A portfolio that is correct for a UK resident is frequently wrong for the same person eighteen months later in Dubai or Singapore. Asset allocation travels well. Wrappers, fund domiciles and share classes do not.
Trap one: US situs assets and US estate tax
Non-US persons holding US-situs assets — including shares in US-incorporated companies held directly — are exposed to US federal estate tax above an exemption of only $60,000. The rate reaches 40%. A treaty may raise the threshold; many nationalities have no such treaty.
The fix is usually simple and always worth doing early: hold US exposure through non-US-domiciled funds, typically Irish-domiciled UCITS ETFs. The fund is the shareholder, not you, so the situs problem disappears. Irish funds also benefit from the US-Ireland treaty rate of 15% on dividend withholding, against 30% for many other domiciles.
Trap two: PFIC rules for anyone touching the US
If you are, or may become, a US person — citizen, green-card holder or someone meeting the substantial-presence test — non-US pooled funds are Passive Foreign Investment Companies. The default tax treatment is punitive: excess distributions taxed at the highest marginal rate for the relevant year, plus an interest charge, with annual Form 8621 reporting.
The two rules point in opposite directions. This is the single most common construction error we see in mixed-nationality families: a US-citizen spouse holding the Irish UCITS that is correct for the non-US spouse.
Currency: match liabilities, not headlines
The right base currency is the currency of your future spending, not the currency of your passport. For a family whose children will be educated in the UK and who intend to retire in Portugal, sterling and euro liabilities dominate — regardless of where the income is earned today. We model the liability schedule first and hedge the fixed-income sleeve back to base currency; equities are generally left unhedged, since currency exposure inside a global equity index is partly self-correcting over long horizons.
Withholding tax leakage
Dividend withholding is a real, permanent cost that never appears on a factsheet. The same global equity exposure can leak between roughly 0.2% and 0.6% a year depending on fund domicile and share class. Over a 20-year horizon that gap is comparable to the entire management fee. Accumulating share classes also simplify reporting in most jurisdictions — with the notable exception of the UK, where reporting-fund status and the offshore income gains rules need checking before purchase.
A construction sequence that works
- Fix residence and likely future residence, with dates.
- Establish the liability schedule by currency and year.
- Select wrappers — pension, ISA, bond, trust, direct — for tax fit and portability.
- Then choose fund domicile and share class.
- Only then choose the asset allocation.
Most investors do this list backwards, starting at step five. The allocation is the part the market rewards; the first four steps are the part your tax authority notices.
Review triggers, not review calendars
An annual rebalance is fine. What matters more is a review triggered by an event: a change of residence, a liquidity event, a marriage or divorce, a child starting school in a new country, or the acquisition of a US connection. Those are the moments when a correct portfolio silently becomes an incorrect one.
