The concept of looking at citizenships and residences
in the same manner as a financial portfolio came
to me during a recent telephone conversation I had
with a Russian client. This gentleman had taken
great pains in the last few years to diversify his
financial holdings out of his native Russia and
it's national currency, the ruble. When the recent
economic crisis hit, his material wealth was secure.
However, he became gravely concerned
when the popular press started calling upon the
government to revoke all the passports of wealthy
citizens. The idea was to hold the wealthy ransom
and not allow them to leave until they had repatriated
all of their assets and turned them over to the
masses. If this policy was adopted, this gentleman
realized, with horror, that his family's personal
well-being would be at risk. He now found himself
in the position of having money abroad but with
no means to enjoy it. Furthermore, he and his family
now faced growing danger to their personal safety
and yet were unable to get on a plane and fly to
a safe haven. In short, my client had failed to
establish and maintain an adequate "passport
portfolio".
PASSPORT PORTFOLIO
A COLLECTION OF CITIZENSHIPS AND RESIDENCIES THAT
MEET THE CURRENT AND FUTURE NEEDS OF YOU AND YOUR
FAMILY
Most people will go through their
lives with the passport portfolio that is allocated
to them at birth. Their passport portfolio will
not be diversified and they will have to contend
with the advantages and disadvantages of their original
citizenship. They will rely on the benevolence and
goodwill of their native government to take care
of their needs and not treat them like chattel or
abuse their rights. Unfortunately, history has shown
that while most governments do not mistreat their
citizens, when one does, the effect is profound.
It is not only to avoid such events as the rise
of Nazi Germany or the break-up of the former Yugoslavia
that prudent people today are paying more attention
to their passport portfolio. The meteoric rise of
globalism and all of it's potential dangers and
advantages is forcing people to review their own
passport portfolio plans. As these changes are occurring
at an amazing rate, having a healthy passport portfolio
will allow you to maximize their return on positive
development and minimize risk on negative ones.
GLOBALISM ~ DANGERS AND OPPORTUNITIES
Consider the following things that have emerged
in our world in the last two decades:
· Federal Express world-wide delivery
· Inexpensive long-distance telephone services
· Fax machines
· The Internet
· Automatic bank machines with world-wide
access
· Satellite television
· Digital mobile telephones
· On-line stock trading
· International terrorism
· Money laundering regulations
· Governments operating on enormous deficits
· Large punitive damage awards and contingency
fee lawyers
· Increased random crime and gated communities
When you review this list, you
begin to realize that you need to arm yourself with
the means to deal with the many possibilities, both
predictable and unpredictable.
PERSONALIZING YOUR PASSPORT TO MEET
YOUR FAMILY'S CURRENT AND FUTURE NEEDS
These needs include:
· Visa-free travel to the countries you visit
for business or for pleasure
· The ability to live and work in your favorite
long-term destination countries
· The ability to have your children study
in the school of your choice
· The ability to arrange your affairs to
minimize government intrusion in such areas as taxation,
currency restriction, overzealous regulation, military
service, unfair seizure of personal property, and
personal liberties
· The ability to arrange your affairs to
minimize intrusion by fellow citizens in areas such
as frivolous lawsuits, divorce property division,
and crime by have-nots on your person and property.
To meet these goals, one must go through a process
similar to that involved in preparing a financial
portfolio.
STEPS TO A HEALTHY PASSPORT PORTFOLIO
1. Set out goals
2. Review existing passport portfolio
3. Plan strategy to revise passport portfolio
4. Regular monitoring of passport portfolio
The first step to a healthy passport
portfolio is to set out the goals that you wish
to meet for yourself and your family. Setting goals
involves a number of different factors.
Step 1: Set Out Goals
· Two generations
· Lifestyle
· Business or employment opportunities
· Political and social stability
· Fears and concerns
In setting out goals for your passport
portfolio you need to look at long-term scenarios.
As with an estate plan, the passport portfolio should
deal with at least two generations. Your passport
portfolio decisions will have a profound impact
on the lives of your children, grandchildren, and
great-grandchildren.
Few people relish living out of
suitcases, therefore, you will need to evaluate
various locations to determine whether they are
suitable as long-term "full-time" residences.
Issues such as medical and educational facilities,
infrastructure requirements, rural versus urban
lifestyle preferences, and accessibility, may all
be factors to take into consideration.
You will also need to evaluate
your employment or business requirements. Do you
have the ability to earn a living or manage a portfolio
from any location? Will you require occasional access
to countries where your customers, colleagues, and
advisors are located? Preparing a list of countries
where you or your children are most likely to find
full-time employment would be a useful exercise.
