James Pittman: Welcome to Immigration Uncovered, the docket wise video podcast. I'm James Pittman. This is episode 36, and we're here with David Lesperance, who is the founder of Lesperance and Associates. It is a law firm. David is based in Poland.

James Pittman: He has offices in Montreal and Gibraltar, and they deal with citizens of of any nation who are looking for potentially second residencies or, second domiciles or second citizenships and beyond. David, welcome to the program.

David Lesperance: Pleasure to be here, James.

James Pittman: Okay. Well, we've we've talked a little bit about, sort of you you know, you and I had a little preconversation. We talked about 3 essential scenarios that we're gonna use as our framework for going into our discussion today. And the 3 the 3 scenarios are the first 1 is where someone wants to go abroad for a limited period of time, but they're they're not planning to stay long enough to really be a tax resident in a second country. That's our first scenario that we'll go into.

James Pittman: 2nd scenario we'll get to after that is where you are going to go abroad. You're gonna be residing long enough so that you're gonna need to have tax planning considerations. You may be be acquiring a second citizenship. You are, however, not planning to give up your primary citizenship. And then the third scenario is when you're planning to leave your country of origin or your main country of citizenship for good, and then, you know, especially for US citizens, that introduces a whole other set of considerations regarding taxation, the expat tax and, foreign tax compliance and and all of that. So we're we're gonna talk about those 3. So having said that, let's go to our first scenario. So, David, you know, what sort of what sort of scenarios do you encounter when someone is planning to go abroad for a limited period of time, and what are the considerations involved in advising

David Lesperance: them? James, I've been using this analogy as a that is a bit dangerous for a Canadian, for my American clients to say, imagine you live in a wildfire zone. So what are your wildfire concerns? While it may be taxation, it may be gun violence and not your children doing active shooter drills. It may be rising antisemitism, Islamophobia.

David Lesperance: It may be just, you know, tired of political polarization. And so what do you do when you're in a wildfire zone? Well, I'm gonna fight the fire. I'm gonna vote and gonna register my friends. I'm gonna donate. That's great, but no, you know, no chief drops a crew into a hot zone without having an exit strategy. And so that would be a second resident, second citizenship, and then a fire escape plan. So the first 1 that you you've mentioned is what we call the the go bag option. There's been a hurricane, there's been an earthquake, or, you know, I have clients that are planning to be outside of the US during the election season. They're as you said, they're gonna be be abroad somewhere longer than a visitor. They don't know quite how long, but they suspect it'll be less than the normal 6 months when they will become tax resident in another jurisdiction. And so for a lot of clients, it's that's that's assurance of events that they think may happen or that they have a good chance are happening. It I have everything from I've got some clients in California, same sex couple, who as a result of Dobbs are worried that, you know, same sex marriage may be next, and they just want the comfort of that insurance policy so that they know just because you have fire insurance and a fire escape plan doesn't mean you need to use them. It just means that if you smell the smoke, you've got options.

James Pittman: Okay. And, so, you know, what are what are the considerations that you have to take into account? So you have considerations of permission to reside abroad. What what goes into making a choice of country, and, are there any tax considerations when you are so you're not I mean, you're going for a limited period of time. The idea is you're not gonna stay long enough to be subject to taxation.

David Lesperance: Yes. I mean, unless you're going to Eritrea, where no other country taxes based on citizenship. Okay. In fact, no other country ties immigration status with tax status. So you are, for example, US person for tax purposes if you get the immigration status of a green card. You don't if you, for example, get a leave to remain in the UK or permanent residence in Canada or a work permit in Germany, etcetera. So the when we look at how you acquire the fire insurance, a lot of it depends on your background. Do you have claim to a European citizenship, European country citizenship? That doesn't mean that you need to go back to the country of your ancestors. In fact, with an EU country citizenship, you can go to any 1 of 27 countries. Can you take advantage of, for example, a trade agreement between Canada and the US? A lot of our go bag options that we use are are people who have US companies or they're their senior executives. We create a Canadian subsidiary. We get a work permit for them under an inter corporate transfer. Other countries have what are called residents or golden visa by investment programs. As I mentioned to you, before we started talking is, I act on behalf of my clients. I don't act on behalf of some fund manager in Portugal or you know, some Caribbean island. So if we have to go with the residence or citizenship by investment, I actually return the commission back to the client so they know that I'm acting in their best interest and not not in a complicated manner. The key for any developing of any of the fire escape plans is it's gotta be a place that works, and I I like to say sells at the breakfast table. Occasionally, I'll get a client who said, look. I've been sued. I've been audited. I've gone through a divorce. Move me somewhere with no lawyers and and no tax system. And so my glib answer is, no problem. We'll move you to Pitcairn Island. Only 38 people on earth have decided that's where they wanna live. Oh, no. No. No. I want schools. I want hospitals. I want airports. I want this. I want that. And it's like, okay. So let's put movie to a place which is gonna fulfill all those business and personal needs for all the family members and do so in a tax efficient manner. Right.

