“I have personally moved my family four times, so my professional expertise is refined by personal experience. One of my favorite sayings is that `Backup Plans must not just be sold at the boardroom table but also at the dining room table.’ In practice, this means that all planning must not only make fiscal sense…it must also be acceptable and livable for all family members who are involved,” he said.
“In practice, the vast majority of my client families don’t move to small island tax havens. Rather they move to large developed countries like Canada, the UK, the European continent, New Zealand, and Australia. Either with legal pre-immigration tax planning or taking advantage of existing tax-favorable regimes designed to attract HNW residents, my clients can enjoy the same lifestyle but at a tiny fraction of their prior US tax burden,” he said.
This news service asked Lesperance about how some traditionally “offshore” places such as Switzerland and Singapore have compulsory military service, and for those of the Jewish faith thinking of Israel as a new home, their children could be called into the IDF. What does he tell clients?
“Too many people focus on the `visa-free travel’ of a given citizenship, rather than much more important issues such as citizenship-based taxation; dual citizenship; mandatory military service; and the right to live in multiple jurisdictions. This is top of mind in our planning, as the ramifications of these issues are often significantly more than the cost of acquiring the citizenship. Quite frankly, given the profile of my clients, they can pay a travel agent a few hundred dollars to get the rare country which is going to charge an advance airport tax by way a visa requirement,” he said.
Back to the issue of Americans seeking to renounce their nationality, Lesperance said the process requires planning.
“To execute an expatriation plan, a wealthy American needs both a second citizenship and a place to reside in the future. The first is required in order to avoid statelessness upon renouncing US citizenship. The second is required as the person must limit their future time in the US to either less than approximately four months or six months (if a tax treaty is involved). Sometimes the expatriate will reside in their place of citizenship but often it is a combination of two or more jurisdictions,” he said. “On citizenship, EU countries where the person is entitled to a lineage citizenship are popular. In the same vein Israel is popular for those who qualify under The Law of Return. If neither of these are available then various Citizenship by Investment programs fit the bill,” he said. (Such programs are sometimes dubbed “golden visas”. Lesperance mentioned the following candidates as “alternative residences”: Canada, New Zealand, Australia, Ireland, Portugal, Malta, Italy, Greece, Switzerland, Monaco Dubai and the UK.
“Most of my clients are referrals from Centers of Influence such as family offices, private bankers, financial advisors, lawyers and accountants. This group knows their client’s situation and exposure and has their trust. Often I will have worked on multiple clients for the COI previously. Occasionally I will be contacted by a potential client directly, but most are not able to understand the value I bring until one of their trusted advisors has spoken with me. The trusted advisors are quickly able to recognize the expertise and experience required. They are also able to quickly identify those who are simply “salespeople” flogging products which may or may not be an appropriate solution for this client,” he said.
“Along with acquiring the `fire insurance’ of an alternative citizenship and residence, the other key element of backup planning is a `fire escape plan’. The fire escape plan is devised by the client’s advisors supplemented by specialist US tax lawyers I recommend and my team. The fire escape plan is a tax-efficient way of dealing with each and every one of the client’s assets. Almost universally, the client will be subject to the Expatriation Tax regime which means an immediate deemed capital gains event and planning for future bequests to US person heirs must be part of the backup plan,” he said.
“The entire world is living under the Chinese curse of `May you live in interesting times’. From the rise of populist `Tax the Rich’ movements to the loss of easy, cheap, no-thought-needed travel, wealthy families are increasingly aware of both the opportunities and threats of this changing world. In some countries like China or Saudi Arabia, the wealthy are also concerned about the second Chinese curse `May you come to the attention of the Emperor’.”
In early March, The Heritage Foundation, a conservative think tank, put Singapore at first place in its 2021 Index of Economic Freedom, followed respectively by New Zealand, Australia, Switzerland, Ireland, Taiwan, the UK, Estonia, Canada and Denmark. The US, at 20th, has plummeted to its worst-ever score, caused by “out-of-control spending and a loss by Americans in the even-handed rule of law,” the report said. The US recorded a score of 74.8, lower than its 2020 score, and dropped to 20th place globally from 17th in the year prior. The US remains “mostly free” and its regional ranking is unchanged at third out of 32 countries that were graded in the Americas region, behind Canada and Chile. According to the editors, out-of-control government spending has put US fiscal health at grave risk.