Expatriation

Expatriation Stats: A Look Behind the Curtain

Concept art of an article about Expatriation Stats: American couple overseas at the beach (AI Art)

As you may know, the latest quarterly statistics on “expatriation”—i.e., renunciation of U.S. citizenship—were published just a few days ago.

A total of 1,130 names appeared in the latest list, which happens to be many more than any previous quarterly total, and more than the total number of expatriations reported in all of 2012.

There’s a lot of media hoopla about the whole story, but we wouldn’t trust them. The numbers aren’t all that accurate, and neither is the commentary around it.

To start with, the real numbers of expatriation are much higher.

The IRS – the agency that releases the stats – doesn’t believe in providing a full accounting. We’ve experienced this in our own practice: The names of only one-third of clients we’ve helped expatriate have ever shown up on the list.

In fact, based on our research and experience, we suspect the real number of expatriations is around 50,000 a year, and maybe even more.

But regardless of what the real numbers are, one thing is certain: They are rising and the U.S. government is the reason.

The Real Reasons Why Americans Expatriate

The mainstream media would have you believe it’s all about taxes, and, to a certain degree, that’s true. Taxes are part of the reason, but it’s definitely not the whole story – many expats live in countries where taxes are even higher than in the U.S.

The real reasons are often much more practical. Citizens of the good ol’ U.S.A. have become pariahs on the world stage. The U.S. government’s efforts to leave no tax-stone unturned have made it virtually impossible for us to bank freely in other countries.

(Not too long ago, a bank cancelled a client’s mortgage after it found out she had committed the heinous crime of carrying an American passport.)

Insurance is another practical issue: It’s become nearly impossible for a U.S. citizen living overseas to obtain an ordinary life insurance policy. The insurers don’t want us.

More Expatriation Reasons

You can find more information here on why Americans choose to give up their U.S. citizenship here: expatriation reasons.

Other clients tell us they can no longer do business internationally, because prospective business partners shun them. Their maybe-partners assume (in some cases, rightly) that doing business with a U.S. citizen or permanent resident opens the door to continuous surveillance of their own financial affairs by the IRS.

And let’s not forget the curse of the “covered expatriate.”

While admittedly it applies to only a small percentage of the expat population, there’s some risk in becoming what the authorities call a “covered expatriate“: having a net worth of more than $2 million at the time you hang up your spurs.

And believe us, the consequences are serious.

For one, you may never be allowed back into the U.S. for any reason – even to visit family and friends.

You may be forced to pay a hefty exit tax on all unrealized capital gains on ALL of your assets. In other words, a sizeable tax bill even though you had no intention of selling those assets.

(Then, as if that weren’t bad enough, when you actually do sell the asset, your newfound home might tax you again on the capital gain. In effect, it’s double taxation.)

That’s why some people – mainly up and coming entrepreneurs and high value executives – choose to opt out before they hit the threshold.

“Should I do the same?”

It’s a question we get frequently, and, in all honesty, there is no right answer.

But, if…

  • You’re comfortable living outside the United States, or are already doing so.

  • Your spouse and minor children are comfortable living outside the United States, or are already doing so.

  • You have already or are capable of shifting the majority of your income and assets outside the United States.

  • You understand the tax implications of expatriation and can minimize or eliminate the possibility of “double taxation.”

  • You already have a non-U.S. citizenship and passport, or can acquire one in a reasonably short period of time.

  • You’re willing to take the chance, however remote, that you might be permanently excluded from ever returning to the United States.

…then yes, expatriation may be appropriate for you.

Are You A Good Candidate for Expatriation

To expatriate is a big decision. One that has implications far beyond possibly paying an “exit tax” upon your permanent departure.

Expatriation means, for example, that you no longer have the automatic right to enter or live in the United States. You’ll need to get a visa to do so, unless your non-US passport qualifies you for visa-free entry. In all cases, the Department of Homeland Security can deny you re-entry to the United States, and is under no obligation to tell you why.

Before making this decision, review several key factors to ensure it’s the right choice for you.

You can find more information here: Are you a good candidate for expatriation?

But, it’s definitely not for everyone… Like most important things in life, there are benefits as well as risks.

And, in truth, unless you said “yes” to most questions on that little quiz above, you might be best served to focus on all the other areas of asset, privacy, and personal freedom protection…

  • Securing your assets from prying eyes and sticky fingers.

  • Building a strong privacy shield to remain under the radar.

  • Looking at 2nd residencies and passports, “just in case.”

You can still protect yourself pretty well while remaining a U.S. citizen. It’s not easy, but it’s still possible and well worth doing.

The Importance of Getting a Second Citizenship Before You Expatriate

Although it’s not legally required, a second passport from another country is strongly recommended before you give up your US citizenship. This is true no matter if you renounce or relinquish.

Without a second citizenship, the act of expatriating will render you stateless. You won’t have the right to legally live anywhere. Stateless people who manage to stay out of detention camps and refugee centers live on the margins of society, since they lack official papers. In most cases, the only way they can qualify for legal residence is to make a successful claim for refugee status.

For an entertaining, but romanticized, view of statelessness, watch The Terminal. This movie is based on the true account of Mehran Karimi Nasseri. After being expelled from Iran, he spent 18 years living in a departure lounge of the Charles de Gaulle Airport in Paris until he finally qualified for refugee status in France.

Need Help?

We can assist in every phase of giving up your US citizenship or long-term residence. This includes helping you get a second passport before giving up US citizenship.

And if you’re not ready to expatriate, we can help you take advantage of tax breaks in the Tax Code that apply to US citizens and permanent residents living overseas. 

Schedule a free no-obligation consultation with a Nestmann Associate to see if expatriation is right for you. 

On another note, many clients first get to know us by accessing some of our well-researched courses and reports on important topics that affect you.

Like How to Go Offshore in 2024, for example. It tells the story of John and Kathy, a couple we helped from the heartland of America. You’ll learn how we helped them go offshore and protect their nestegg from ambulance chasers, government fiat and the decline of the US Dollar… and access a whole new world of opportunities not available in the US. Simply click the button below to register for this free program.

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