James Pittman: So it's interesting. So so the fact that you're gonna acquire residency or you're gonna acquire citizenship even does not necessarily trigger being taxed under the laws of that jurisdiction. You've just said that it's really only the United States and maybe Eritrea who just tax you just based on the fact that you have their citizenship. So you can get the 2nd citizenship. You can get a residence permit, but you're not necessarily triggering a tax tax requirement. But is this is it still a it's it's it's still a good time, I think, to talk about, SBAR and FATCA because if you're a US citizen, you're going abroad even for a period of several months, you may find it advantageous depending on what you have to do abroad to open a bank account. I mean, do you do you find do you find that the FBAR and and FATCA come into play even for short term residents abroad? So

David Lesperance: an FBAR is a foreign bank account report that you have an account in a foreign bank with a greater than $10,000, transaction within within a year. You have an obligation to file a particular form with the Treasury Department, not a tax liability. It's simply that you are, you have this obligation to report. And if you don't report, there's quite onerous penalties. So there's lots of people who thought, well, I have a cottage in Canada. I'm gonna open up a bank account with, you know, a Canadian bank to pay my property bill and my, you know, my gardener or whatever. And, you know, they when they add it up over the period of time or they have a child who's going to school abroad and they open up an account for that child, and they said, well, you know, I don't want them spending it all at the pub, so I'm going to have a cosigning on that. And not only does the child abroad have the obligation for the foreign bank account report, but so does the cosigning American. FATCA was an interesting piece of legislation that ICON10 was brought in. So the if you go back before FACA, there's something called the qualified intermediary regime. And what it was was the United States realized, hey. We're the we're the the the world reserve currency here, so any financial institution on earth is going to want to have US correspondent banking relations. And in fact, we have 30 to 35 percent of the world's equity market. So any financial brokerage house internationally is going to want to access the US market for all of their clients. So, the US government had signatories directly with each of these financial institutions called qualified intermediaries. Well, some of these, banks and EUBS was not the only, but they were the first 1 to be kind of outed, were not complying with the q QI regime. And the QI regime obligated them to search through all their clients, report, withhold, and remit on US persons who had accounts, brokerage accounts, bank accounts with that institution. UBS was outed, major case from Credit Suisse, HSBC, Vaguely, and all kinds of banks all over the world, were outed. And so that then gave an opportunity to for the US government to bring in FATCA, which was kind of QI on steroids. So now, for example, I, as a Canadian who opens up a bank account I live in Europe. I open up a local bank account. I've never been a US person. They still have to do FATCA compliance. So if I was a US person, citizen, green card holder, substantial presence, I'd have to sign a W9. If not, I sign something called AW8 BIN, which means that they don't have to report withhold or remit. Now that these financial institutions are going through all their existing and new clients and determining whether they're US persons, they're gathering a lot more information. That then other countries such, you know, other countries said, well, gee. Okay. They're out there trolling everybody. The Americans are taking the tuna out of the net. Let's get our Kiwi or Canadian or British or French dolphins. See, that then gave birth to something called the Common Reporting Standard. And so, you you know, CRS is now, you know, a new program. So when going back to our fire escape plan, even if you say, I'm gonna have a go bag option, and I'm gonna choose Portugal. And I'm gonna go for a golden visa. Still have that program. You just can't. You can still buy real estate in Portugal. You just can't use it as a vehicle to get a residence permit. You can get the residence permit if you're gonna spend more than months there without making an investment under something called AD7, but let's just say that they're getting it as a go bag option. And that's €500,000, so they would decide which fund they wanted to invest in. Well, they would have to open up a bank account where they go through the screening process in Portugal, deposit that 500,000 in there, and then they would invest in the in the in the fund. Well, even though they're not tax resident in Portugal because they're not spending 6 months plus in Portugal, they've got an FBAR account. Even if that account just had 5 100,000 for a week before they bought the fund, there's an FBAR requirement there. And, of course, they've just bought a PFIC because they're an American who now has a Passive Foreign Investment Corporation. Sorry. Well, I went acronym there on you.

James Pittman: So am I correct that it's the FR is really a burden on the individual, and the FATCA is really a burden on the on the banking institutions?

David Lesperance: You're correct. So the the the banks have an obligation for their existing or new customers to determine whether they are US persons. And now a lot of institutions in countries which are in CRS signatory countries, for example, the 1 I live in, also requires the the bank to collect information on for CRS purposes.

James Pittman: And a lot of the banks don't wanna deal want want to be bothered with those requirements. I understand. So there are some banks that just don't wanna deal with US citizens living abroad. Is that correct?

David Lesperance: Correct. So when it first came out, there were some banks that were quite used to dealing with Americans. So for example, the Canadian banks. So they were still accepting US clients. Other banks is, oh my god, the compliance cost for an American as opposed to, you know, the Kiwi behind them or the Brit or the or the Frenchman or the South African. I don't have to do any of this stuff. And and so they just made a decision, Unless it was gonna be a big enough client where it generated sufficient amount of fees to justify the hassle, they would just say, yes, American, off you go. It's been you know, Safka has been around for for quite a while now, and so you're seeing more and more of the major institutions. I just answered a question on Chorus. Is there any bank in the world that will deal with Americans? It's like, oh, yes. What country are you in? So the myth that no bank will offer you that or no bank will give you a mortgage, etcetera, that may have been true how to when fraud first came in, but now institutions are saying, okay, well, we'll deal with Americans. We may charge them more in in fees because of the of the hassle or now that we have gotten spent the money to deal with Americans, the marginal cost of adding 1 more American customer, you know, is not worth it, so we wanna be able to to get out that market.

James Pittman: Okay. Now, let's I guess we can segue into our second scenario. So our second scenario is you're going abroad and you are gonna be sub you're staying long enough to where you're gonna be subject to tax considerations. So what's your framework for advising clients in these types of situations?

