Roth IRA for children not for expats thanks to FATCA?

Forgive me if I use the wrong terminology here, as I'm not totally up on the US investment world, but I'll try to be as accurate as I can. My parents set up Roth IRAs for my sister and me (presumably before we were 18) because they're the special kind for children that we can access without penalty or tax before we're a certain age. A friend of mine who is also an expat has one as well from her family. Her dad received a call from their financial advisor the other day and was told that with the FATCA rules coming in, he was no longer allowed to administer the Roth IRA for my friend because she is an expat. I believe the upshot was that FATCA prohibits expats from keeping this particular type of investment. My mum was going to speak to her financial advisor to see if this would also be the case for me, particularly since in my case I will be renouncing hopefully by the end of the year. It seems rather odd that they would prevent even temporary expats from maintaining a long term investment like this, but at the same time it wouldn't surprise me that the US government pushed through ill-thought-out legislation that had unintended consequences that screwed people over! Personally I don't mind liquidating the thing anyway, as the cash will come in handy and there is no penalty or tax due in the US, but I was wondering if this financial advisor had gotten the wrong end of the stick or if it really is the case that Roth IRAs for children aren't valid for expats.

I think the financial advisor is 100% wrong. With a ROTH IRA being a U.S retirement plan there would be no reason for it to be none FATCA compliant. It would otherwise spell disaster for many.

You may find after enquiry the Roth IRA administrators are now freaked (because of FATCA) by account owners not resident in the USA and are now saying 'go away', although there are some who would say the account is the IRA, not the person, which is still USA resident, and therefore would have no problem. There's evidence of Wells Fargo doing the same thing with account holders (i.e. asking a cross border specialist to 'take these people away'), and HSBC in Jersey that used to deal with USCs has shut its doors too. We're compiling an internal list of the best of who's left for our clients.

I think the financial advisor is 100% wrong. With a ROTH IRA being a U.S retirement plan there would be no reason for it to be none FATCA compliant. It would otherwise spell disaster for many.

+1. FATCA has nothing to do with ROTH IRAs. The fact that it is owned by an expat is irrelevant. The only issue I can see is if the expat was trying to contribute to the ROTH without any US earned income.

Financial institutions in the United States have been saying for years that they have been closing accounts for US persons overseas because of the Patriot Act.

The US/UK intergovernmental agreement may aditionally require US institutions to forward data to the IRS for UK residents so that the IRS can forward this to HMRC.

Many institutions manage their own risk by selecting low risk customers. For some in America this may mean closing accounts for non-US residents to avoid FSA regulation, additional cost or risk. FATCA compliance is part of that risk.

If you want the account move it to someone else. If you don't, then yes close it.

It seems like you received some confusing advice regarding FATCA.

This  FATCA Webinar [nofollow] might help you see some of the issues with FATCA and how it affects Americans living abroad.

It is common today for US based investment houses to throw out UK based customers. It is equally common for UK based investment houses to throw out all US person customers.

There are nonetheless a limited class of investment managers who are both SEC and FSA regulated able to handle investors in either situation.

It is common today for US based investment houses to throw out UK based customers. It is equally common for UK based investment houses to throw out all US person customers.

There are nonetheless a limited class of investment managers who are both SEC and FSA regulated able to handle investors in either situation.

Both Vanguard and Fidelity in the US are perfectly ok with UK residents as long as they opened the accounts while US residents.

Since it's an existing account, after you move to the UK, you can continue to add to the accounts, can open or exchange to a new fund, and add money to the new fund account just as you do as a US resident. However, outside of retirement accounts, be careful to only buy US mutual funds that are UK reporting.