It is extremely important to have
access to places that are considered safe in time
of turmoil such as western or small remote countries.
However, you need to be very careful when looking
at these countries and will have to decide whether
you simply wish to visit these places or if you
wish to reside in them for extended periods of time.
Long-term residence may have unwelcome side effects
such as taxation.
Your passport portfolio is a very personal reflection
of the matters which concern you most, therefore,
you should set out a list of your own personal concerns.
Such a list could include a lack of visa free travel,
taxation, excessive litigation, political instability,
crime, infringement of personal liberties, etc.
In listing these concerns you should include scenarios
you feel "could" happen such as taxation
based on citizenship, estate taxation, unreasonable
restrictions of financial dealings through anti-money
laundering regulation, currency restriction, backlash
of "have-nots" if the welfare state collapses,
etc. The key to the ultimate success of your passport
portfolio is the ability to deal with many contingencies,
even those that seem unlikely from today's prospective.
Step 2: Review Existing Passport Portfolio
· Cash cows
· Stars
· Dogs
Cash cows are citizenships and
residences that currently have great advantages
in lifestyle, visa-free travel, preferences to live
and work in trade blocks such as NAFTA or the EU,
and preferences in local investment opportunities,
etc.
Stars refers to citizenships or
residences that have the potential to become cash
cows. For example, residences that, after a naturalization
period, will become cash cow citizenships or citizenships
in emerging countries that may, in the future, join
trade blocks.
Dogs are citizenships or residences
that have problems such as poor visa free travel,
unrestricted world-wide taxation based on citizenship
or residence, restrictions on dual citizenship,
poor lifestyle and business opportunities, excessive
government intrusion, mandatory military service,
considered pariah states by the international community,
etc.
I will later review some sample
passport portfolios and discuss some of the cash
cows and stars that might be an asset to your own
passport portfolio.
Step 3: Strategy to Revise Passport Portfolio
· Select professional advisor
· Review goals with advisor
· Review existing passport portfolio with
advisor
· Review ancestry, background and finances
· set up long-term strategy for revising
passport portfolio
Unfortunately, there is currently
a great deal of misinformation in the marketplace
which could result in your making expensive and
potentially dangerous mistakes. Therefore, an appropriate
strategy should be determined with the assistance
of a qualified, professional advisor.
A qualified advisor should set out a long-term strategy
to revise your passport portfolio so it will meet
your personal goals; be able to guide you through
the process of setting these goals; will review
your current passport portfolio; and will identify
cash cows, stars and dogs. In addition, your advisor
should be able to identify changes in citizenship,
residence, and tax laws for each element of your
passport portfolio. As part of the review of your
existing passport portfolio, your advisor should
review ancestry, education, employment, background,
financial situation, and family lifestyle to determine
suitable cash cows and stars.
You should, with the assistance
of your advisor, devise a way of ridding yourself
of the dogs in your current passport portfolio while
ensuring your strategy takes into account your financial
position and any lifestyle restrictions.
Step 4: Monitoring of Passport Portfolio
· Have your advisor on an annual retainer
· Commit to continual passport portfolio
education for yourself and your family members
Your passport portfolio is a perpetually
evolving project. Constant revision of laws, on-going
political events, increased international regulations
on financial and taxation issues, and personal lifestyle
changes will all affect your passport portfolio.
To effectively monitor your passport
portfolio you should have an advisor on retainer
and commit to continual self-education in this area.
It is very important to also educate family members
about their passport portfolios as it is unlikely
that the same advisor will be available to advise
the future generations who will be positively or
adversely affected by passport portfolio decisions.
CASE STUDIES
I will now take a few moments to
analyze the passport portfolios for three fictional
clients which, I hope, may reflect some of your
own situations.
In lawyerly fashion, I will take this opportunity
to remind you that any resemblance to persons living
or dead is purely coincidental.
MR. WILLIAM GOATES III
Step 1: Set Out Goals
· Forty-something, married, one child
on the way
· Founder and president of large software
company
· Ability to run company from anywhere
· Need to travel occasionally for business
meetings mostly on west coast of US
· Allergic to sun and gets stir crazy on
small islands
· Wants to be able to live in a developed
country with good education and medical facilities
· Currently concerned about overtaxation
and increased government interference with company
operation
· Future concerns relate to personal safety
from kidnapping, personal liability as a director
from company clients, and ever increasing income,
capital gain and estate taxation
Step 2: Review Existing Passport Portfolio
Mr. Goates: US citizen by birth, US resident
and US domiciliary
Passport Portfolio analysis: one dog, US
Although Mr. Goates has enjoyed
the type of personal lifestyle that he wants in
the US, taxation by citizenship, substantial estate
taxation and increasing government interference
in his personal and professional affairs make US
citizenship a dog for him.
