A growing number of super-rich are opting not to pay taxes anywhere by becoming perpetual tourists.
These are individuals who, by not spending very much time in any jurisdiction, can legitimately avoid paying taxes and increase personal freedoms.
Central to being a perpetual tourist is citizenship. They have citizenships in jurisdictions that do not tax money earned outside the country. In other words, the legal residences of perpetual tourists can be considered tax havens. Moreover, these jurisdictions tend to have low corporate tax rates.
“Making sure a person is and continues to be a perpetual tourist is a matter of following the rules and being able to prove he or she was doing so. Thus, depending on the situation, careful record keeping can be extremely important,” said Cliff Oberlin, chairman and CEO of Oberlin Wealth Partners.
The situation becomes somewhat more complicated when the wealthy perpetual tourist seeks to manage his or her business enterprises and at the same time ensure a high-intensity lifestyle. For example, a super-rich perpetual tourist wanted a single-family office after deciding that the private banks he was relying on were gouging him and not matching his expectations. His major concern was being able to access just about all his resources and elite professional talent anytime and anywhere. Based on his requirements, the answer for him was a near-virtual single-family office.
Essentially, the structure consisted of six boutique accounting firms geographically dispersed. Each one is the cornerstone of his single-family office when he is in that geographic region. The accounting firms function, in part, as coordinators of a litany of external experts, many of which never know whom the ultimate client is. Many communications are encrypted to further ensure privacy. Also, a number of customized apps were created to speed up the communications.
“Virtual family offices are becoming the norm for the very wealthy," said Peter Sasaki, managing member of SDS Family Office and co-author of "Maximizing Your Single-Family Office: Leveraging the Power of Outsourcing and Stress Testing." "They can be adapted to any set of circumstances where the very wealthy want extensive control to help them address their financial and lifestyle concerns. We’re seeing wealthy families, who are considering the idea of becoming perpetual tourists, making extensive use of virtual family offices. The preference for virtual family offices persists even when they choose not to become perpetual tourists.”
While super-rich perpetual tourists might gravitate to virtual family offices, anyone considering becoming a perpetual tourist will likely be well served to engage professional advisors knowledgeable and experienced in this highly specialized area.
Russ Alan Prince, president of R.A. Prince & Associates, is a consultant to family offices, the ultra-wealthy and select professionals.