David Lesperance: Well, 1 thing for for those who are getting a little overwhelmed on on the information is I do have white papers on the integrated tax and immigration issues for Americans living abroad and Americans expatriating. So we'll we'll kind of fly at at 30,000 feet. So if the client is saying, I'm gonna live abroad, the real key first discussion is them really figuring out what other family needs, what's particular for that family, then talking to me, and I can then go through here are all the different jurisdictions that will meet those needs. Some people like a certain type of weather. Some people want to be in an English speaking environment. Some people want to be, you know, in a particular time zone or close to a particular time zone. Some people want to I mean, New Zealand's a beautiful place, but it's a 14 hour flight from LAX, so you don't go there for the weekend. So it's understanding kind of what is it that really works for you and then understanding, okay, what are they what do I need to to to live there? Oh, I have a lineage of citizenship. I've got 27 instant choices. I don't need need to deal with any immigration issue. I've got the right to live in any 1 of these 27 EU countries. Other jurisdictions, oh, I have to get some type of immigration permission to live there. And we look at, again, what's the what's the the the best that fits your situation? What's the cheapest? Again, if we have to go with 1 of these Golden Visa, programs, then, you know, again, I'm flying flying the the the commission back to them so they they know the advice. I'm trying to get what's best for them, not what's paying me the highest commission. And so the first step, really understanding the family and your situation, narrowing it down to jurisdictions, and then saying, okay. Here's the immigration path. Here's the tax path. Does it have a tax treaty with the United States, for example? And so, you know, what kind of income do you have? What kind of warning technical term stuff do you have? You're familiar. You know, because a lot of clients these days, they'll have 401ks and they have charitable remainder trusts and they have, you know, super raths, grats, all kinds of stuff. So how is that going to be treated in the other jurisdiction?

James Pittman: Alright. So you've got, you know, you've got a couple general pathways. I mean, you might have the citizenship by descent pathway. You might have the citizenship by investment pass pathway, and then, you know, that can be some some I know some of the countries, it's just a straightforward, maybe donation to their sovereign wealth funds. Sometimes it's an investment in real estate. Are there other other than those 2 main ones?

David Lesperance: Sure. So so there's digital nomads. That's quite common. Sometimes we can get it because you are somebody who is a they have retiree or self employed is an option in some countries. They may give it to you because you are a young brilliant person who is they need your particular occupation there, or you're starting up a company, a startup visas. There's a number of different paths. And so we really look at, first off, what's the country and then what are our options, what's the best option for for you, in that particular country?

James Pittman: Okay. Now, I mean, is you know, you're gonna have US taxation, and then you're gonna have foreign taxation. So you have to look at what tax treaties exist. And can you introduce us a little bit as to the considerations and how that works? I mean, you're gonna be taxed on your US on your worldwide income in the US. And then what how does that play out? I mean, what sorts of scenarios do do people encounter? Well, you know, tax lawyers have their own kind

David Lesperance: of version of a Hippocratic oath, which is the the for doctors, it's do no further damage. For tax lawyers, it's pay no further tax. So, you you you try to to look at in tax treaties, what will come into play? Foreign tax credits, you may have reduced rates withholding tax rates. You may have different foreign earned income exemptions, foreign housing exemptions. So you have to figure out kind of what are the types of income you have. Is that passive? Is that active? Are you gonna be employed in the local jurisdiction? Are you going to be employed outside of that jurisdiction? So we look at kind of all the interplays and then different jurisdictions. For example, if we look at just the the let's let's look at a couple of diff of places that Americans often go to. Canada. Well, it's a high tax country. Well, Canada doesn't have a gift tax, estate tax, or wealth taxes. Okay. So what about the income and capital gain? Again, there are pre immigration planning that you can do to reduce and, in some case, completely eliminate the taxation on the non Canadian source income. Oh, okay. I have, you know, health coverage there. I can get that, but I want something better. Well, you can still get, you know, you can still go to the Mayo Clinic. You can still go to all the places in the states that you would have available to you anyway. In fact, you can get insurance now at a cheaper rate for that because kind of for the catastrophic stuff, you've got the Canadian healthcare system. Okay. So it's looking at the delta between the 2. Other jurisdictions have what are called remittance or where sometimes called non dom systems. The UK, has 1 right now, may not have 1 by April of next year, But Ireland, Malta, and Cyprus, other jurisdictions have lump sum. Italy and Greece, it's a €100,000 a year for a high net worth client, and that's whether you make a dollar or a €100,000,000. Well, I had 1 client who said, 100,000? That's what I pay my accountant every year. Yes. That's great. And so, you know and you don't have to worry about depreciation. Should I buy or lease a car? Is this dinner? Do you dock a business expense? You know? You don't have to worry about any of that. You you just it's a 100 k a year For a high net worth or ultra high net worth client, that's great. For the average person, you know, it's not. So understanding kind of what works for you and what's gonna be most tax efficient for you. And when the numbers start kind of getting higher, then that's when people start really looking at the 3rd option, which is expatriation.

James Pittman: Okay. But before we get to that, let's talk a little bit about now, you you know, there's no limit to the complexity. I mean, when you start talking about, the concerns and the different strategies that high net worth and ultra high net worth individuals might need to employ. There's really it can get as complicated as I mean, there's no limit. So but but for, you know, some of the more, typical examples of people, they might have some considerations. Like, suppose they have their retirement accounts in US, brokerage accounts. Now if you move abroad and you are spending most of the year abroad, would you need to move your US accounts to an international institution or an institution in the country where you are?

