Are you awake to see opportunities?
Why is it that some people have the knack to see an opportunity and seize it, and others just watch them pass by?
I am introducing a series of five (5) interviews on how to prepare your life and your finances for internationalization. Being able to have a ''bug out'' strategy should the USA go through a possible financial collapse, social uprising, civil war or other potential catastrophic situation is critical in 2020.
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The one thing you can guarantee in life is that things change
I came to the USA in 1989 - it was very different then
I left Australia to pursue opportunities elsewhere
I returned 6 years later to live for a few years, and it was a very different place. I then returned back to the USA in 1999.
When I went back again, 12 years later, and have continually done that for the past 8 or so years, I see a failed state. A state in which government has mis-managed the sovereignty of the country, the opportunities for the people were offshored and the identity was dilluted. As I record this, Australia just entered its first official recession - the first one in 28 years and it doesn’t look very good for the future based on the failed relationship with China that it now has.
This could be your country. In fact in many cases, it is your country. Consider the current status of the USA.
To parallel this, if you remember back about 8 years to Egypt, it was the time of the “Arab Spring”. This was a country that everyone wanted to visit for the pyramids, Sphinx, etc.
Under a dictatorial leader (Mubarek), the country fell into protest, eventually bringing in the military to quash the protests. Ultimately the military leaders broke from Mubarek, eventually arresting him and jailing him, where he eventually died in prison.
This happened quickly. Consider the situation in the USA today and you can almost parallel each step in Egypt’s journey with the USA.
But the USA has one thing additional - it has massive debt. And since it is the world’s currency, the 80% of the other countries in the world will be hurt if the USA and its currency are hurt. Meanwhile elected officials are mismanaging the coffers of the country while being “guided” by those peddling Modern Monetary Theory and some hacks to try and pretend that debt isn’t real - like some entitled brat of a country that thinks it doesn’t have to be responsible to its future.
Any sane person would look at these things and weigh up whether this is where they should be right now. It could get very much worse - we have already tasted what martial law looks like, and we have those that want to “crack down” on protests rather than respecting the US constitution and right to free speech and assembly. We could be Egypt.
I’m an immigrant and a dual citizen of the USA and Australia. I see things from an outsider’s perspective and I’m a contrarian. So I have no issue with traveling the world to obtain what you need from the best possible places. But normally that is considered as a tourism experience, or a vacation, etc. There are times, however, when you seriously need a “bug out” plan in the case of catastrophe. And there has never been a more relevant time for that than now. Of course, this all comes at a time when due to COVID19, travel is significantly restricted.
There are two forms of internationalization that is relevant here:
1. You and your family, physically
2. Your money
Your physical internationalization
In the case of the first option, you need to have travel documents that will let you cross borders into other regions. That is typically a passport. Your native citizenship entitles you to obtain a passport from your country. Surprisingly only 42% of United States Citizens have a passport, and most of them only got one because they wanted to go to Cancun or Canada on a vacation. Before a passport was required to cross into Mexico or Canada, that statistic was as low as 7%. That would shock any European where the number of citizens that have passports are more likely in the 90% range.
The thing is that your country of citizenship will claim right to your physical presence if they feel it is in their interest to do so. We see that mainly in the case of extradition requests for parties that they want on US soil, mainly in the case of major crimes, etc. They have agreements with other countries to extradite parties to the US if the laws in the US are reciprocally applied. There are obviously some restrictions, because each country in the world is entitled to its own laws, its own sovereignty, etc. But with the US being the dominant player, particularly in terms of monetary settlement (the $USD is the “World Currency”), most countries would cave to any US request.
I’m looking at this from a US centric point of view, of course. You could be a citizen of any country in the world and the same rules will apply. It is just that the USA has a particularly unusual and strong power when it comes to their subjects.
Having the ability to travel at any moment with a passport is one thing - having a place to go to, to live, to be safe and to meet your physiological needs, is another. Sure, there are short term rentals, AirBnB, hotels, etc. in your place of destination, but that can be expensive and probably only good for shorter term stays. If your intention is to go to a foreign country for longer than a short term stay, then you will likely have to subject yourself to some form of VISA or legal residency status. And each country have their own rules, etc. for that.
There is a popular movement and concept of the PT - The Perpetual Traveler. The idea is that you can stay in a foreign country for the amount of time that they allow a tourist to stay. For example, in the case of Mexico that is 6 months. That may be enough time to avoid the turmoil of what is happening in your home country, but chances are that you need more time than that. Those that practice PT, will move to another country (not their native one) and repeat the same process. Many choose 3 or so countries to ensure that they have that flexibility.