Mrs. Goates: UK citizen by birth,
US citizen by naturalization, currently US resident
and domiciliary.
Passport Portfolio analysis: one cash cow, UK, and
one dog, US
As both the US and UK allow multiple
citizenship. Mrs. Goates is still a UK citizen.
The UK is part of the European Union, allowing her
to live and work wherever she wishes within the
EU. She can also pass on UK citizenship to her child
and give her husband permanent residence in the
UK. As long as Mrs. Goates does not become domiciled
in the UK she can avoid UK estate tax. All of these
factors make the UK citizenship a cash cow. Her
US citizenship is, unfortunately, a dog for the
same reasons as her husband.
Baby Goates: UK citizen at birth, US citizen
at birth
Passport Portfolio analysis: one cash cow, UK and
one dog, US
Baby Goates could be both a
UK and US citizen through parentage. In addition,
by having the foresight to arrange for the birth
to take place in a cash cow country, Baby Goates
will also be able to acquire another cash cow citizenship.
Step 3: Plan strategy to revise passport portfolio
Mr. Goates: acquire cash cow, economic
citizenship in Grenada;
acquire star, UK residence leading to EU citizenship;
acquire star, Canadian residence leading to NAFTA
citizenship;
drop dog, lose US citizenship
Since Mr. Goates currently does
not have any cash cow citizenships, and he is not
entitled to any through lineage, he should acquire
an economic citizenship. The possession of this
citizenship will be of great use, should his US
passport be seized during his current litigation
with the US government.
Mr. Goates needs to be careful
in acquiring a suitable economic citizenship as
there are a number of fraudulent or poor products
advertised in the marketplace. If a "second
country passport" is acquired through bribery
or fraud, then Mr. Goates opens himself up to charges
in the US and any country that he tries to travel
to with his new document. Any viable economic citizenship
program should be able to demonstrate a legislative
authority for the program and for the official issuing
the document. Once legislative authority is established,
then value can be assessed by looking at cost vs.
visa free travel. Currently the best value on the
market is Grenada. Therefore, I would suggest that
Mr. Goates acquire a Grenadian citizenship for himself
and his family immediately.
As Ms. Goates can pass on UK residence,
Mr. Goates should immediately acquire this star
and begin to move towards the UK citizenship. Although
the naturalization period in the UK is five years,
once acquired the UK citizenship will give him the
right to live and work anywhere in the EU.
In addition, I would suggest that
Mr. Goates acquire another star, namely Canadian
residence. This status will lead to a cash cow citizenship
in Canada after a three year naturalization period.
As a NAFTA country, Mr. Goates will acquire the
right to live and work throughout this trade block.
It is also worth noting that Canadian residence
can allow Mr. Goates to establish his home and business
in Western Canada, which will meet his need to operate
in this time zone. Finally when combined with Grenadian
citizenship, the Canadian permanent residence will
allow Mr. Goates to travel visa-free to the US.
This is a very important point, if Mr. Goates wishes
to take up my final piece of advice and give up
his US citizenship.
I have included in my materials
several articles which deal with the advantages
of losing US citizenship. I direct you to the articles
entitled "Leaving
on a Jet Plane", "H.
Alger sets himself free" and "Can
US expatriates be barred from the US?".
In designing a strategy to revise Mr. Goates' passport
portfolio, I have been careful to allow the greatest
amount of flexibility in this area. Giving up US
citizenship is an excellent tax and asset protection
strategy but must be planned carefully and executed
properly. I have left Mr. Goates the option of executing
this strategy either immediately; when the Canadian
citizenship is issued; or when the UK citizenship
is issued. Finally he can decide not to execute
this strategy at all, if he so chooses.
Ms. Goates: acquire cash cow, economic citizenship
in Grenada;
acquire star, Canadian residence leading to NAFTA
citizenship;
drop dog, lose US citizenship
Ms. Goates' current passport portfolio
is in much better shape than Mr. Goates, as she
already possesses a first-rate cash cow in the UK
citizenship. As the entire Goates' family can secure
economic citizenship in Grenada for a small extra
fee, I have suggested that they do so. Ms. Goates
will also be given Canadian residence and add this
star to her portfolio. Finally, as Ms. Goates currently
possesses a first-rate cash cow citizenship, she
may be more prepared to lose her US citizenship
at this time.