David Lesperance: Well, that's that's AAA question that you really have to look at the is for the broker on securities compliance because now you are their their customer is nonresident. Mhmm. Not resident in the United States. So now you've got, you know, SEC issues to deal with there. And so different institutions handle it in different ways. Some of them, you know, move move your account to a non US brokerage. You may still like that person in Wichita who kind of understands your risk return and your profile. They can give advice, but that account is actually now based at Fidelity in the UK as opposed to Fidelity in in Oklahoma. And so that's 1 of the things in some jurisdictions and with some financial institutions, that's not possible. And what is I'm seeing more and more of there used to be people who'd be cute and try to have, like, a US cell phone number and and and things like that. But now the there's a lot of pressure on the on the brokerages to make sure that their cost that they are complying, and so you're finding more and more, you know, those types of accounts closing. For pensions, interestingly, you know, just because you no longer live or even if you've given up US citizenship, you still have entitlement to Social Security. That depends on whether you paid in for a sufficient number of quarters, not where you're resident or where you happen to be a citizen of at the time that you're eligible for it. Medicare is different. That's based upon residents in a particular state. So if you're living abroad, you're not meeting the residence requirements for Nebraska or California or wherever you were getting Medicare or Medicaid. And so 1 of the big considerations that we do for a lot of clients is medical insurance. And so I refer them again to an outside medical broker and they say, okay. What are you looking for? You can have everything from, you know, if I break my leg on Kilimanjaro, I wanna be hell lifted off to I'll pay my local dentist and my local doctor. I just want kind of catastrophic Major. Major medical stuff. And so, you know and that that's a that's a cost that they also put into the calculation for living abroad.

James Pittman: But there are a number of countries where under a lot of these programs you would probably be eligible for their public health care systems. Have you have you or do any examples stand out? I mean, let's say for, you know, retirees who might be very concerned about, you know, moving abroad and the need to have access to a, you know, a a high quality health care system, Are there any examples that stand out as being good places that they might consider?

David Lesperance: So there are a couple of jurisdictions that people don't really think about. For example, Cayman has a a has made itself a medical tourism jurisdiction. So previously, if you had some kind of serious thing, it was like, when's my first flight to Miami? Now you can have not only have that treated if your resident came in, they're actually bringing in people. Mexico has similar things, Costa Rica, etcetera. Those are popular destinations for kind of retirees. You're quite right. In in Europe, all the European countries have some type of in in the UK, they call the NHS, some type of public health system. Where I live right now in Poland has a public health system. Poland's also a medical tourism destination. There are 6 private hospitals in the city I live in.

James Pittman: Well, out of curiosity, what I I'm just curious, you know, what how much lower are medical costs in Poland versus, let's say, Canada, the US? Are we talking about 30% lower or 40% lower?

David Lesperance: So I use something called SwissMed, there's Bupa and some of the some of the popular ones. For our dentist, for example, I, so the Polish latte is basically 4 Polish latte to the US dollars, so I'll give kind of the equivalent US dollars. For my teeth cleaning, it's $28. For AAAI needed a bridge, that was $200. We I if I, you know, I had a a an operation, Again, probably a little too personal, but it that it was basically 1 tenth of the cost. My brother in Canada needed some dental work, came to Poland. And I and I you have to understand, the dentist office we're going to, it's a dentist that does the cleaning. The, the the operations are you know, the the the equipment is, like, state of the art. Here's a good example. I have twins, 10 year old twins. My wife, that's considered a high risk pregnancy. The OB GYN that we had here, and we live in Gdynia, Gdansk area on the Baltic, We went to a leading guy in our in the waiting room work, Saudis, Russians, Brits, etcetera. An old friend of ours, an American, needed we didn't use, but she needed to do she wanted to do IVF. He had tried it in New York, London. She now lived in Dubai. She was getting pretty desperate. And she said, okay. Well, why don't you come here? We'll have this guy's he's world renowned. He'll come and she came in, and he said, okay. Give me your name, date of birth. Oh, yeah. I gave the second opinion on your New York 1. Okay. She tried it. 1 shot. Pregnant. Got a little girl now. So it's really understanding, will you get that same medical coverage in Guernsey? You really have to kind of decide where you're going, what fits. That's part of that breakfast table discussion.

James Pittman: Let let me just ask another kind of specific question. When you're talking about, availing yourselves of benefits in the US, like Medicare, for example, depends on state residency, I mean, do you actually like, if you maintain a residence, if you maintain a home in the US, but you're really living most of the year abroad. Is that sufficient, or do you actually have to be physically present?

David Lesperance: That's kind of a little beyond what what what I deal with. You'd have to talk to somebody who's an expert in in in Medicare and and Medicaid.

James Pittman: Alright. The thought just popped into my mind. But let's move on to our 3rd scenario, which is people who are leaving for good. Now we need to talk about the whole process of renunciation of citizenship, and we'll talk about it with respect to the US, obviously. That's the rest of our listener base. So let's let's do that first. So what you know, first of all, what are the considerations someone needs to think through to determine whether or not to renounce their citizenship?

David Lesperance: Well, they need to have another citizenship in place. In theory, you could do it to be stateless, but you don't wanna be stateless. In the 100 I've done in the 34 years since I did my first US expatriation, I've never had anybody that wanted to be stateless. So how do you have that other citizenship? Well, you may have it, like, for example, Eduardo Saverin Facebook immigrated and got US citizenship later on, still had his Brazilian citizenship. You may have had somebody who had dual citizenship because of their parentage or where they were born, and and so they may already have dual citizen. And when I say dual citizen, it's really multiple citizenships. Most people just have 2, hence the term dual citizenship. Some people have moved and have lived abroad long enough to come naturalize in that other country, and some people may have claimed to a lineage citizenship from a relative kind of further further abroad, further along. And some people may do the citizenship by investment. Why do people consider expatriation? Well, some people do it because they've been, you know, yes, I've been I'm an American. And now as a result of FATCA, all of a sudden my bank is asking questions. I didn't think I was American. You know, yeah, my mother was American, but I never applied for an American passport. I've been to Disney World, but I've never lived or worked there. Why would I consider them a they didn't know about citizenship based taxation. They thought, well, you know, my parents never registered me. Well, under US law, if you fit the facts stereo, you're an American from your first breath.

