Increasingly, we get inquiries from Americans conveying their plans for renunciation and requesting info on what they can do to fill the void left by relinquishing a top-tier citizenship.
Their stated motivation is almost always to get away from the IRS’ tentacles. But if you probe such clients further you usually find that they have emotional justifications for exploring this radical option:
“Trump this, Biden that…”
“The socialists are coming…”
“The end of the dollar…”
“They will conscript me for their wars…”
“The country is going downhill…”
Many influencers and industry professionals use these grievances to push people towards Caribbean passports and tax optimization schemes that may leave them richer, but at what cost?
While we are not interested in casting judgment on our clients’ ambitions, the reality is that they often are thinking too much about themselves and losing sight of the fact that the United States is still the main show in town.
This is especially true for clients who plan on having children.
The conversations almost always reveal that clients haven’t thought this through
What’s your plan? Are you going to renounce your U.S. passport and then run around the world on Antiguan and Turkish passports? Will this constitute a sustainable, net improvement to your lifestyle?
And your children, is this the legacy you want to leave them? What if your daughter just wants to be a librarian and live the white picket fence life in the suburbs of Colorado? Is she going to have a 7 figure income as you did, or will she have a median income and stay within a tax bracket that is by all accounts reasonable among first world top economies? Will she ever feel culturally and linguistically at home or professionally fulfilled anywhere else? Maybe not.
Not everyone is meant to be, or wants to be, the high-flying investor, businessperson or crypto speculator that you are. Not everyone wants to “grind” in the second world and miss out on unfettered access to the world’s most dynamic economy and cultural powerhouse.
The reality is that paying 20% taxes or less, given all the structures available to Americans to reduce their taxes, is objectively a low price to pay for access to arguably the world’s best banking and capital markets, prestigious and practical education, the best healthcare if you are wealthy and a culture of optimism, risk-taking and celebrating prosperity. Name another country with all these amenities and characteristics, not to mention one that is an English-speaking, somewhat democratic federation of hundreds of millions of people.
There’s a reason that the upper classes and ascendant middle class of the world have been practicing birth tourism in the U.S. for generations. Are they aware of the tax implications for their offspring? Do they feel at odds with American foreign policy or the tide of domestic politics? Acutely so. But they see it as a great tradeoff and go to extreme lengths to become a part of the American project.
Are you the clever contrarian for wanting to jump ship? Or are you going against all conventional wisdom?
Internationalization and sovereign diversification are about having options
Renouncing reduces options. A detractor might say “But I can’t open a bank account in X country because of my US citizenship.”
Don’t ignore the options that are still available to you. And guess what, US banking is probably better anyways.
“Oh, but I can’t participate in this crypto project”
Probably better for you. Thank the SEC for once.
“Oh, but there is this fund I can’t invest in”
There are many other funds you can invest in. The US literally has endless opportunities and structures to invest in.
“It’s fine, my children will have a UK or Italian passport which is just as good.”
Sure. They can go work as a barrister in London for £40,000 or a software developer in Milan for €30,000 with a cost of living that is 85% of the US. Great. Thank you, Daddy.
“I don’t want to be associated with American wars, or be dragged into them myself”
If America starts rounding people up for the next military adventure, you’ll see it coming. Just have a place to live overseas when it happens and of course, have another passport and home abroad. In the last five years, the Ukrainians and Russians with extra citizenships and who had international footholds presented a good case study of how those who were prepared fared better than those who didn’t think a few steps ahead.
“I want to leave it all behind and buy a finca in the middle of Paraguay.”
Sure, and when you are away for two weeks without security, everything will be pilfered down to the toilets and bathroom tiles. Welcome to Latin America. If you want a remote, agrarian Plan B without neighbors who steal from you soon as you turn your back, do you know where you can go? North Dakota or Idaho. Actual high trust societies. Keep your Paraguay cedula and Asuncion condo, but don’t fall for anyone telling you that a farmstead in the boonies is a standalone solution.
By all means, get your Turkish passport, get an African passport, get your Plan B residency in Paraguay or Panama. Increase your optionality as much as you can afford to. These increase your and your children’s options in life. We are always encouraging our clients take advantage of these opportunities while they last. We’ve helped 1000+ clients obtain additional residencies and citizenships.
But unless you are done having children, think twice before renouncing. It’s not about you.
The US is increasingly punitive towards renouncers
Many people assume, based on what Grok or some Caribbean passport purveyor tells them, that they can renounce and then apply for an ESTA or 10-year tourist visa to the United States as normal citizens of their new country do if they wish to visit New York or Miami for a holiday.
This is not a sure thing by any means, even if you are wealthy and have a solid justification for visiting.
Are you prepared for your visa application to be rejected? Are you prepared to be treated like a second-class citizen or third-world citizen and barred completely from visiting your family and friends in the United States?
Maybe you can tolerate this now. But what if you develop a chronic, debilitating illness and need your family in the U.S. to take care of you? Do you understand that re-entry to your home country and the largest, most important economy in the world will never again be guaranteed? Will you fare better growing old and senile in a state-run nursing home in Turkey where nobody speaks English while your children are too busy to fly and visit you?
Rest assured that as more people renounce, the U.S. will take more steps to tamp down the trend. Rejecting tourist visas is the most effective tool at their disposal and they won’t hesitate to make an example out of you.
If I were to survey our clients…
I would estimate that 65% of our clients who renounce end up regretting the decision. And there are probably a handful more that will never admit it.
Keep your options open, and leave options open to your posterity.
Don’t forget that diversification is the name of the game.
Ladislas Maurice – The Wandering Investor
