The Costa Rica News (TCRN) – The rate of U.S. citizens denouncing their citizenship was up 212% in 2013, Forbes reported last month. Simply calling these folks ‘turncoats’ or ‘sharp cookies’, depending on your stance, doesn’t explain why this massive outpouring is taking place. Sure, some leave for political or personal reasons but the vast majority do it for the money, honey.
Keeping Uncle Sam’s sticky fingers out of one’s honey pot has practically turned into a spectator sport. The billionaire elite, particularly those racked with legal problems or amid tribulations with the Internal Revenue Service, are fleeing to countries with more favorable tax structures, looking for one that doesn’t pinch as many pennies on the dollar.
But assuming neither of us are jet-setting fat cats trying to squirrel away a few hundred million that would presumably go to a variety of taxes, let’s take a look at this from another angle: say you have $100,000 in student loans or equally hefty chunk of debt. What happens to these acquired debts if you decide to call it quits on the country, pack up, move to Australia and fall off the grid for good lounging in the sunshine of Bondi Beach?
In short, nothing. It’s still there. Currently, only death itself can free you unconditionally from education debt. That might be a pretty heavy statement, but we all know it’s true: student loans are the yoke of the 21st century. Other forms of debt are more easily wiped out by declaring bankruptcy, but relinquishing your status as an American doesn’t erase your past. Creditors might stop harassing you, as most are not legally able to chase you overseas, but it’s certainly not necessary to renounce citizenship just to bail on loan agreements.
Neither officially expatriating, nor simply becoming a fugitive, does anything erase debts. If the money you owe is for taxes, as opposed to loans or credit, becoming an expat is close to impossible: finding another country willing to list you as one of their citizens will be pretty tough.
Whether you’re under the thumb of incurred debts or up to your ears in wealth that you’d rather keep away from government vultures, renouncing citizenship is close to irrevocable – so be careful. The U.S. Embassy in London has a waiting list of Americans no longer bleeding red, white and blue who are seeking shelter from the IRS. It’s actually theorized that there are far more expats than reported, as not everyone declares it officially.
For the wealthy who live, work and invest internationally, with no income earned from U.S. sources, becoming an expat can be extremely sensible. This is a global marketplace, after all, and country allegiance isn’t tantamount to being a decent human, as it was thought only a few decades ago. If you’re considering becoming an expat, financial managers can help sort through the intricacies of renouncing citizenship and transferring funds abroad.
For those in the debtor boat, while renouncing citizenship can lead to a couple quick wins, like no more garnished wages or distance from creditors, in the end you might still be relegated to a sinking vessel. Poor credit is harder to shake, even overseas, than the guy trying to squeeze you for an extra $100/month on your student loans.
If you really are considering a ‘bon voyage’ to the ol’ U.S.A., do your research. The last you want is to be stranded high and dry in Costa Rica with no money, no contacts and no Embassy to run to when you get in a sticky situation. The best way to escape from a life under the thumb of debt is solid financial planning. But by all means, sally forth.
By: Jimmy Simond
The Costa Rica News (TCRN)
San Jose, Costa Rica