreign credits.
Residency abroad can trigger local taxation on worldwide income. Many countries use a 183-day rule, but thresholds vary. Spain considers the location of the principal home; Switzerland may tax after just 30 or 90 days. If clients aren’t tax residents, they’re typically taxed only on local-source income.
Caution clients that living abroad often increases complexity and could raise overall tax burdens. Cross-border mismatches are common with taxes. Investments favored in one country could be penalized in another.
Financing And “Quiet” Costs
Remind clients of the financing challenges. U.S. lenders rarely finance foreign properties, and foreign banks could hesitate without local credit history. Clients often use U.S. lines of credit to fund cash purchases abroad. Currency risk and exchange fees can add volatility.
Emphasize the importance of due diligence. Clients should verify the title, check for liens and inspect the infrastructure, ideally with the assistance of local legal counsel. Renovations could be slow and costly due to labor norms, preservation rules and permit requirements.
Help clients budget for “quiet” costs. Carrying costs include local property taxes, surcharges, and insurance. These vary by country and are often nondeductible on U.S. returns.
Estate-Planning Implications
Explain the estate administration challenges of owning property abroad. A local (situs) will—drafted in the local language and aligned with the client’s U.S. estate plan—can expedite probate and prevent conflicts.
Death taxes vary widely. Nonresidents are typically taxed only on local property, whereas residents may be subject to global estate taxation. Forced heirship laws in civil law countries can override U.S. wills. The EU Succession Regulation (Brussels IV) enables clients to elect the law of their home country in their will, potentially circumventing local constraints.
Trusts and other entities can trigger U.S. anti-deferral rules, foreign tax penalties and reporting requirements. Civil law countries often don’t recognize trusts, and even common law jurisdictions impose special taxes on trusts with long durations. A U.S. revocable trust may become classified as a foreign trust if the trustee lives outside the United States, which increases tax risks.
12-Step Checklist
Joan Crain shares this additional checklist for helping clients purchase a home overseas. With these steps in mind, your client’s dream can become a well-managed reality rather than an expensive surprise.
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Assemble the team. Coordinate immigration, tax, estate and real estate professionals with cross-border expertise, including experienced practitioners from both the United States and abroad.
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Revisit the human factors. Confirm that the plan aligns with the client’s lifestyle and long-term comfort with travel and seasonal living.
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Suggest clients pilot the location. Encourage renting first to test neighborhoods, infrastructure, noise and seasonal patterns before committing capital.
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Clarify the frame. Confirm the client plans to retain U.S. citizenship (not expatriate), and brief them on the implications of each path.
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Map intended use and time. Identify the number of days abroad, frequency and purposes; this drives visa/residence strategy and tax residency risk.
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Vet entry and stay requirements. Determine tourist limits, pre-authorization needs and whether to get a possible residence visa. Build timelines for applications and renewals.
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Assess tax exposure. Evaluate tax residency thresholds, local source taxes if the client is a nonresident and the interaction with U.S. tax (treaties, foreign tax credits and the net investment income tax gap).
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Screen jurisdictional rules. Surface ownership restrictions, surcharges (for example, Annual Tax on Enveloped Dwellings-type rules) and sale time taxes; monitor evolving policies in the chosen country and locality.
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Budget for upgrades and approvals. Model realistic renovation timelines and costs, including permits and heritage rules.
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Quantify carrying costs. Itemize property taxes/levies and insurance requirements; integrate into U.S. cash flow planning with attention to deductibility limits.
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Plan financing and currency. Test local mortgage feasibility, then compare it against U.S. financing and a potential cash purchase, considering currency risk.
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Align estate planning. Draft and coordinate a situs will with the U.S. estate plan, evaluate inheritance/estate tax exposure and consider a Brussels IV election when available. Avoid trust/company structures unless clearly advantageous.