Another and more secure way of doing this is to have multiple passports. Passports represent the countries negotiating power with others - some countries allow VISA Free travel to other countries, and that is typically reciprocated. The US has those agreements with countries like the UK, Australia, etc. in which they allow a 90 day period of time for anyone traveling under a passport of one of those countries to visit and stay in the USA. This is considered an advantaged status for those countries. Typically they reciprocate in the same manner, so that US passport holders typically do not need a VISA to enter Europe or Australia. They just get the same reciprocal treatment. But what happens if the US has a beef with another country and shuts down that option? Then typically it is also shut down in that other country, which can be a risk if the PT is domiciled in a country that has some form of “falling out” with the USA.
If you have a 2nd or 3rd passport, then the travel privileges that the country of your additional passport grants you is enough for you to remain or travel under that country. The number of countries that allow passport holders from one country to come to their country determines a “Tier” status, often referred to as a Tier A, B or C passport. If you have, for example, a Mexican passport, most countries are available for you to travel to with the exception of the USA and Australia. But if you have a US passport, then you have those covered as well. Most people consider those without a US passport in Mexico to be less able to travel, but the reality is that Mexicans can travel freely through Europe, Latin America, Asia and Africa without restriction. They can often go to countries that US citizens cannot (e.g. Cuba, Iran, etc.).
How do you get additional passports? Well first you need one of the country of your birth. Once you have that, then you may be eligible for others based on your parents nationality, or your grand parents. Countries like Ireland have very flexible rules to grant citizenship to those with Irish heritage and since Ireland is still a part of the EU, it then inherits the privilege of European travel, work, etc. But there are 200 or so countries on this planet, so finding out if you are eligible for a 2nd or 3rd passport often is best handled by profesionals that work in that space.
Alternatively you can get citizenship in some countries by investment. If you make a large donation to some Caribbean island countries, they may fast track you to citizenship. In some cases, buying certain types of real estate or investing in one of their nominated businesses may grant citizenship. Again, the rules change quickly and you need to work with a professional to find the best solution. However when it comes to costs, you don’t want to even consider going down that path unless you have at least $250K to donate or $500K to invest. This is something that is typically only taken advantage of by those with liquid capital to deploy. Most of the time, however, a passport granted to one person in a country can entitle their entire family to obtain passports, so it can be a good plan for safety.
Your financial internationalization
Although having some physical status in a foreign jurisdiction certainly helps with establishing a financial flag in the ground, it doesn’t actually require you to have physical status. You have probably heard a lot about the rich that put their money in the Cayman Islands or Panama or the Cook Islands or Malta, etc. There are even movies that portray those that do this as criminals and evil. The 2019 movie with Merril Streep, “The Laundromat” was an example of this.
In truth, this is just a way that the media and governments use to spin fiction into fact. There is nothing illegal with you having a bank account in the Cayman Islands, or a business in Belize or Panama. And many of those countries do not have reciprocal reporting agreements with the USA, but that is rare these days. The truth is that if you are thinking that using foreign banks or trusts or companies, etc. to avoid tax is a viable strategy, you are wrong. It isn’t. For US citizens and green card holders, you are obligated to pay US taxes on worldwide income (yes, the US is one of only 2 countries in the world that does this) and you are also required to report assets overseas in bank accounts, etc. to the US FINCEN department through the FBAR forms (administered by the IRS), along with a ton of other reporting requirements for foreign entities that you either own or control. The penalties for these things are severe (often in the hundreds of thousands of dollars) and can involve criminal prosecution, so you need a good tax attorney for this. I recommend IRS Medic and I am a customer of them. They are affordable and will streamline the reporting process.
But if you are properly disclosing your international assets to the US government, you are in compliance and legal.
If you are unable to hide your assets overseas from the US government, why would you do that? Well simple. Private party litigation. You see, the US is one of a few countries in the world that are litigation crazy. They have setup their laws so that anyone that wants to steal your stuff can. Basically if you are attacked by someone (the plaintiff) for whatever reason, whether it is legitimate or pure BS, the onus is on you to defend yourself and the costs and obligation to do that can be massive. In the case where you are unsuccessful, a judgment may be made against you for damages and with that judgment the prevailing party can start to take your stuff. Real Estate, Bank accounts, physical goods like jewelry, etc. It is all fair game. And many countries have agreements with the USA where a judgment in the US is considered a judgment in their country, so you are not safe there either.
