The importance of having a Plan B in the face of current global events
Covid-19 has thrown into stark relief how being dependent on one place of living – even in a traditionally “secure” country – can become stifling, disadvantageous or downright unsafe within a very short period of time. This is where a Plan B comes in – a means of escape during uncertain times. The term conjures up images of paranoid survivalists stocking food in remote bunkers, but the reality is that for those of us lucky and financially secure enough to contemplate such things, a Plan B often just means acquiring health insurance, opening a domestic trust, or possibly stashing a small amount of cash somewhere safe.
Another option, which is becoming more popular as its ease and usefulness becomes apparent, is dual residency – and eventually citizenship – in a second country. As we will see in this article, one of the easiest and most reliable ways to future-proof your life and those of your loved ones against unpredictable global events – not to mention see the world and expand your personal and professional horizons – is to start a second home in a politically, economically and financially stable country.
Dual residency as a Plan B
For many of us, freedom of movement is something we take for granted, and only appreciate once it’s gone. A recent example of this phenomenon was when many EU states placed bans on the entry of third country nationals, in order to combat the spread of Covid-19. The value of being a permanent resident was highlighted in stark fashion during this time. No one relishes having to consider the impact of such a loss, but it pays to prepare by applying for dual residency in a country which ticks all the right boxes. Doing so frees you from the limitations imposed by your place of birth, and opens up the possibility of a second opportunity should things go wrong for whatever reason.
The same reasoning applies to material wealth. Limiting our ties to a single country means ceding our autonomy to a single institution – the government – and growing dependent on its continued viability to maintain our assets. But institutions are fallible, and rise and fall depending on external factors. Dual residency can act as an insurance plan that will cover the value of your assets in case the situation in your home country deteriorates.
Residents in politically or economically unstable countries – where a centralized power can single-handedly impose martial law, confiscate property or close bank accounts on a whim – have no choice but to try and secure their future with an escape plan, and for those lucky enough to afford it, dual residency is a particularly attractive option. But even people in supposedly “secure” countries are at risk of losing money to financial institutions, or having to submit to travel restrictions at short notice, if they haven’t made contingency plans elsewhere. A second residency allows you to plan and enact your escape in case of such an emergency.
As a result, dual residency and dual citizenship are increasingly coveted these days, and are considered to be a safe haven investment, for relatively little expense or effort. Dual residency as a Plan B can grant you and your loved ones safe passage during times of economic or societal uncertainty, provide access to improved healthcare and education, expand your business opportunities, and bestow greater travel freedom. It can also be invaluable for maintaining your financial stability, by protecting your assets and inheritance, assisting you in low tax planning, safeguarding against political instability, and counteracting currency volatility.
Internationalizing your life
Investment guru Harry D. Schultz is credited with the Three Flag Theory (later updated to the Five Flag Theory), an offshore diversification strategy invites residents around the world to internationalize all aspects of their lives – creating an offshore plan for business, banking, investments, residency, citizenship, taxes and digital footprint so as to maximise one’s freedom while protecting assets and reducing taxes.
The theory recommends planting so-called “flags” in different countries around the world. The five main flags are: a second passport, low tax residency, one (or more) foreign bank accounts, an offshore company, and asset security. This helps to minimize risk, secure assets against volatility, and expand ones opportunities – creating an “offshore lifestyle” free from the restrictions of a single country or institution. When you think about it, the theory says, it seems reductive to abide by state-imposed travel restrictions or governmental regulations purely on the grounds of having been born there.
Dual residency allows you to plant most of these flags, and is the first essential step for planting others, such as a second passport. It can open the door to visa-free travel, tax benefits, family planning, new lifestyle opportunities and exciting investment possibilities. It also gives you control over your freedom to choose, arguably the most important benefit of all – whether you are looking to escape oppressive regimes or simply secure your financial stability and be treated as a first-class citizen.
It also has the benefit of safeguarding against worst-case scenarios – for example, a court freezing your assets or a government unlawfully restricting your movement. This may seem unlikely to most, but any local court in the USA has the legal right to freeze your assets in the event of a civil suit being filed against you, before any proof of evidence is presented. And the IRS has the authority to cancel your passport if you have unpaid taxes. So maybe these scenarios are not so far-fetched after all.
That being the case, it makes perfect sense to prepare a Plan B if you have the means to do so, as an insurance plan for you and your loved ones. All sorts of scenarios can occur, entirely unexpectedly, which can drastically alter our circumstances, and in which a second country of residency could prove to be invaluable. Dual residency can open up new horizons and opportunities, but it can also act as a safeguard for your future wellbeing.
A different mindset
As an additional perk, dual residents often report that their atypical status and way of life leads to a new state of mind. The freedom to create a life without submitting to the restrictions of any given country enables dual residents to pursue happiness, and financial stability, in any way they see fit. In most cases, being bound by the whims of a single institution inevitably causes discomfort and stunts ambition, which has knock-on effects elsewhere in life.
Conversely, the break from restrictions and conformity afforded by dual residency is freeing, and empowering – not just for the “globally-minded”, but for everyone. You don’t need to be a globetrotting digital nomad to appreciate the limitations of localizing one’s life in one place, and the harmful consequences in other areas of life – or recognize the benefits of broadening one’s horizons through residency in another country.
Dual residency in Paraguay
Despite the benefits listed above, some people are hesitant to make the leap that dual residency entails – after all, it involves getting to know a new country and way of life, which can take a long time to process. To alleviate this concern, some countries, such as Paraguay, offer dual residency with no minimum condition for physical presence.
This means you can live wherever you want, including in your country of origin, and not risk losing your permanent resident status. You can also take advantage of a 0% tax rate for income earned outside of Paraguay. This makes the country particularly attractive to individuals looking to reap all the lifestyle benefits that a second residency offers without having to actually live or reside in the country in question.
The world is a big place, and for citizens to limit themselves to their country of birth seems like a waste of potential, especially those with the means to address this situation. The acceleration of digital communication and financial transactions means that a digitally nomadic lifestyle, unanchored from any one country, is increasingly common and coveted by globally-minded people. It also opens up a whole new world of opportunities and ways of thinking.
Dual residency allows you to not only tap into that exciting new way of living, but also guarantee the security of your loved ones and your material wealth, providing a surefire Plan B in the event of adverse events. It is worth bearing in mind that preparing this plan takes time, and that consulting with experts is a worthwhile investment, if not a necessary one. Contact us today for more details on creating the perfect Plan B for you!