James Pittman: Of law, right, regardless of whether you ever acquired a document to that effect.

David Lesperance: Yeah. I I mean, in fact, registering or applying for a passport is just advising the US government of an existing state of fact. Right. And and it's be beyond what we're talking about now. But, on the other side, you've got a lot of people who got green cards who thought when their permanent resident card expired, they cease to be a green card holder. And they think, woah. So I'm no they tell their their accountant I'm no longer a green card holder. Oh, great. You're not a US person anymore, and they they fail to file. And then they they come back to the airport, and the persons of value had been gone a long time. I'll let you in if you sign this little I407 voluntary relinquishment and not realizing that that may be a tax event when they do that. But, anyway, the motivation for some clients who've never lived in the United States or long ago left is they just wanna uncomplicate their lives. They don't wanna deal with with p fix and f bars and all of those things. So I'll call that, you know, the grandmother in Calgary idea. So when FATCA came in, we had a rush of people that did that. You then have people who say, okay. I'm gonna do it for tax purposes. And it tends to be in 2 routes. 1 is the people who are high income who say, I'm trying to get, you know, net closer to gross by q 4 of next year. Yes. So the then you have people who have a big liquidity event. So for example, I'm a Silicon Valley founder. I've got my founder shares. Edward O'Saverin would be a perfect example. There's gonna be a liquidity event, an IPO at some point in the future. I want to pay a lower tax. We'll talk about that tax in a few minutes, now and enjoy the increase in value of the pop on the IPO, when outside of US tax. Then you have a state tax driven people. They tend to be ultra high net worth. Now why? Because the unified credit is increasing so dramatically. So you're talking about 12.7, and if you've got a couple, you know, you're you're 27,400,000 in exemption. And so you're really talking about people, you know, 30,000,000 plus who are are are looking at at that, and we'll talk about the planning they need to do because of the inheritance tax on expatriation. So, those are the motivators. And so now let's look into the difference if you're the little old lady in Calgary versus the Silicon Valley founder or the ultrahigh net worth. The US looks at the day yet you give up your US citizenship relinquished. We'll talk in a bit about the process of that, but as of that day or if you've had a long term green card, 8 out of the last 15 years, you had green card status, not that your permanent resident card expired. And if that's issued for 10 years, so those who you've got a lot of people who inadvertently, trigger the long term green card because they've had their green card for more than 10 years. Anyway, if as of that date, you fit 1 of 3 tests, are you worth more than 2,000,000 worldwide net worth? Looking at your federal tax paid, federal tax paid, not the taxable income, not the amount of tax you paid state and and and federal and city in New York, but the federal tax paid. Take that number for the last 5 years, add it up, divide by 5. Is that number more than right now, a 192,000? That number increases with, with inflation. So or can you not certify that you've been tax compliant for the last 5 years? Well, why would that be? Well, because you didn't know you had to file a US tax return or you thought you lost your your your US tax filing obligation when your permanent resident card expired. And so we'll get a lot of clients who either inadvertently or burtonly did did not, or cannot certify that. And so we we we send them through remedial action to to update that so they can certify that. Now what if the answer is yes to net worth or it's 1 or the other, or or the federal tax bill? You are what's called a covered expatriate Yes. Which means that you now have the the expatriation tax regime applying to you. 2 types. 1st, 877 a, that's the exit tax. That's the deemed disposition you're deemed to have sold at fair market value, your worldwide assets, and triggering unrealized capital gains as of that date. There is an exemption on the amount of capital gain that you pay that increase is with every year with inflation. I believe it's 832,000 right now. So you don't pay on the first 832,000 of capital capital gain unrealized capital gain, but you pay whatever federal, state, and city level on every dollar above above that. The other tax, which people don't really talk about much, is 2801, which is the inheritance tax. Estate tax is paid by the estate, You as the heir or if you're getting a gift, the beneficiary or or the recipient of the gift, get that net of gift or estate tax. If you are a covered expatriate and you are leaving it to US person heirs, you have passed that liability, 40% tax liability, onto the recipient. Now they haven't even created the forms yet. This was packed as the hard act 2008, 16 years ago. They still haven't created the form for 2801 for that recipient to actually but the liability is still there. The law is still there. At some point, they'll get around to do it.

James Pittman: How does that play out in reality? I mean, what do people in that situation do?

David Lesperance: If they retain proper counsel, they would, they would set aside that tax liability at the time of the request or or or gift and leave that as a potential tax payment. But but but the reality is right now the IRS is not not focused on that, but the IRS has targeted in the form you fill in to determine whether you are covered expatriate is something called an 8854. They are going back and getting people. A very recent example is a is a guy named Roger Ver, who's known in the crypto community as Bitcoin Jesus, who expatriated in 2016, thought he'd be cute lying on his 8854. Now he was arrested in Spain. He's out on bail, and he's looking at a $50,000,000 tax bill. So if you're relying on the IRS to not find you as opposed to not being legally liable, it's great. It it's a choice. I mean, lots of people were deciding that I'm gonna not disclose my my US bank account at UBS, and it worked until it

James Pittman: Until it didn't. Right. Yeah. Yeah. Your yeah. Your house doesn't burn down until it burns down. Right?

David Lesperance: Right.

James Pittman: So but wait. Let me just ask a couple of questions about this, because it's an unfamiliar topic to many. What so the the actual liability is triggered only when the grantor dies. Right? This is it operates like a regular inheritance tax. Are we talking about that you're you're expatriating and you have an instrument where you're gonna be granting, so there's a liability created on the date of expatriation?

