Vital Financial Steps for an Executive Job Change

By Daniel Baumgartner & Petra Peters

A new executive role often brings excitement, fresh challenges, and a significant boost in professional trajectory. Yet, amidst the exhilaration of an executive job change, it’s easy to overlook the critical financial strategies that come with it.

In this article, we guide you through the essential domestic and international financial considerations to facilitate a lucrative and seamless executive transition.

Decoding Your Compensation Package: Beyond the Base Salary

For executives, compensation extends far beyond the base salary. A new offer often includes a complex mix of incentives, each with its own financial implications.

Bonuses and incentive plans: Understand the structure of both sign-on bonuses and performance-based annual or long-term incentive plans. Are they a sure thing? What are the metrics for payout? When are they paid out, and how are they taxed?
Equity compensation: Equity compensation can include stock options (ISOs or NSOs), Restricted Stock Units (RSUs), or Performance Share Units (PSUs). Each has different tax treatments at grant, vest, and exercise/sale.
Deferred compensation: Non-qualified deferred compensation (NQDC) plans allow you to defer a portion of your income until a future date, often retirement, to facilitate an optimal tax bracket.
Severance packages and change-of-control clauses: While not immediate income, understanding the severance terms and change-of-control provisions is vital.

Managing Your Retirement Accounts: 401(k)s, Pensions, and Cross-Border Transfers

Transitioning between employers means making critical decisions about your existing retirement accounts.

Old 401(k) options (domestic): You typically have four choices for your old 401(k): leaving it with the old employer, rolling it into your new employer’s 401(k), rolling it into an IRA, or cashing it out. Rolling into an IRA often offers the most control and flexibility.
Pension plans (domestic): If your previous employer offered a pension, understand your vesting status and payout options. Carefully weigh the pros and cons.
New employer’s 401(k) and contributions (domestic): Enroll promptly in your new company’s 401(k) plan, especially to capture any matching contributions.
International considerations for retirement accounts:
- Portability: Can your previous country’s retirement accounts be moved or transferred to your new country?
- Tax treaties: Understand how tax treaties between countries affect the taxation of your retirement distributions.
- Foreign account reporting: Many countries, including the U.S. with its FBAR (Report of Foreign Bank and Financial Accounts) and FATCA (Foreign Account Tax Compliance Act) requirements, demand reporting of foreign financial accounts.
- Local retirement schemes: Understand your eligibility and the perks of contributing to your new country’s local retirement plans.

Healthcare and Insurance Continuity: Global Dimensions

Pursue a seamless transition for your health and other vital insurance to avoid gaps in coverage.

Health insurance (domestic): Understand when your old health coverage ends and your new coverage begins. COBRA (Consolidated Omnibus Budget Reconciliation Act) can bridge the gap, but it’s expensive.
Health insurance (international): Domestic health insurance likely won’t suffice in a foreign country. Research international health insurance plans that cover you in your new host country.
Life and disability insurance (domestic & international): Review your existing policies. Your old employer’s group coverage might terminate. Assess your needs and explore purchasing new individual policies or enrolling in your new employer’s plans. For international executive job changes, confirm that your policies are valid in your new country of residence.
Dental and vision: Don’t overlook these. Confirm when coverage starts with the new employer.

Navigating Cross-Border Tax Planning and Residency

This is arguably the most complex area for international executives.

Tax residency: Determine your tax residency status in both your old and new countries. This isn’t always based solely on physical presence but can involve “tie-breaker rules” in tax treaties based on domicile, center of vital interests, and nationality.
Dual taxation: Understand how tax treaties aim to prevent double taxation. You may still be required to file tax returns in both countries, but the treaty dictates which country has primary taxing rights.
Income sourcing rules: Understand where different types of income (salary, bonuses, equity, investment income) are sourced for tax purposes in each country.
Departure/arrival taxes: Some countries have “exit taxes” or “deemed disposition” rules when you cease residency, potentially taxing you on unrealized gains of assets as if you sold them.
Equity compensation tax implications: Taxation of stock options and RSUs can be incredibly complex, as it depends on where the grant occurred, where you worked during vesting, and where you reside at exercise/sale.

Seek Professional Guidance for an Executive Job Change

If you’re experiencing an executive job change either domestically or internationally, it’s wise to enlist help from a professional financial advisor. They can help you pursue a smooth transition and lay a strong foundation for your long-term financial prosperity.

At Terra Nova Asset Management, our clients can anticipate experience, transparency, flexibility, and continuity in a relationship that is based on mutual respect and understanding from our team of experienced investment advisors.

Does it seem like we may be a good fit? Reach out to us directly at 212-355-1234 or ppeters@terranovausa.com for the New York office (Petra) or 855-248-6630 or baumgartner@terranovausa.com for the New Jersey office (Daniel). You may also contact us here to schedule a meeting and we’ll get in touch with you soon!

About Daniel

Daniel Baumgartner is a founding partner of Terra Nova Asset Management LLC, a partner-owned investment advisory firm that manages individual portfolios for clients. Daniel has extensive experience in marketing, development of special U.S.-investment products, as well as customer acquisition and relationship management. His ultimate goal is to make a difference in his clients’ financial lives through honest investment advice. He strives to provide high-touch, personalized service and enjoys getting to know a client’s personality as it relates to their financial circumstances before crafting the right solutions. As money is a very personal subject, Daniel takes his responsibility as an advisor very seriously, forming long-term relationships with clients based on trust.

Daniel received his degree in finance and international business from New York University. Outside of the office, he is a hobby landscape, street photographer, and has a great interest in U.S. and European history (16th-19th centuries), believing it helps him answer the question “Why is something the way it is?”

About Petra

Petra Peters is a founding partner and the Chief Executive Officer of Terra Nova Asset Management LLC, a partner-owned investment advisory firm that manages individual portfolios for clients. Petra has decades of experience in the banking industry, asset management, overseeing the administration of individual accounts, and designing and advising specialized funds tailored to the requirements of international private and institutional clients. With extensive knowledge of both Europe and the U.S., she’s able to provide advice and services beyond the typical investment advisor. Petra desires for her clients to live a financially care-free life so they can pursue their passions, and she values their trust and gratitude. Creating invaluable friendships formed over years of partnership, some clients even consider her part of their family.

Petra’s interests outside of work include classical music, history, travel, charities, motorcycling, and golf. She is also on the board of a German charity.