Why Wealthy Individuals Seek Second Passports as a Precaution Against Instability

Wealthy individuals around the world are increasingly seeking second passports as a precaution against instability, according to a leading law firm. These wealthy individuals, including Americans, are building “passport portfolios” consisting of multiple citizenships to hedge their financial risk and protect themselves in case they need to flee their home country. Henley & Partners, a law firm specializing in high-net-worth citizenships, has reported that Americans now outnumber every other nationality when it comes to securing alternative residences or additional citizenships.

While the United States is still considered a great country with an amazing passport, wealthy individuals are looking to diversify their citizenship and residence as a way to mitigate volatility and uncertainty. Dominic Volek, the group head of private clients at Henley & Partners, explains that diversification is a well-understood concept when it comes to investments, so it makes sense for wealthy individuals to apply the same principle to their citizenship and residency.

Some notable examples of wealthy individuals obtaining second passports include billionaire tech investor Peter Thiel, who added New Zealand citizenship, and former Google CEO Eric Schmidt, who applied for Cyprus citizenship. However, it is important to note that the wealthy are not abandoning their American citizenship en masse. Renouncing American citizenship is financially prohibitive due to the “exit tax” required for renunciation, making it a viable option only for the ultra-wealthy.

Instead, many wealthy Americans are seeking supplemental passports or citizenship programs to complement their U.S. passport. Portugal, Malta, Greece, and Italy are among the top destinations for Americans seeking supplemental passports. Portugal’s “Golden Visa” program is particularly popular as it offers a path to residency and citizenship, along with visa-free travel in Europe, in exchange for an investment of 500,000 euros. Malta also offers a Golden Visa program that grants European citizenship with settlement rights across Europe.

There are three main reasons driving the rise of American passport portfolios. Firstly, an alternative passport makes travel easier for Americans to countries that may be less friendly to the U.S. Secondly, having a non-U.S. passport can provide safety and discretion during business travel, especially in high-risk countries. Finally, some wealthy Americans are seeking backup residencies for retirement, to be closer to family living abroad, or for lifestyle reasons in the age of remote work. Additionally, U.S. politics also plays a role, as individuals seek alternative options in uncertain times.

The trend of millionaire migration is expected to continue rising, with an estimated 128,000 millionaires forecast to move to a new country in 2024. This increase is driven by factors such as wars, government crackdowns on wealth, and political uncertainty. However, the United States remains a top destination for global millionaires leaving their countries, with a projected inflow of 3,500 millionaires in 2024.

In conclusion, wealthy individuals worldwide, including Americans, are increasingly obtaining second passports as a precaution against instability. These individuals are building “passport portfolios” consisting of multiple citizenships to hedge their financial risk and protect themselves in case they need to leave their home country. Diversification of citizenship and residence is seen as a way to mitigate volatility and uncertainty. While the United States remains an attractive destination for millionaires, the trend of seeking alternative passports is expected to continue as wealthy individuals seek backup options in uncertain times.