David Lesperance: So there's 2 things. So the 877 a ex in tax is a liability that is determined as of the day the day before you renounce or or relinquish your long term green card. Okay. So if you expatriate, for example, on April 1st of 1 year, you've determined what your tax bill is. You don't have to pay that amount until the following April. So there's some planning opportunities there. There's also some planning opportunities in the pre immigration the preexpatration tax planning. So for example, if you haven't used your unified credit and you've got 12,700,000, you can sit there and say, I'm gonna put my highly appreciated assets to my US children prior to my expatriating. You complete that proper gift in the year before you expatriate. You're gonna do that in 2024. You're gonna use your unified credit, and you're gonna expatriate in q 1 of 2025. You've triggered the tax bill and what you haven't done on on your gifting. Okay. And there's all kinds of cute things that you can do. Can you use that to get you below the 2,000,000? Have you been in Puerto Rico? And under act 60, you've been driving down your federal tax liability over the last 5 years. So there's it gets complex that you know? So for those who start with reading the white paper on my white but, you know, actually, you know and organize these things. And 1 of the things is, have I been doing this a long time? Yes. Do I know a lot of stuff? Yes. Do I know everything? No. You have US so in in particular cases, they can get quite complex, but it's a wonderful tax savings. So doing it right is a great plan tax wise. Doing it wrong, you're gonna step on a landmine. So we'll oftentimes bring in so the coauthor for the for the article for that white paper, is a top US tax lawyer who's been doing it for 45 years. I've been doing it for 34. So I always joke that he doesn't hold my youth and inexperience against me. But, you you you know, we figure that. Are you gonna go to Portugal? Okay. We're gonna bring in Portuguese tax counsel. We're gonna work with your family office. We're gonna work with your investment adviser because they know what your succession plan is. They know, you know, we're are we gonna are are you moving into a jurisdiction where where the UK is great when the remittance space is also the divorce capital of the world? So what are the you know, tax as a percentage of income, divorce as a percentage of capital. So, you know, III have 10 year old twins, as I mentioned, you know, a boy and a girl. Statistically, 1 of them is gonna get divorced. I'd bet on my daughter because she already thinks the bad boys are cute. And so think of 2 future conversations that she may have. What is, honey, I know we're getting married in 2 weeks, but I need you to go to this lawyer and get independent legal advice on the prenuptial. Or, honey, it didn't work out. I'd love to give you half, but my father set it up in a trust when I was 7 years old, so you'll get half of nothing. So it's understanding who and having an integrated plan, who are the different players that you need to have in order to make this successful. Great plan if properly designed and executed. Terrible if you're not because there's all kinds of, you know, tax and family law and landlines that you can step on. Yeah. It's not a DIY project.

James Pittman: No. No. It it doesn't sound like it. Now the actual the actual and you've got these great white papers that we'll we'll link to. The the actual, process of renunciation, though, for US citizens is fairly straight forward. Right? It's just it's just 2 appointments. I hope you can hear of people doing it in 1. And and what is that like for just for your point.

David Lesperance: Sure. So you have to make an appointment at a US mission. Embassies are in capitals. Consulates are in secondary cities. Outside of the US. So you have to do this outside of the US. During COVID, it was a real nightmare because a lot of these offices were closed. And so, you know, we were I was flying people into I we were a couple of Silicon Valley people into New Zealand. The embassy was open. The trick was getting into New Zealand. Well, we had gotten them residents prior to COVID because they were all Tolkien fans, and New Zealand was a popular kind of place for a lot of wealthy Americans to kind of get a bullful, so that came in handy. But we go so getting some offices are are are are have big backlogs. Canadian offices, for example, in Vancouver, Calgary, Toronto, and Montreal, you're looking at a year and a half waiting list. Well, if you wanna get out sooner than that, so we may fly you to Reykjavik or NASA or Bonasera. So knowing which offices don't have a backlog, getting you the appointment. There's a little bit of a trick in that. The second is the paperwork looks fairly straightforward, kind of tombstone information, but the key is understanding why that is being asked and what it means. And, again, having done so many of these, I prepare the client for, you know, this is what this this is what the officer needs to understand, and this is what they're what they're getting at. A major problem, we got a client who, you know, had retained a a US immigration lawyer who's great at bringing him in, well known, never done an expatriation. Told this this fellow, while you better stay out of the US for the year before you expatriate so that the officer will allow you to expatriate. Didn't realize that giving up your US citizenship, you're not asking the officer's permission. You're exercising a right. So so long as you have capacity, so long as you're not under under duress, you're exercising a right. So this fellow wasted a couple $100,000 flying around for the year before because the the the person didn't know that stuff. I mean, the number of expatriates, you know, we're talking couple tens of 1,000. That's a not a lot of number compared to the people coming into the US, for example. So they're a bit of a Right. So you need to be somebody who's used to dealing with unicorns and knowing all the tricks. So then we we prepare them for the interview. We get them to the interview. You know, they pay the fee, currently, 2,350. It's supposed to drop to 400.

James Pittman: It's gone up in recent years.

David Lesperance: Oh, it went up. It was 0. Right. Then it went up to 400, then it went to 2,350. And then the US government agreed in in a lawsuit that they were gonna drop it back down to 400, but that was in January of 2022 or 2023. We're still waiting for them to gazette the number, but you pay that at the cashier, you know, whether you do it yourself or, you know, you or me.

James Pittman: Are they going down to the lower number in practical terms?

