Canada: Multi-Citizenship Planning for the Wealthy Client

Most people will go through their lives with the passport portfolio that is allocated to them at birth. Their passport portfolio will not be diversified and they will have to contend with the advantages and disadvantages of their original citizenship.

They will rely on the benevolence and goodwill of their native government to take care of their needs and not treat them like chattel or abuse their rights. Unfortunately, history has shown that while most governments do not mistreat their citizens, when one does, the effect is profound.

It is not only to avoid such events as the rise of Nazi Germany or the break-up of the former Yugoslavia that prudent people today are paying more attention to their passport port-folios. The meteoric rise of globalism with all of its potential dangers and advantages is forcing many clients to review their own situations. As these changes are occurring at an amazing rate, having a healthy passport port-folio will allow your clients to maximize returns on positive development and minimize risk on negative ones.

Consider the following things that have emerged in the last two decades:

• world-wide overnight delivery
• inexpensive long-distance telephone services
• fax machines
• the Internet
• automatic bank machines with world-wide access
• satellite television
• digital mobile telephones
• an-line stock trading
• international terrorism
• money laundering regulations
• governments operating on enormous deficits
• large punitive damage awards and contingency fee lawyers
• increased random crime and gated communities

When you review this list, you begin to realize that your clients need to arm themselves with the means to deal with the many possibilities, both predict-able and unpredictable.

You and your clients should consider:

• Visa-free travel to the countries your clients visit for business or pleasure
• The ability to live and work in favorite long-term destination countries;
• The ability to have children study in the school of your client's choice;
• The ability to arrange affairs to minimize government intrusion in such areas as taxation, currency restriction, overzealous regulation, military service, unfair seizure of personal property and personal liberties;
• The ability to arrange affairs to minimize intrusion by fellow citizens in areas such as frivolous lawsuits, divorce property division, and crime on your person and property

To meet these goals, you and your clients must go through a process similar to that involved in preparing a financial portfolio.

The first step to a healthy passport portfolio is to set out the goals that you wish to meet for your clients. Setting goals involves a number of different factors.

In setting out goals for your clients you need to look at long-term scenarios. As with an estate plan, the passport portfolio should deal with at least two generations.

Your decisions will have a profound impact on the lives of your clients' children, grand-children, and great-grandchildren. Few people relish living out of suitcases, so various locations will have to be evaluated to determine whether they are suitable as long-term "full-time" residences. Issues such as medical and educational facilities, infrastructure require-ments, rural versus urban lifestyle preferences, and accessibility, may all be factors to take into consideration.

You will also need to evaluate your clients' employment or business requirements, such as access to customers, colleagues, and advisors.

It is extremely important for your clients to have access to places that are considered safe in time of turmoil, such as Western or small remote countries. However, you need to be very careful when looking at these countries and will have to decide whether your clients simply wish to visit these places or if you wish to reside in them for extended periods of time. Long-term resi-dence may have unwelcome side effects such as taxation.

Passport portfolios are a very personal reflection of the matters that concern your clients most, so you should set out a list of their concerns. Such a list could include a lack of visa free travel, taxation, excessive litigation, political instability, crime, infringe-ment of personal liberties, etc.

In listing these concerns you should include scenarios you feel "could" happen to your clients, such as taxation based on citizen-ship, estate taxation, unreasonable restrictions of financial dealings through anti-money laundering regulation, currency restriction, backlash of "have-nots" if the welfare state collapses, etc.

The key to the ultimate success of any passport portfolio is the ability to deal with many contingencies.

You should review your clients' current passport portfolios and assess their various elements as cash 'cows', 'stars', or 'dogs' (see Table 1). Unfortunately, there is a great deal of misinformation in the marketplace.

Advisors should set out a long-term strategy to revise their clients' passport portfolios so they will meet their personal goals, be able to guide them through the process of setting these goals, review their current passport portfolio, and identify cash cows, stars and dogs.

In addition, advisors should be able to identify changes in citizenship, residence, and tax laws for each element of their clients' passport portfolio. Advisors should review ancestry, education, employment, back-ground, financial situation, and family lifestyle to determine suitable cash cows and stars, and devise ways of ridding clients of the dogs in their passport portfolio while taking into account their clients' financial position and lifestyle restrictions.

Continual education of clients will be necessary. It is very important to educate as many family members as possible on this subject as it is unlikely you will be available to advise future generations.