Baby Goates: acquire cash cow,
UK citizenship through mother;
acquire cash cow, economic citizenship in Grenada;
acquire cash cow, Canadian citizenship through birth;
avoid dog, do not take up US citizenship through
father
Baby Goates can acquire UK citizenship,
simply by registering with UK officials after birth.
In the same way, he/she can avoid acquiring US citizenship,
by failing to register with US authorities. Canadian
citizenship can be acquired simply by having Ms.
Goates give birth in a Canadian hospital. Finally,
Baby Goates will also be given Grenadian citizenship
along with his/her parents. By some careful planning,
Baby Goates can begin life with a very healthy passport
portfolio, which he/she can then pass on to future
spouses and children.
SHEIK MOHAMMED EL-WEALTHY
Step 1: Set out goals
· Fifty year old, married, three children
18, 15 and 11
· President of large Saudi trading company
· Needs to split time between Saudi Arabia
and Western Europe
· Need to travel frequently to meet with
joint venture partners in Europe and North America
· Needs to spend summers outside of the heat
of Saudi Arabia
· Wants to be able to live in a developed
country with good education and medical facilities
· Needs to keep additional citizenships secret
as Saudi Arabia does not allow dual citizenship
and he enjoys many business advantages in Saudi
as a citizen
· Currently concerned about forced heirship
rules (Muslim estate division) as a result of recent
heart attack, and diversifying portfolio out of
Saudi Arabia because of a domestic recession
· Future concerns relate to personal safety
if current Saudi government is overthrown by Islamic
extremists, and seizure of assets by Western countries
(as happened to Kuwaitis during the Gulf war)
Step 2: Review existing passport portfolio
Sheik El-Wealthy and family: Saudi
citizens by birth,
Portuguese resident permit holders
Passport Portfolio analysis: one cash cow, Saudi
one star, Portugal
Currently the entire El-Wealthy
family are Saudi citizens. As such they enjoy an
ability to travel fairly extensively without the
need to secure visas. However they recently found
out how tenuous their visa-free travel can be as
a few Western countries imposed visa restrictions
after the Gulf war. As Saudi citizens they enjoy
a significant number of privileges and social benefits
in Saudi Arabia. These privileges include the ability
to own businesses and land. As a result of these
factors, I would rate the Saudi citizenship as a
cash cow.
It is worth noting that while currently
very valuable, the long-term stability of its status
as a cash cow is in question. If the current regime
were to fall and a new regime became antagonistic
to Western countries, the visa free travel could
be severally restricted. In addition, the recent
recession has drawn into question the long-term
ability of any Saudi government to continue to provide
the current extensive financial benefits to its
citizens.
It is also worth noting that Sheik
El-Wealthy secured Portuguese residents permits
for himself and his family three years ago. He owns
a summer residence in Portugal and as a result of
some European countries imposing visa requirements
on Saudi citizens, he thought it prudent to secure
a more secure right to enter Portugal and occupy
their summer home. I have ranked this residence
as a star, since after a naturalization period,
the family may be able to secure citizenship in
Portugal, an EU country.
Step 3: Plan strategy to revise passport portfolio
Sheik El-Wealthy and family: acquire
an additional cash cow, economic citizenship in
Grenada;
acquire star, economic citizenship in Cape Verde;
acquire star, Canadian residence leading to NAFTA
citizenship
Since Sheik El-Wealthy's Saudi
citizenship could lose its cash cow status very
quickly, I suggest that he acquire an economic citizenship
in Grenada as an insurance policy. This can be done
in highly confidential manner so as to avoid Saudi
authorities from finding out that he has a second
citizenship. The passports relating to this citizenship
can be kept by a family member or trusted advisor
outside of Saudi Arabia and be available quickly
if needed.
In addition, since the El-Wealthy
family all have held Portuguese residence permits
for three years, I have suggested that they seek
citizenship in the Cape Verde Islands. The Cape
Verde Islands are a former Portuguese colony off
the coast of Africa. Generally speaking this economic
citizenship is not very valuable, since the visa-free
travel is quite restricted. However, as Cape Verde
citizens, the El-Wealthy family will enjoy a reduction
in the naturalization period for Portuguese citizenship
from ten to five years. This is a solid move toward
turning their star Portuguese residence into a cash
cow, European Union citizenship quickly.
