Why And How To Establish Residency Overseas–Going Offshore Primer Part 3
With a bank account offshore and at least some of your assets protected offshore, you’ve made a great start at globalizing your financial future, both immediately and longer term.
However, the benefits of “going offshore” aren’t only to do with assets. Going offshore is also an opportunity to diversify your life…to create a lifestyle safety net as well as a financial one.
One key to diversifying your life offshore can be setting up residency in another country. This can be a place where you actually intend to reside, either full or part time, in retirement or otherwise…or it can simply be a back-up plan. A “back-up residency” means you’re ready to make a move to another country anytime you decide you need or want to.
If you’re a retiree with a pension or Social Security or if you’re still working but already receiving a pension, residency in many Latin American and a few other countries around the world can be a straightforward thing to organize. Show you have a minimum amount of income from a pension (U.S. Social Security qualifies), and, typically, you can get legal residency. The minimum monthly income amounts range from as little as US$800 for Ecuador up to US$3,000 a month for Malaysia.
If you’re setting up legal residency in another country as a back-up plan, you’ll want to understand the rules of residency to make sure you don’t inadvertently lose your legal resident status after having gone through the trouble of obtaining it. Ecuador is a good example, as this country requires you to be physically present in the country for two years with a total allowable absence from Ecuador of no more than 90 days. Panama, on the other hand, requires you to be in the country only once every two years to keep your resident status.
Residency as a back-up plan is a growing concept. With even “stable” countries facing off against destabilizing forces from economic crises to terrorist attacks, more and more folks are recognizing the appeal of having a place to go live “just in case.” The sense of security that comes from having options for you and your family should things become unbearable in your home country can’t be underestimated.
Residency for lifestyle is more common. Moving permanently to another country isn’t on most working people’s agendas; however, the numbers of nowhere-near-retirement-age folks who are trying to organize their lives so that they can earn an income and afford to live where they want to live are expanding like never before in history. Meantime, we remind you regularly of the advantages of living overseas full time in retirement.
And even wanting to spend a few months a year in a place can be a reason to obtain legal residency in that country. Benefits include being able to open a local bank account to an easier time of it getting through immigration. Also, increasingly, being a legal resident of a country can make it possible (when it might not be otherwise) to fly from that country on a round-trip ticket. Airlines are getting stricter about allowing you to fly to a country where you’re not a citizen if you haven’t already purchased an onward ticket. (The reason is because it’s the airline that’s responsible for bearing the expense of returning you to whence you came if you’re refused entry into the country where they’ve flown you.) If you’re a legal resident of the country, this is not an issue.
The ultimate potential benefit of legal residency in another country is citizenship. Holding another citizenship provides benefits beyond residency. It allows you to obtain a passport from the country, which opens up travel options. It means you can work in the country without a work permit. If you’re a U.S. citizen, it can make it easier to open a bank account in another country.
A second citizenship is also the ultimate back-up plan. While it isn’t common, legal permanent residency can be revoked. Being a citizen eliminates that possibility. It also gets you the protection of your new country of citizenship should you have problems while traveling.
Living in another country also provides you additional asset protection. Most of the world isn’t as litigious as the United States or even the U.K. In many countries, you have to post a bond to sue someone. In some cases, the amount of the bond must be the amount you’re suing for.
Asset protection benefits aside, living in another country offers a wealth of lifestyle advantages. You could learn another language (beneficial, they say, in helping to stave off Alzheimer’s). You could enjoy different food…different music…a different culture altogether. You could find a climate you prefer better than the one where you happen to have been born. You could remake your life entirely. At a minimum, you could have a great adventure.
Residency options are many. You just have to decide where you might want to spend time and then research the options for that country. Citizenship is more complicated and requires some additional research to make sure you understand all the implications and potential consequences up front. You don’t want to dedicate years of your life to obtaining a second citizenship only to find out too late that you can’t or don’t want to comply with the requirements or responsibilities of that citizenship.
Remember: Residency and citizenship in another country are part of a global diversification plan. I recommend that you don’t move the bulk of your assets to a country where you intend to reside. Don’t end up like many people I’ve spoken with over the years who have set up bank accounts in one country (Belize, say) only to decide they in fact want to live in Belize. In the interest of preserving the overall diversification objective, this means replanting the banking flag.
Lief Simon
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