We’re inching closer and closer to the day many Americans have been waiting for — Election Day. One thing is very clear among the insults and attacks, and that’s that individuals on both sides of the aisle are fearful of what lies ahead and who will be left to lead our nation.
Following a trend that started in 2016 with Trump’s victory, high-net-worth individuals (HNWIs) and ultra-high-net-worth individuals (UHNWIs) are considering ways out of the country should their opposed candidate win, and are looking to financial advisors for the best ways to protect their assets. The difference? While in 2016 it was mostly talk, in 2020 it’s become action, and for that reason, financial advisors need to be prepared for how to best guide their clients through the process of attaining citizenship elsewhere.
Putting all rhetoric aside, conservatives are concerned that a Biden victory will result in significant increases to their tax liabilities. This is not unfounded, as Biden has made clear his intentions to restore a top income tax rate of 39.6% for those producing income above $400,000. When compared with the Trump tax cuts that greatly benefited the wealthy, this is significant for HNWIs.
On the other side of the aisle are the more liberal voters who are concerned with Trump’s track record of adding to an already historic national debt, as well as his pension for discourse and conflict. These individuals, many of the same since 2016, are concerned that America stands on the brink of losing its status as a global superpower.
Questions about how to leave America are not ones most financial advisors are equipped to answer, but there is a solution they should be aware of: citizenship by investment programs (CIPs).
A quick overview, but CIPs are essentially a legal means of investing in either real estate or infrastructure of a desired country, in exchange for securing citizenship and a passport in said country. CIPs exist all over the world, and are best known in Caribbean countries such as Dominica, St. Kitts and Nevis, and Antigua, as well as European countries such as Malta and Montenegro.
Financial advisors should start by asking their clients the following questions:
- How much are you willing to spend? The minimum amount to attain citizenship in the Caribbean is $100,000 — but that’s for a one-time, nonrefundable payment. For an investment where ROI is expected, $200,000 is the minimum. By contrast, obtaining a passport in European countries can be much more expensive, as Montenegro requires at least a €350,00 investment, Malta €800,000 and Cyprus even reaching upwards of €2.2 million!
- Does your ability to travel play a role? Ironically, one of the countries most limited in terms of travel right now is the United States, due to COVID-19. However, much of the time a U.S. passport is one of the top passports for visa-free travel. If a client wants to maintain their normal travel freedoms, they must take into consideration the access their new passport grants them. For example, a passport from Dominica grants them visa-free travel to nearly 150 countries. Most European countries provide travel access to more than 130 countries as well.
- What are the tax implications? A critical question for any client, but especially one for HNWIs, many of which are managing multiple businesses, investment properties, bank accounts and more. Pursuing CIPs may enable your clients to optimize their taxes, if they actually move out of the United States and give up their citizenship. In fact, some clients may find that they’ll have to pay little to no taxes at all, as many countries throughout the world have much lower tax burdens than those in North America.
When a client asks about options for moving abroad, it may seem challenging to take them seriously. However, as rhetoric on both sides of the aisle ramps up and violence stemming from protests and alt-right groups looms perilously over society, financial advisors should familiarize themselves with CIPs as viable options to advise their clients.
Nuri Katz is the founder of Apex Capital Partners, a company specializing in advising high-net-worth individuals and governments on citizenship by investment programs.
