Guarding his privacy with a fanaticism bordering on paranoia, the Perpetual Traveler would typically journey on a second passport under an assumed name. He would use post office boxes with no physical or forwarding addresses, and would always conduct business on a public pay phone to avoid snooping government agencies. He was a citizen of the world, with allegiance to none but himself.

He was also a man without a country because the key to his financial success was to stay on the run. Although no one knows exactly how many people ever successfully adopted this peripatetic lifestyle, the PT moniker became something of a legend among affluent individuals, particularly in the United Kingdom, where the tax rate approached 80 percent under the Labour government.

William* is a real-life example of a perpetual traveler. A native-born American who now travels on a Dutch passport, he tendered his U.S. citizenship in 2000 because he anticipated that the federal government would interfere in his oil refining and shipping businesses in the Caribbean. “I visited Cuba in the ’90s, and disagreed with what the U.S. was doing there,” he says, referring to the effects of decades-old sanctions that prohibit U.S. citizens and corporations from establishing economic ties with the communist nation. The Office of Foreign Assets Control, the arm of the Treasury Department that administers sanctions, came after any American trying to do business there, William says. “I never had any run-ins with them, and was in Cuba legally, but I wanted to get as far away from their jurisdiction as I could. I felt that I could not exercise my democratic right to travel with my passport. I wanted to do business with other countries that the United States has sanctions on.” William, who resides in the Netherlands Antilles, says he also has a moral problem with the IRS requiring Americans living abroad to file annual income tax returns.

In 1995, he and a friend drove to Laredo, Texas, and stopped at the border to Mexico. Crossing over proved an emotional hurdle. “I had this intense moment of doubt, and had to pull the car over. I wondered if I should really go through with it, or just turn around and drive back home.” At this point, however, he actually had no place to call home. William had spent the past year preparing to expatriate, deciding which nation would be the most potentially advantageous as a new home. He set up residence in the Antilles, moved his U.S. assets offshore and paid all outstanding taxes to the IRS.

TOP VIEW For most Americans, the idea of renouncing one’s citizenship is abhorrent. Yet impelled by financial, political or other reasons, a small number of Americans choose to become citizens of other countries each year. The U.S. government frowns upon expatriation, but it is legal. And while it may ultimately deliver some desired benefits, the decision to expatriate often comes with a substantial emotional price.

However, as he approached the border, he realized that he would be closing the door on his native country, one that might never freely open to him again. He pulled the car over, unable to proceed. “My friend said, ‘If you don’t cross this bridge, you’ll never go through with it. It’s now or never.’” William drove through the border crossing, flashed his U.S. passport to the Mexican immigration authorities, and five years later, after obtaining Dutch citizenship, surrendered the passport to a U.S. consular officer in the Caribbean. “To be honest, I felt like crying after handing it over,” he said. “It was one of the toughest things I’ve had to do.”

William’s life after expatriation, however, has been much less shadowy than that of Hill’s Perpetual Traveler. He first immigrated to a Dutch island that would give him a passport issued by the Netherlands, and beyond there, access to the European Union. “I figured if my business ever dried up, I could find a job in one of the EU member countries,” he says. “The last thing you want to do is be a stateless individual.” As a Dutch citizen, he can travel to the United States without a visa and stay up to 122 days a year.

Expatriate Acts EXPATRIATION—the act of formally relinquishing your U.S. citizenship and physically handing back your passport—is surprisingly simple. Under Section 349(a) of the Immigration and Nationality Act, those relinquishing their citizenship must appear in person at an American embassy or consulate in a foreign country and make a voluntary written renunciation of nationality. The State Department reviews all oaths of renunciation and must issue a Certificate of Loss of Nationality for it to be legally binding. Fewer than 1,000 Americans each year follow through with the expatriation process, and most are not necessarily tax-motivated or “taxpatriates,” notes Robert Bauman, legal counsel to the Sovereign Society, an association that promotes offshore investing within full compliance of U.S. tax laws. “Many are people who have married someone outside the country, or people with parents who were U.S. citizens but have no emotional or financial ties to the United States. Very few people expatriate for only tax reasons.” Those who do should begin by liquidating all U.S. assets, which can take up to several years. Then the individual must move to a no-tax foreign nation to establish residency and start the process for new citizenship, which can take anywhere from one to 10 years. Once a new passport, residence and domicile are secured, the individual surrenders his or her U.S. passport. The IRS, however, requires some expatriates to file U.S. income tax forms for 10 years and to pay taxes on U.S.-based assets if they have given up citizenship to avoid paying taxes. Also, the Illegal Immigrant Reform & Immigration Responsibility Act of 1996 gives the attorney general the right to block entry to former citizens who renounced citizenship to avoid taxation. The law, which lumps taxpatriates in the same category with terrorists, drug traffickers, prostitutes and polygamists, has yet to be enforced. “Then-Attorney General Janet Reno said she couldn’t think of how she could enforce it,” Bauman explains, “so it has been something of a paper tiger.” However, the fact that it remains on the books should be a consideration—if only a minor one—in the decision to expatriate.

