August 15, 2014
By: Bobby Casey, Managing Director at GWP
Two days ago I returned from a cruise through the Baltic Sea. On September 1st, I boarded the ship in Amsterdam for an 8 day journey throughout the Baltics with stops in Warnemunde – Germany, Tallinn – Estonia, St Petersburg – Russia, and Helsinki – Finland (I got off the boat in Helsinki, but the ship continued to Stockholm – Sweden, Copenhagen – Denmark, then back to Amsterdam).
I was on the cruise as a speaker for an offshore conference hosted by my good friend Joel Nagel. Joel hosts a couple of events per year to share information with attendees about internationalizing their lives and investing offshore. At this conference I spoke on 2 topics: 1.) How to Internationalize Your Investment Portfolio, and 2.) 2nd Residency and Citizenship Opportunities.
In the course of discussing Internationalizing Investment Portfolios, I shared the various structures people can use to properly diversify their assets offshore along with a case study showing how we created an offshore asset allocation model for “Tim”. Many people get fearful about this topic, but in Tim’s case we moved the bulk of his assets offshore, wrapped everything up inside an Anguilla Foundation for asset protection and estate planning, and set him up for long term gains as well as short term profits in the portfolio. (If you are interested in learning about the various alternative investment options we have, click here to schedule an appointment).
For me however, the most interesting discussion was on 2nd residencies and citizenships. Here I am, in a room full of people in their mid-50’s, all with a rather high net worth, and nearly every one of them was asking in-depth questions about how and where to get 2nd residencies and citizenships. I’ve been speaking and writing about these topics for years, and I can tell you the interest in getting 2nd residency and citizenship among affluent Americans is growing at an astounding pace. Even just two years ago, if I were to speak at a conference like this about a similar topic, I would get maybe two or three people ask questions followed by a polite golf clap. Last week, on this Baltic cruise though, nearly every person in the room asked detailed questions.
Take a look at the graph below:
This graph shows the average number of Americans renouncing their citizenship per quarter. For 1998, you can see that on average, 100 people per quarter gave up their US citizenship. That’s only 400 per year. Fast forward to 2013, you can see that 750 per quarter, or 3000 people gave up their US citizenship. And in Q1 and Q2 2014, we have already more than matched that number.
Here’s the kicker – these numbers do not reflect the number of Consular expatriations where people do not file exit tax forms with the IRS. Some estimates show the number of Consular expatriations are three to four times the published figures shown on the graph. Another significant number that people never consider in the statistics is the number of Americans abroad who hold at least one other citizenship who have effectively, but not legally, renounced by not renewing their US passports or traveling back to the US.
Based on my travels and the people I’ve encountered abroad, this number likely dwarfs even the first 2 numbers.
Kelly recently wrote an article titled, “(Im)Migration: It’s Just Moving”. In the article, she discussed the heated political debate going on now about “illegal” immigration into the US. Personally, I am all for open borders. Let’s eliminate the welfare system, end the war on drugs, legalize gambling and prostitution, and stop the attack on gun ownership. These are some of the primary factors driving the motivation for illegal immigration in the first place. But aside from that, “I”mmigrants actually increase GDP and economic productivity. They actually provide a net benefit to the social systems (see Kelly’s article for references).
I find this topic interesting, especially when contrasted with the number of people who want to leave the US. And not just the numbers, but the difference in wealth between “I”mmigrants and “E”migrants. Clearly the “I”mmigration numbers are much higher than the “E”migration numbers, however the difference is all in the cash. The I’s come with nothing but the shirts on their backs. The E’s leave with companies, portfolios, cash, and most importantly their productive capacity to hire all those I’s.
Eduardo Saverin of Facebook’s fame was all the rage when he announced his intent to renounce US citizenship. Prior to Facebook going public, he moved to Singapore and gave up the little blue passport with the eagle on it. How many penniless “I”mmigrants does it take to equal the productive capacity of one Eduardo Saverin? Some say you cannot put a price on US citizenship. But like my buddy Joel said last week on the Baltic cruise, “Saverin saved $250M by giving up his US passport, so you can clearly put a price tag on it”.
I am not recommending or advocating giving up your US citizenship. That is clearly a personal choice. However, I do highly recommend obtaining a 2nd residency and/or citizenship as quickly as possible. Consider it your insurance policy to give yourself another option for living, working or just a place to escape to. There really is no downside for doing this except for a little bit of time and money you need to spend to make it happen. There are many options out there depending on your personal situation. However we have found the easiest, quickest and cheapest option in the world for obtaining not only 2nd residency, but a relatively quick path to citizenship as well. We have a package available for just a few thousand dollars where we can facilitate the entire process giving you a turnkey solution in a very well regarded country. If you are interested in setting up a consultation, click here.
Until next time, live well.