Finally, I would suggest that the
El-Wealthy family acquire another star, namely Canadian
residence. This status could be turned into a cash
cow citizenship in Canada after a three year naturalization
period. It would also provide an opportunity for
the El-Wealthy children to attend top-ranked universities
that are not available in Saudi Arabia. Since it
may be more difficult, to keep the acquisition of
Canadian citizenship confidential from Saudi authorities,
Sheik El-Wealthy may delay the taking up of citizenship
and remain a resident. He may also choose to have
some or all of his children who are residing outside
of Saudi Arabia for school take up the citizenship.
MS. IVANA TAKEOFF
Step 1: Set out goals
· Forty-five year old, Russian born in
Latvia, Jewish mother, widowed, one 16 year old
son
· Co-founder and current president of trading
company in Russia
· Wants to ell business since husband's death
and collapse of Russian economy
· Would like to live in a sunny tax haven
as she no longer trusts any government not to try
to seize her wealth
· Wishes to have her son go to university
in North America and be able to visit him easily
· Is currently concerned about increasing
taxation, personal safety from kidnapping, seizure
of Russian passport by government, and poor visa-free
travel
· Future concerns relate to on-going ability
of Russian government to try to seize her assets
Step 2: Review existing passport portfolio
Ms. Ivana Takeoff and son: Russian citizens
by birth
Passport Portfolio analysis: one dog, Russian
Currently Ms. Takeoff and her son
only hold Russian citizenship. This citizenship
can currently be ranked as a dog. It is extremely
difficult to travel outside of Russia without the
need to secure visas. As a result of fears about
Russian Mafia and refugees fleeing the current crisis,
these visas are increasingly difficult to obtain.
Furthermore, when they are granted, the visas are
usually given for only single entries of short duration.
Step 3: Plan strategy to revise passport portfolio
Ms. Takeoff and her son: acquire
cash cow, economic citizenship in Grenada;
consider acquiring cash cow, Israeli citizenship;
acquire cash cow, tax haven residence;
acquire star, Canadian residence leading to NAFTA
citizenship;
acquire star, Latvia citizenship
Since Ms. Takeoff currently does
not have any cash cow citizenships, she should acquire
an economic citizenship in Grenada. This citizenship
will give her the immediate mobility that she needs
to move out of Russia and begin to reorganize her
passport portfolio and her business and personal
life.
Ms. Takeoff's next step will be
to acquire a cash cow residence in a tax haven.
She will need to make some investigations as to
where she would like to reside, but I think that
she should explore Cyprus, Malta and the Caribbean
tax havens like the Bahamas. Acquiring a residence
in one of these countries gives her a solid base
in which to operate and will also provide her with
a clear foreign tax home to avoid continuing Russian
tax liability.
Since Ms. Takeoff's mother was Jewish, she may want
to look into acquiring an Israeli citizenship under
the law of return. The process for acquiring this
status takes anywhere from one to two years. While
an Israeli citizens enjoys relatively good visa-free
travel, mandatory military service for her son may
be enough of a disincentive to make her reconsider
acquiring this citizenship.
As Ms. Takeoff and her son were
born in what is now the Baltic state of Latvia,
she should take the necessary steps to acquire this
citizenship. Recent changes in Latvian citizenship
law make it easier for Russian citizens who were
born in Latvia to secure this citizenship and to
hold multiple citizenships. I have rated this citizenship
as a star, since the visa-free travel is not extensive,
but Latvia has been named as a fast-track country
to join the European Union.
Finally, I would suggest that Ms.
Takeoff acquire another star, namely Canadian residence.
This status will immediately extend the visa-free
travel of her Grenadian citizenship and if she takes
the necessary further steps will lead to a cash
cow citizenship in Canada after a three year naturalization
period. This residence will also allow Ms. Takeoff's
son to attend university at very low tuition rates
in Canada. If he wishes to go to school in the US,
I would suggest that he acquire only a student visa
for the required period of time.
CONCLUSION
I hope that by considering these
three sample passport portfolios, you can begin
to appreciate the many planning opportunities that
are available. These cases represent a spectrum
from Ms. Takeoff who has immediate urgent needs;
to Sheik El-Wealthy who is at present quite well
off but worries about changes in the next few years;
to Mr. Goates who is dealing with issues like his
estate and the ability of his children to study
an work anywhere in the world.
Even if your situation is not
urgent, you should have the appropriate options
in place to allow you to visit, live, work, and
thrive in any country you choose. As people become
used to thinking globally and governments continue
to treat their citizens as chattel, it is essential
that people garner the means to fulfill their own
objectives and thwart government and societal restrictions.
A healthy passport portfolio is as important as
a healthy financial portfolio. Don't leave home
without one.
©COPYRIGHT 1999-2007
DAVID S. LESPERANCE
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