David Lesperance: They haven't yet. We're we're waiting for them to gazette. They they promised to do it, and, hopefully, it'll be by the end of this year that we back them

James Pittman: to 400. Discourage people? Or

David Lesperance: Well, I actually did a a core answer on this. So when when we first started doing when I was doing expatriations in the 19 nineties, there weren't a lot of them. I could go into you know, I I would go into US citizen services in Toronto, and the locally engaged staff person who I knew quite well would always say, oh, here comes trouble. And, you know, my clients would be fully prepared, and then we'd go through the process, and and that was it, and that was great. Well, then as a result of FATCA, that number increased dramatically. So they said, well, we're getting a lot more of these. Let's figure out, you know, what's what is the what's our cost, and should we be people be paying for that? And that's when they got to 400. Then the general accounting office did another analysis, and they said, well, when we take into account the amount of time at the at the mission in Washington and reviewing all this, they did all the calculation and how much for the lights and how much for all this. They came out with 2,350, which was the highest amount in any country. But and I think the it they it came out I'm sure a bureaucrat kind of came out with a number, but politicians said, oh, well, this would be good. They didn't challenge it because it did discourage people. Right. Right. It didn't discourage my client who was looking to save 1,000,000. It discouraged kind of, you know, little old lady in in Calgary.

James Pittman: Right. Yeah. And so I understand there's really I it's it's as it boils down to essentially 2 pieces of paper in in the end. I mean, there's a memorandum kind of of understanding where, you know, know, they you've discussed with the consular officer your motivations for for making a renunciation and you you know, there's sort of a checklist of of points that they want you to acknowledge and you sign, and I think they, you know, notarize that. And then and then there's an actual oath where you essentially swear yourself out of the country.

David Lesperance: Yeah. And there is a preliminary document Right. Where they wanna make sure that you're actually an American still to give up your US citizenship. So they go through, have you can you know, have you done a previously expatriating act with the intention of giving up your US citizenship at that point? And so they determine first, if I got an American across the street from me, I'll understand from their demeanor, their age. For example, nobody's behind them with a gun, you know, under duress. Do they understand what they're doing? That's the memorandum of understanding. If you exercise this right, madam or sir. You know, these are the ramifications of that, and 1 of the ramifications is you may not lose your tax liability, which is accurate because if you give up your US citizenship and then you go and live in the United States and spend too much time there, you're still gonna be a US person for tax purposes, except now you're gonna be under a substantial presence test, not as a US per as a US citizen. So, you know, there and and 1 of the big things is something called the Reid Amendment. So, again, way back in history, 1996, the US was doing a major immigration reform. The US passes legislation in these big quarterly omnibus bills that got 1. Back then, the major chunk of it was the immigration bill, but there was the funding for Yellowstone Rangers and, you know, everything that's in these quarterly bills. And, representative Reid came in and said, oh, well, you know, as a result of a of a Forbes article called the New Refugees, the previous November. We're going to if you leave, you can't come back. So they drafted this thing, and back then, it was be under the AG, who was Janet Reno. This was in the Clinton, administration. Jenna Reno was the AG, and somebody on the staff goes, well, that's kinda unconstitutional. So they kinda put it aside. And then when they were running the kind of last version, they threw it back in. 3 readings of the house, 3 readings of the senate, Thursday, Friday. President's gonna sign it on Monday in order to fund the government on Tuesday morning. And, 1 of my clients looked through, oh my god, they threw the read amendment back in. So I was on a bunch of conference calls that weekend. Did somebody, you know, ask Clinton to do a line by line veto? And we thought, no. That would be like Streisand effect. Yeah. I'm not. So, so we woke up with the Reid Amendment and things. But there were a number of ways of getting around it because it was poorly drafted, etcetera. But there were only 2 attempts. It's all in Wikipedia. There were 2 attempts to actually enforce it. I got called in on 1 of those cases, and it was, you know, a fund manager, I think, probably somewhere on the spectrum and came into the United States and and said, oh, sir. You give up your US citizenship. Did did you do that for tax purposes? Yeah. But I'm gonna ask you again specifically. Did you relinquish your US citizenship for the purpose of avoiding taxation? Yeah. Well, then I'm gonna exclude you today. Exactly. And that then went back to this case, and we came back and now retired at Denton Court, it was State Department, said, Oh my God, somebody's trying to actually enforce this, and it ended up getting the client in. And, again, 1996, we're now coming up on almost 30 years. Yes. 2 early attempts to enforce it, so it's a toothless tagger. But but lots of people still say, oh, if I give up my US citizenship, I can't go back. The reality is the with you know, do I need a visa? Well, what passport do you have? You either need a visa or US visa waiver program and an ESTA, or you're Canadian or Bermuda, and you don't even need a visa to enter the United States. And, again, when I was going through law school or, you know, before I either saw the light or went to the dark side and got called to the bar in 1990, I actually worked for the Canadians as a port of entry official. And it's I like to say to to my clients, it's almost like the the the immigration guys are gonna say, come on in, and the IRS is behind them whispering, and we hope you stay too long. So the problem is not getting in. The problem properly advised and having the proper visas. The problem is not getting in. The problem is triggering tax liability, by by physical presence.

James Pittman: Right. So the Reid amendment put that section 212 a, whatever section it is, into the Immigration and Nationality Act. They you're inadmissible if you have previously renounced or relinquished citizenship for tax avoidance purposes.

David Lesperance: No. No.

James Pittman: No? That's a different

David Lesperance: If you if if if you have previously relinquished. Okay. So what we were doing is getting clients a new citizenship or sorry. Ren it said renounced. We're getting a new citizenship and saying, okay. You've just taken on citizenship in certain name of citizenship by investment country. And you have declared that when you did that, you intended to lose your US citizenship, so you relinquished. Okay. Read amendment only dealt with renunciation. Great. Yeah. So in the early years, we were getting clients, who already had another citizenship that they felt comfortable, we would just buy whatever 1 it was and then say, okay. They they relinquish. They they took out they became naturalized in in certain name of country yesterday, and they intended to lose their US citizenship. So they relinquished, and the re amendment didn't apply. Then, eventually, we stopped doing that because the re amendment

James Pittman: letter, essentially?