But William has also experienced the downside of expatriation. Some members of his family disagree with his choice to leave the United States. His sister-in-law thinks it unpatriotic, and his mother worries what neighbors or friends of the family will think. If William ever decides to reapply for U.S. citizenship, he will have to submit to the same process as any naturalized alien. And the INS occasionally bars expatriates from reentering the United States, especially if they have handed over their passports to evade taxes.

A decade later, William harbors no regrets about his choice, which has boosted his business. “I can travel to more countries without a visa than an American can,” he says. “There’s no question that I’m better off financially. My tax rates are lower and I don’t have to file in the U.S. anymore. But more than anything, I just feel more free.”
the price of freedom

Many émigrés who hand in their passports are seeking greater independence. Some have strong libertarian leanings, while others vehemently disagree with government policies. David Lesperance, a Canadian attorney who counsels U.S. clients on tax and expatriation issues, notes that some of his clients are concerned about the possibility of the government drafting their children for service in Iraq. Most of them, however, simply want to protect their assets. Some call expatriation the ultimate estate plan, in the belief that once clear of the U.S. government, individuals can avoid income and estate taxes.

While most Americans view expatriation with disdain, they hold financially motivated expatriation in howling contempt. In 1994, Forbes ran an article on a group of wealthy U.S. citizens who had expatriated to preserve their estates for their heirs. These “taxpatriates,” as they came to be called, included the founder of Carnival Cruise Lines, Ted Arison, who kept his Israeli citizenship and moved back to Israel; billionaire John Dorrance III, an heir to the Campbell Soup fortune, who moved to Ireland and tendered his U.S passport; and Kenneth Dart, heir to Dart Container, whose fortune was valued at $1 billion at the time. He became a citizen of Belize and works in the Cayman Islands. Congress reacted to the subsequent outcry, rushing through a series of laws designed to make expatriation, particularly for the wealthy, more difficult.

Most affluent individuals who give up their citizenship move to either no-tax or low-tax countries (although under IRS rules, taxpatriates must pay U.S. taxes for 10 years after renouncing their U.S. citizenship) in order to avoid what they believe are unfair estate taxes. However, several attorneys interviewed for this article report that their expatriate clients move most of their assets offshore, making it tricky for the IRS to enforce its 10-year rule.

Anthony, whose family owned a specialty steel manufacturing business worth $30 million, says he decided to pursue expatriation when he realized that he wanted to leave most of his money to his children and grandchildren—not the federal government. Because the United States is the only developed nation with taxes based on citizenship rather than residency, Anthony knew that he could not simply leave the country and establish residency in a tax haven such as the Bahamas. He would still be liable for any dividends or investment income, and his estate would be subject to U.S. tax laws.

In the late 1990s, Anthony secured Grenadian citizenship for himself and his wife through a government passport purchase program (which has since been phased out) and took up residence in the Bahamas, where there is no estate tax. After moving his residence and domicile there, the couple relinquished their U.S. citizenship. Next, reluctant to stake his future on the relative insecurity of a country such as Grenada, he secured a permanent residence visa to Canada and moved there. He also set up a trust that, under a special exemption in Canadian law, allowed income and assets to remain tax-free for five years. The couple’s Grenadian passport with a Canadian permanent residence visa meant they could travel to the United States without a visa, and stay up to 122 days a year. After three years, Anthony and his wife acquired Canadian passports, gave up residence in Canada and moved back to the Bahamas.

This tactic provided the couple with the security and freedom of a Canadian passport, while their Bahamian residency precluded them from paying income and estate taxes after the five-year grace period ended. Anthony and his wife now spend up to six months each year in Canada, 122 days in the United States (any longer and they would be considered legal aliens who fall under U.S. tax law again) and the rest of their time in the Bahamas.

Still other expats have a philosophical ax to grind with U.S. policies. “I’m giving myself a birthday present next June and moving out of the U.S. for the rest of my life,” explains Michael, an heir to a long-established business fortune. “I am taking up residency in Ireland, a country that doesn’t invade other lands, and has no phony wars on drugs or terrorists.”

Michael explains that his motivations are partially tax-driven, but he also cites “threats to my wealth through lawsuits and other unjust laws in America” as additional reasons for his emigrating. He claims he pays thousands in legal fees each year for frivolous lawsuits.

While expatriation might indeed be the ultimate estate plan, it also borders on the unfathomable, and unforgivable, in the American psyche. After Michael announced his departure in the newsletter of the Sovereign Society, an association that promotes offshore investing, he received a string of hate mail—from fellow members. Some called him an economic Benedict Arnold, while others launched salvos that are unprintable. “Good riddance,” one penned. “Where and how did you accumulate your wealth and have the freedom to leave on your own free will? Once you’re on foreign soil, remember where your bread was buttered all these years.”

*Worth has changed the names of the individuals profiled in this article.

Additional Information
 Foreign Appeal

Michael Verdon, a resident of Rhode Island, is a senior correspondent for Worth. He also writes for Robb Report. michael.verdon@verizon.net.

Illustration by Stephen Webster