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A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide for wealthy investors and consumers. Register to receive future editions, straight to your inbox.
Wealthy American families are increasingly seeking second citizenship and national residency to hedge their financial risk, according to a leading law firm.
The wealthy build up these “passport wallets” – collections of second, or even third or fourth citizenship – in case they need to flee their home country. Henley & Partners, a law firm specializing in high-net-worth citizenships, said Americans now outnumber all other nationalities when it comes to obtaining alternative residencies or additional citizenships.
“The United States remains a great country, an extraordinary passport,” said Dominic Volek, head of the private clients group at Henley & Partners. “But if I’m rich, I’d like to protect myself against levels of volatility and uncertainty. The idea of diversification is well understood by wealthy individuals in terms of what they invest. It doesn’t make sense to have a single country of citizenship and residence when I have the ability to diversify this aspect of my life as well.
Recent examples of second citizenship include billionaire tech investor Peter Thiel, who added citizenship in New Zealand, and former Google CEO Eric Schmidt, who applied for citizenship in Cyprus.
Of course, the rich don’t pack their bags en masse and abandon their American citizenship. While a relatively small number of Americans renounce their citizenship each year to declare a new country of origin, primarily due to tax filing requirements, the so-called “exit tax” required to renounce citizenship makes it financially prohibitive for most, except for the ultra-wealthy to simply renounce and declare a new citizenship.
Instead, many wealthy Americans seek a visa or additional citizenship program to supplement their U.S. passport.
According to Henley, the top destinations for additional passports among Americans are Portugal, Malta, Greece and Italy. The Portuguese “Golden Visa” program is particularly popular because it offers a pathway to residency and citizenship – with visa-free travel to Europe – in exchange for an investment of 500,000 euros (about $541,000) in a fund or private equity. Malta offers a Golden Visa for 300,000 euros invested in real estate, which Volek says has become “particularly popular with Americans.”
“With Malta, you become a European citizen, with full rights of establishment throughout Europe,” he said. “So you can live in Germany, your children can go to 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 wallets, or “home diversification.” An alternative passport makes it easier for Americans to travel to parts of the world less friendly to the United States.
“For US, UK and Israeli citizens who are no longer sure they are welcome abroad, additional passports provide vital flexibility,” according to a Henley report. “With increasing global instability, holding the citizenship of another country, especially one considered more neutral or politically innocuous, now constitutes a valuable alternative or alternative option.”
Another reason is business travel, which can be safer and less visible with a non-US passport in many countries. American business leaders could be targets of “resentment, hostage-taking or random terrorism in the chaos of collapsed states or high-risk countries to which they must travel for business purposes,” according to the report, which says interested parties range from speculative circles – from fund managers who meet with global clients to mining company executives who visit mining sites.
Using a secondary passport can also facilitate cross-border financial transfers or transactions within the new country.
Finally, some wealthy Americans simply want a secondary residence in anticipation of possible retirement, to be closer to family living abroad, or for lifestyle reasons in the new era of remote work. For others, American policy is the driving force.
“We are all living in uncertain times, not just in the United States, but in every country around the world,” Volek said. “Who knows what’s going to happen next. It’s really about having not only a plan B, but also plans C and D.”
Globally, millionaire migration is expected to reach a new peak in 2024, as wars, government crackdowns on wealth and political uncertainty push more wealthy residents to other countries. An estimated 128,000 millionaires are expected to move to a new country this year, up from 120,000 in 2023 and 51,000 in 2013, according to Henley.
The United States remains a favored destination for global millionaires leaving other countries, with a net influx of 2,200 millionaires in 2023 and a projected influx of 3,500 in 2024, according to Henley.
China remains the largest source of millionaire emigration, losing a net 13,500 millionaires last year.
“The opportunities for wealth creation in the United States are unrivaled globally,” Volek said.
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