Norwegian Inheritance - What would you do?

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Norwegian Inheritance - What would you do?

Post by hermitbear » Tue May 14, 2013 9:22 am

Hi all,
First post, so be gentle. I am soon to receive an inheritance of 2.5M NOK and I wanted some feedback on what people would do AFTER the recommended one year waiting period for windfalls. The situation is this:

I'm 31 and I just graduated law school in 2010. I started my own firm, which has (weirdly) been successful, so current income is healthy. I made $108,000 in 2012 and hope to make $125,000 in 2013.

No wife (soon to change in the next year), no kids, no mortgage, no credit card debt. I paid off all my student loans within 14 months of graduating because I am compulsive, and I have no other debts except for a minor car payment that I am purposefully stretching to build credit (stretching to 1.5y, but still).

I have $57K in an inherited IRA, parked in VTIVX (I didn't really know what else to do)
I have $10K in an SEP, parked in VGHCX (same as above)

The USD/NOK exchange rate is very close to being the best it has ever been, I think. Its currently at 1/5.8, as of yesterday. I'm "used to" an exchange rate of 1/7 or 1/9, because thats what it was when I was growing up. I think the best it has ever been since WW2 is between 1/4 and 1/5.

My questions:

1. If you were in this situation, would you keep the money in NOK based on lack of need & USD devaluation fears, or go ahead and take advantage of the historically excellent exchange rate?
2. If you left it in NOK, what would you do with it? If you moved it to USD, what would you do with it?

Thank you all! I much appreciate it!


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Re: Norwegian Inheritance - What would you do?

Post by hicabob » Tue May 14, 2013 4:01 pm

Having the money in Kroner's is an interesting diversification although 100% is probably too much. Norway has been doing brilliantly it seems.
Perhaps 50/50 USD/Kroners, US funds in VTI, Kroners in a Norwegian index if such exists? Of course Norway's tax rules may have a huge effect??

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Re: Norwegian Inheritance - What would you do?

Post by asset_chaos » Tue May 14, 2013 4:31 pm

If it was me, foremost in my mind would be my plans/expectations for my future residence. Am I an American who's going to live the rest of my life in America? Am I a Norwegian-American who will regularly visit Norway no matter where I'm living for work? Am I planning to work here and retire to Norway? If I were going to regularly visit or retire in Norway and could anticipate a likelyhood of regular expenses in kroner, I'd lean towards keeping the money in kroner. If I don't plan to live for extended periods in Norway, I'd lean towards bringing the money to my home country and investing it consistent with my investment plan, paying off debt, using to purchase home, whatever. For me abstract currency diversification issues wouldn't be foremost in my mind.
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Re: Norwegian Inheritance - What would you do?

Post by notsure » Tue May 14, 2013 5:49 pm

Speak with good tax advisors in both Norway and the U.S. In your shoes (depending on the tax advice), I would personally move the money to USD and invest it in a three fund portfolio with Vanguard. If you choose to invest the money in passive funds, I imagine it'll almost certainly be prudent to invest in U.S. registered funds and not Norwegian funds, in order to avoid PFIC penalties, irrespective of currency risk. You might want to find out what the Norwegian tax consequences would be if you think you might ever live in Norway in the future and realize capital gains from U.S. registered funds at that time.

I'm a novice myself, but my impression is that for the three fund portfolio you should not worry about all the naysaying about bonds and still invest in them if this will be for the long term. You might want to make your asset allocation a little more conservative given you'll be starting with a large sum. You'll also want to look into tax efficiency.

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Re: Norwegian Inheritance - What would you do?

Post by SeattleCPA » Wed May 15, 2013 8:33 am

I would research and understand the tax laws that relate to foreign holdings. These laws, I will guess, will strongly encourage you to move your money to US if you'll be saying in US. Example: The 5471 form which you'll need to include in your 1040 tax return if you make certain types of investments outside the US will make your tax return very complicated. And the 8938 form is a lot of work, too.

Note: You can do your research simply by reading or skimming the instructions for the forms mentioned above.

Also, I am not a huge fan of Roths... many of the people who tout them don't really know how to do or simply don't do the math that's necessary to see if you're truly saving taxes. (One should compare marginal rates at both time you contribute and time your draw money out IMO.) However, in your situation, a solo Roth-401(k) seems like a pretty serious option. You could run your practice as an S corp, pay yourself $80K, do a $20K employer match, and then have another $17,500 plopped into the Roth. In effect, you could squirrel away $17,500 a year of the money from Norway into your Roth meaning you'd probably be able to make the income on a big chunk of this money tax-free.

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Re: Norwegian Inheritance - What would you do?

Post by Aptenodytes » Wed May 15, 2013 8:46 am

Based on the information you provided, the only clear choice is to move the money to the U.S.

Bogleheads don't speculate on currencies.

If you are wavering, pose yourself this thought experiment: imagine you inherited the money in U.S. dollars instead. Would you be moving them to Kroner now? Why is your current money not in Kroner to start with? Or ask yourself this: If your goal is to locate money in a place with favorable exchange rate context, how incredibly unbelievable is it that of all the world's currencies you could have possibly inherited, you ended up with the best possible one to locate your savings? If Kroner are better than dollars, why stop looking at the first comparison? Why not evaluate all the possible homes for your money?

The fact that your are wavering makes me think you might be succumbing to the classic behavior trap of overvaluing assets you own. Before the inheritance, a Kroner account had no attraction to you at all. You evaluated the merits rationally and stayed away. After the inheritance, your mind started playing tricks on you. We know from research that transferring an asset from the unowned to the owned category can trick you into magnifying the perceived value by up to a hundred-fold. But that's just a trick, and you need to counterbalance it with rational thinking.

I realize there are constraints on where you can locate savings accounts, but the basic point holds. In spite of these constraints, there are places you could locate your money if you really thought the exchange rate situation was going to tilt your way.

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Re: Norwegian Inheritance - What would you do?

Post by BL » Wed May 15, 2013 9:19 am

Get investing advice here to help minimize tax consequences of taxable investment. Coordinate with your larger inherited IRA.
You may owe 15% Norwegian inheritance tax (10% if child or parent) so you may be talking about something less than $400k.
Be sure to get good tax reporting advice on both sides of the ocean.

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Re: Norwegian Inheritance - What would you do?

Post by scone » Wed May 15, 2013 9:24 am

My husband is in this situation, as he has dual U.K.-Australian citizenship. For us, it's a family thing, not a currency thing. If we inherit in Australian dollars, we will keep the money there and invest it, mostly in CDs and local government bonds. This gives us the option of having money on hand when we visit Australia, and also being able to help out young family members over there if need be. This inheritance will then be willed to the younger family members equally. We have a similar plan if anything comes to us on the U.K. side. At the same time, my husband is keeping his "foreign" citizenship in case, for whatever reason, he wants to "go home." (At which point, I'd be the expat, if I'm still alive.)

If we didn't have this family and citizenship situation, there isn't much reason to keep overseas money right now. Of course if we do a lot of traveling overseas after retirement, an account in Australia and London makes some sense. Anyway, that's our line of reasoning, HTH.
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Re: Norwegian Inheritance - What would you do?

Post by michaelsieg » Wed May 15, 2013 11:58 am

hermitbear wrote
The USD/NOK exchange rate is very close to being the best it has ever been, I think.
Not really, I just looked at 5 year data at


But that really doesn't answer your question regarding what to do with the money - since your ancestors seem to come from this financially very healthy country - (in the parlament they fight if they should spent 15 or 20% of their surplus....), you could consider to put at least part of it in an index fund mirroring the Norwegian economy....just a thought...

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