David Lesperance: Yeah. Okay. Alright. Well, they never passed enabling regulations, and, of course, you know, sudden 9 11 happened, and then, you've got something called Homeland Security and, you know, was no longer under the AG and and things. And now 28 years have passed.

James Pittman: Mhmm. Understood. Adi, what what other considerations, if any, should someone make before they make the decision to renounce? I mean, we've talked about the taxation considerations. We've talked about the fact that you'll need you're gonna be treated, you know, as an alien for purposes of US. But, I mean, for for most people who don't have other grounds of inadmissibility, just the fact that they renounced is not gonna stop them from getting back into the US. Are are there any other considerations they

David Lesperance: need to take into account? Well, it was just dropped by SCOTUS yesterday, and I haven't had a chance to read the Moore case. I've read and so the the the Moore versus the United States was a Supreme Court of Canada or Supreme Court of Canada. Supreme Court of the United States decision, that was dropped on June 20, 2024. We're now taping this on 21st. And the question there was it dealt with guilty tie it dealt with taxing unrealized income, but it was really you know, is it constitutional to tax unrealized capital gains? And they kind of as a and so far as I understand it, they kind of tried to, in a Solomon like way, kind of split the baby. And so, you know, depending on who if you're listening to, you know, Elizabeth Warren, she's saying, oh, we can tax unrealized capital gains now, and we can bring in the ultra millionaire tax or the billionaire tax. But if they said it's unconstitutional, well, that section 877 a exit tax would be unconstitutional, which means you depart. You don't have to pay you don't have a deemed disposition. So if you're somebody like Elon Musk, who's already got a Canadian and a South African passport and who doesn't need to remain in the US to make him maintain his wealth, he could leave without triggering a capital gain. So those types of considerations you have to watch. We're having I would say in the last few years, 4 out of 5 of my clients are getting fire insurance and a fire escape plan, not for tax purposes, but because they're worried about nontax issues. I mean, I grew up, you know, across in Windsor, Ontario when it when Detroit was known as Murder City. But back then, it was, you know, 2 drug dealers shooting at each other with Saturday night specials. Now you got randos walking in with AR fifteens into places of worship and bowling alleys and movie theaters and playgrounds, and concerts. You know, and so I had a client wealthy guy who'd have been going for for tax. He said, now my main main motivation is the gun violence is just out of control. And he said, I know statistically my children aren't going to be part of a mass shooting event, but I know with a 100% certainty that they're going to go through active shooter drills. I know with a 100% certainty, at least once a month, I'm gonna have to talk them down because they saw on TikTok or the news somebody who looks like their best friend who was just killed. And I know with a 100% certainty, every time they go out for soccer practice or to McDonald's with their friends, I'm gonna be my wife and I are gonna be wondering, is today the day? You're worried sick. And and so there's that. Antisemitism has been a big thing. I had 1 client who his friend said, well, yeah, antisemitism is rising all over the world. And his response was, yeah, but the antisemites in the US are armed with AR 15s. You know, political polarization. I've got lots of clients who've gotten a go bag option who just said, we are not going to be here from the beginning of November until after the, the swearing it. We just we don't know what's gonna happen, and, you know, we just plan we're gonna go for 3 months to Italy.

James Pittman: Yeah. No. I I know I know a lot of people who've actually said that personally, you know, that for that little that little period, you know, it's gonna no matter what happens, no matter what the outcome is, it's gonna be a lot of conflict and contested and a lot of discord, and they just did they just don't wanna be they just don't wanna be present and so that and for the who knows what for the who knows what moments.

David Lesperance: Yeah. I mean, I'm not saying I'm to Tocqueville. I mean, I was explaining to you earlier, the only reason I don't have a US citizenship is because my parents had incompatible blood, and I my birth had to take place in Canada. But I've been watching, as PBS would say, the American experience for a long time. I've seen I've spent more hours watching Ken Burns documentaries than I care to think about, and so I've been watching the US for for quite a a while. I've never seen it in this kind of case. I, you know, wish them the best, but I once had somebody, she thought it was an insult. I thought it was untrue, but aspirational, said, David, you look at the world like mister Spock. Thank you. I try, but probably fail. Oh, wow. Yeah. And, and and stuff. And so when I look at the US right now, I can see why and I have clients who hire me and who you know, they spend money and time on people like me because they have real concerns that fighting the fire is not going to be enough, and they want just the comfort and the optionality. They hope they never need to use the fire insurance or the fire escape plan, but it gives them comfort that they're protecting their family wealth and well-being by having that fire insurance and the fire escape plan.

James Pittman: Absolutely. And, David, that's a that's a a really good point to, you know, to start to wrap up our program because because it used to be this this whole topic and all this discussion and you're such an expert. It's amazing, really, 1 of the preeminent experts, but this entire thing used to be a fairly exotic topic that a very small number of people were really concerned about, and it's not anymore. This is something that is a topic that has really come into the mainstream, and a lot of people, whether they're digital nomads, people wanna work from wherever, or retirees. I mean, more and more American retirees are going forward for their retirement. So I wanna on that note, I really wanna thank you for sharing with us your enormous expertise on this topic, and we're gonna continue to to follow the the trends in this in this space. And, hopefully, you know, you'll agree to come back and and share more. We can maybe delve into some of these specific topics in greater depth.

David Lesperance: I would be my greatest pleasure.

James Pittman: Okay. David Lesperance, founder of Lesperance and Associates, a multinational law firm, joining us today from Poland. David, thank you very much for your time.

David Lesperance: Thank you, James.

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