However many countries do not. Some are just downright horrible for plaintiffs to sue you in. For example, in Belize, if you want to sue someone you have to estimate the damages you are looking to obtain, and place that amount of money in a bond with the Belize government before you can bring a case to their courts. And the other interesting thing here is that from a tax perspective, those with a judgment may have to pay taxes on that judgment even though they haven’t collected on it yet. So there needs to be a really good reason to go after someone here, particularly if it could be very difficult to ever collect on the judgment.
And that’s why those with assets use offshore jurisdictions. They set their companies up in those regions, they bank in those countries, etc. They use trusts that they don’t have control over to put their assets in, because even if they are brought in front of a US judge, and the judge demands that they give up the assets they own, they can’t because the trust won’t let them do it if they are under duress. If they could and they refuse, then they are probably going to wait it out in a jail cell until they comply, but if they can’t that might not be possible. No guarantees here, but you can see the situation. If the plaintiff is engaging with a contingency lawyer to share the proceeds of the case, they probably won’t get one. The lawyer wants to be paid, and if the lawyer determines that the party who has assets has them locked up overseas, the plaintiff better work with the attorney on a time & materials basis and that’s not likely to happen.
As long as you are willing to file paperwork, and use professionals to do this, you may find that at least internationalization of your financial affairs may be prudent. I would state, however, that I’m not an attorney and you need to consult with one. And don’t expect to do this on the cheap. Although pricing for setting up internationalized asset trusts, etc. can vary, it is not uncommon to expect a $20-30K legal price to set this up properly from a reputable attorney.
Let’s talk about Patriotism
While for some, the idea of “The International Man” invokes a romantic notion of the rich guy, traveling in first class from one place to another, living like a king, enjoying reduced taxes, and sheltered from financial attack, to many it looks insincere.
They see it as someone who is abandoning their citizenship. Jumping ship, so to speak while all their friends & family are left to fend for themselves. And what about the idea that you are a citizen of “The best country in the world”?
What exactly is that? Who made that determination? If you are living in the domestic echo chamber of your country, that is great TV new fodder. I mean everyone gets onboard with 4th of July fireworks, and celebrates their “freedom” in the USA. But is it really true anymore?
Are you free when your government watches your every move? Are you free when you are living in a lock down? Are you free when there is martial law? Are you free based on the color of your skin, your gender, your religious beliefs, your sexual preference? Are you watching the very freedoms that are codified in the US constitution be ignored entirely? Are you only free if you have enough money to buy that freedom? Are you free to watch your currency devalue before your eyes as the government prints more money it doesn’t have the assets to back or the ability or willingness to pay back?
I’m not saying don’t be proud to be from the country of your birth. But I am saying that blind allegiance to one ideology is herd mentality. And that is the counter position of a contrarian. When you find yourself in the country of your birth after working your entire life to save money to retire, only to find that you can’t afford to retire because of inflation or the lack of interest paid on savings, or that when you need healthcare you can’t get it, or you can’t afford it, or the risk of bankruptcy comes if you get sick, then you start to realize that maybe the blind pride that comes with your identity of your birth may be a great illusion, but it could also be your downfall.
Look, I realize this is a touchy subject. We identify ourselves with the country of our birth. It is in our accent, our sensabilities, how we perceive ourselves and the world around us, etc. It is us. But sometimes you have to learn that there is a time to be proud and stand firm in your native land, and there are times when you have to get out of dodge. My point is that you should never consider that to be anything other than prudent. It isn’t abandoning your country. It is understanding that the world revolves around you - you don’t revolve around the world. And that the world is huge and just like birds that fly across borders without any issue, you should have and enjoy the same freedoms.
Borders and countries are fictional things really. I mean some guy with a sharpie marker draws a line and gets enough people to agree that one side is country X an the other side is country Y. Many times this is done through the barrel of a gun. But these mythical lines that we create don’t follow climate or nature. The same sun shines on one side of the US-Mexico border as it does on the other. That’s why so many of US farmers sold up their land in California, and bought land or entered partnerships with Mexican farmers because that is where the labor was. The fact that we restrict them from coming in so much that crops are left to die on the vine in the USA because US workers refuse to pick them, then what other choice to they have?
And for those that are looking down the barrel at retirement, and getting depressed that they can’t afford it, I’m going to present to you experts that will tell you that for pennies on the dollar, you can live like a king in other countries, and yet still receive your US social security checks no matter where you are in the world.
Strategic relocation may not be for everyone, but for those that are truly wishing to be unconstrained, this is the pinnacle of achievement.