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A growing number of wealthy American families are increasingly applying for second citizenship and national residency as a way to hedge financial risks, a leading law firm says.
The wealthy are building these “passport portfolios” – collections of second, or even third or fourth citizenships – in case they need to flee their home countries. Henley & Partners, a law firm specializing in high-net-worth citizenship, said Americans now outpace all other nationalities in obtaining alternative residence or additional citizenship.
“The United States is still a great country and still has an amazing passport,” said Dominic Volek, head of private clients at Henley Partners. “But if I’m rich, I want to hedge against levels of volatility and uncertainty. Rich people understand the idea of diversification very well with their investments. While I have citizenship in one country and country of residence, citizenship in one country and residency just doesn’t make sense. There’s also the ability to really diversify that aspect of my life.”
Recent high-profile examples of second citizenship include billionaire tech investor Peter Thiel, who added New Zealand citizenship, and former Google CEO Eric Schmidt ), he applied for Cypriot citizenship.
Thomas Coqueta | Photographer’s Choice Rf | Getty Images
Of course, the wealthy are not packing their bags en masse and giving up their U.S. citizenship. While a relatively small number of Americans renounce citizenship each year to declare a new homeland, largely due to tax filing requirements, the so-called “exit tax” required to renounce citizenship makes most but extreme Americans Financially unaffordable. The wealthy simply give up and declare new citizenships.
Instead, many wealthy Americans are looking around for additional visa or citizenship programs to supplement their U.S. passports.
Henry said the top destinations for Americans applying for supplemental passports are Portugal, Malta, Greece and Italy. Portugal’s “golden visa” program is particularly popular because it offers a route to residency and citizenship—visa-free travel across Europe—in exchange for investing 500,000 euros (about $541,000) in a fund or private equity ). Malta offers a golden visa for investing 300,000 euros in real estate, which Volek said is “particularly popular with Americans.”
“By joining Malta, you become a European citizen with full rights of settlement throughout Europe,” he said. “So you can live in Germany, your children can study in France, and you have the right to live, work and study throughout Europe.”
There are three main reasons for the rise of U.S. passport portfolios, or “domestic diversity.”Alternative passports make it easier for Americans to travel to parts of the world that are less friendly to the U.S.
“For U.S., British and Israeli citizens who are suddenly unsure of their welcome abroad, supplemental passports provide vital flexibility,” Henry reports. “As global instability increases, holding another Citizenship in a country, particularly one considered more neutral or politically moderate, now provides a valuable fallback or alternative.”
Another reason is business travel, where using a non-U.S. passport can be safer and less conspicuous in many countries. The report said U.S. business leaders could be targeted “by resentment, hostage-taking or random terrorism in the chaos of collapsing countries or high-risk countries they need to travel to for business purposes.” – Fund managers meeting with global clients and mining company executives visiting operational sites.
Using a secondary passport can also help with cross-border financial transfers or transactions in a new country.
Finally, some wealthy Americans simply want a backup residency for retirement, to be closer to family living abroad, or for lifestyle reasons in the new age of remote work. For others, American politics is the driving force.
“We are all living in an uncertain time, not just in the United States but in every country around the world,” Wallack said. “Who knows what’s going to happen next. Really, not just have a Plan B, but a Plan C and a Plan D.”
Globally, millionaire immigration is expected to hit a new high in 2024 as war, government crackdowns on wealth and political uncertainty drive more wealthy residents to other countries. Henley said 128,000 millionaires are expected to move to new countries this year, up from 120,000 in 2023 and 51,000 in 2013.
Henley said the United States remains the top destination for global millionaires leaving other countries, with a net inflow of 2,200 millionaires in 2023 and an expected inflow of 3,500 millionaires in 2024.
China remains the largest source of millionaire outflows, losing a net 13,500 millionaires last year.
“The opportunity for wealth creation in the United States is second to none in the world,” Wallack said.
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