Bob Bauman JD, Offshore and Asset Protection Editor
We all know the story about the frog in cold water that gradually heats up until the poor, inattentive critter is cooked.
For millions of Americans suffering from that boiled-frog feeling, there is hope.
Dr. Victor Hutchison, a Research Professor Emeritus from the University of Oklahoma’s Department of Zoology, says that as water temperature gradually increases, a smart frog will actively attempt to escape the heated water. According to a study by Dr. Hutchison, who is an expert on the thermal relations of amphibians, if the container size and opening allow the frog to jump out, it will do so.
The question is: are you ready to jump yet?
Expatriation Anyone?
The number of individuals ending their U.S. citizenship or terminating their long-term U.S. permanent residence status and expatriating continued to soar in the first quarter of 2012. In the first quarter alone, 499 Americans expatriated through the IRS, meaning they probably won’t have to pay U.S. taxes anymore.
Since its founding in 1997, The Sovereign Society has been almost alone in observing the accelerating trend of U.S. expatriation. State Department figures show that about 1,500 people formally ended their U.S. citizenship in 2010, compared with about half that figure in 2003. Last year, however, the number rose to 1,781, 16% more than 2010.
Why is this happening?
Several lawyers told the Wall Street Journal that many expatriates are wealthy Americans who are leaving because of President Obama’s policies and the general direction of the nation’s political leaders.
Wow! Do you really think so?
“There is growing concern, particularly among the wealthy, about the future financial direction of the country,” said Paul L. Caron, Professor of Law at the University of Cincinnati College of Law.
“This President constantly demonizes the wealthy, who undoubtedly are concerned about the tax policy that would emerge in 2012, if a re-elected Barack Obama, unconstrained by re-election concerns, finally confronts the budgetary train wreck that he has done so much to cause.”
And some wonder why Americans might want to leave their homeland? Obviously, they feel the water heating up.
Politicians Try to Put the Lid On
Even as smart frogs prepare to jump, politicians are trying to find ways to slam the lid on top of them.
Some recent examples of this come from very unexpected places, which includes even funding for our highways.
Last Friday, President Obama signed H.R.4348, the $118 billion Surface Transportation Act – minus an unconstitutional Senate amendment from Senator Barbara Boxer (D-CA). In March, the Senator tried to add language that would have allowed the U.S. State Department to revoke, deny or limit U.S. passports for anyone the Internal Revenue Service certified as having “seriously delinquent tax debt in an amount in excess of $50,000” without any right of appeal. The House killed this addition.
Also deleted from the bill was an amendment by the leftist senator from Michigan, Carl Levin, that would have allowed the U.S. Treasury to cut off foreign banks from the U.S. financial system, as well as dishonoring the banks’ checks, credit and debit cards and financial instruments as punishment for not following IRS orders concerning U.S. clients.
The attacks on your liberties stretch across party lines and beyond trying to force through unrelated amendments. U.S. Senators Schumer (D-NY) and Graham (R-SC) are renewing their push to create a biometric Social Security card that would function as a national ID for every American … at a cost of $40 billion! It would require everyone to report to a Social Security office, line up with a birth certificate and other paperwork, be fingerprinted and photographed and then issued a biometric card.
The Only Legal Way to End Your U.S. Taxes
Yes, expatriation is admittedly a drastic plan.
In truth, there are other suitable offshore strategies that can result in significant tax savings or deferrals. These include international life insurance policies and offshore investments made through annuities and retirement plans.
But for U.S. citizens and long-term residents who want to stop paying U.S. taxes legally, expatriation is the only option.
Expatriation requires expert advice, careful, long-range planning and, in its final step, a U.S. citizen must sign a formal document relinquishing citizenship – an intentional act that the U.S. Supreme Court has upheld as an individual’s right.
In 2008, a Democrat-controlled U.S. Congress, with the acquiescence of President George W. Bush, managed to impose an onerous “exit tax” based on the net worth of some expatriates. I examined this act in a 2009 article.
TIME magazine suggests that the complex reporting requirements of the Foreign Account Tax Compliance Act (FATCA) explains why there are now long appointment waiting lists at U.S. embassies in Europe and elsewhere for U.S. citizens seeking expatriation.
Look Before You Leap
Before you take the leap, make sure you’re heading for calmer and cooler waters. There is more to expatriation than simply handing in your U.S. passport. Choosing a new country is not to be taken lightly, and there are several key factors you should investigate first:
1. How Do I Become a Legal Resident?
Make sure you meet all the requirements to become a citizen of your country of choice. Some foreign embassies in Washington can tell you how to become a legal resident. Find your “new” country’s link at www.embassy.org/embassies.
2. Is the Country Safe and Stable?
Your new home must be a place where you can feel secure. The U.S. State Department publishes “background notes” on 200 countries available online at http://www.state.gov/r/pa/ei/bgn.
3. What About Taxes?
You want to be sure the taxes imposed will be lower than those in the U.S. Find out the tax facts at http://www.lowtax.net/lowtax/html/jurhom.html.
4. What About Banking?
Be sure your new home has stable, secure banks. Countries such as Switzerland, Austria, Singapore and Uruguay have solid banking privacy and world-class banks, but remember you need not bank in the country where you live.
5. What About Lifestyle?
You want to be sure you are choosing a country where you will enjoy life, a place to make home. Make an extended visit of several months to your new home to be certain it really is comfortable and compatible with your needs.
Answer these questions before you go and it will smooth your path offshore.
As the water heats up and the government clamps down the lid, now is the time to think about your offshore options.
Faithfully Yours,
Bob Bauman
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