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A Backup Plan Beyond Taxes: How It Safeguarded a Family and Business from a Hurricane
Some of our clients seek the “fire insurance” of a second residence and citizenship as part of a “fire escape plan” with the sole motivation of reducing their tax burden. However, they are the exception rather than the rule.
Comprehensive Fire Escape Plans: More Than Just Tax Savings
Our clients normally want their “fire insurance” to be part of a comprehensive “fire escape plan” that addresses a wide range of concerns for themselves and their families:
- Protecting their assets over multiple generations
- Providing education and career opportunities for children
- Ensuring security for themselves and their families…to protect against economic, political, social and climate uncertainties
- Reconnecting with their family lineage
- Enhancing their lifestyle
….and yes, where appropriate managing their taxes
When we look back upon the many “fire escape plans”…what we call Backup plans…that we have prepared for our clients – always in close collaboration with their other trusted advisors – there are a few that stand out. In this series of blogs, I will give you some examples of prior situations where a Backup Plan was critical to preserving family wealth….and well-being.
Houston Bug Out: A Case Study in Disaster Preparedness
We put together a plan for a client in anticipation of a “possible” extreme weather event which dramatically demonstrates the value of adding an alternative home and business location element. This consideration is even more relevant in light of the dramatic increase in major climate catastrophes around the world.
Our client was a successful Texas-based oil entrepreneur who came to us with a keen eye on the future…hoping for the best but planning for the worst. Along with investigating his family’s possible EU country lineage citizenship claim, we put together a plan whereby he obtained a Work Permit in Canada, an open Work Permit for his spouse, and Student Permits for his school-age children. Understandably, it was essential that the acquisition of these immigration statuses DID NOT automatically make anybody in their family tax resident in Canada.
In addition to the Work and Study Permits, the client purchased a condominium in Toronto where the costs of mortgage, interest, insurance and condo fees would be more than covered by the rental income he would receive by renting it out through Airbnb. The client also set up in a satellite “mirror” back office of his US operations in Toronto with a part-time local employee and a linked computer server. Since he was aware that hurricanes were increasingly getting worse in the Gulf, as part of his planning he also ensured he had quality insurance policies to cover his Texas home and business in event of interruption.
Weathering the Storm: The Crucial Elements of the Houston Bug Out Plan
A few years later, in August 2017, the U.S. National Weather Service started to issue warnings that a Category 5 hurricane named Harvey was likely to hit Houston. Our client jumped into action…using the elements of his established plan. First, he cancelled upcoming Airbnb reservations on his condo and booked flights for himself and his family to Toronto. He also expanded his “mirror” office space and arranged for two of his key employees to temporarily relocate to Toronto. Since this was happening at the beginning of a new school year, my client quickly enrolled his high school age children in the pre-selected private schools for that school year…achievable only because the children already possessed valid Student Permits.
By the time Hurricane Harvey hit…rendering his home uninhabitable and shutting down his business…my client and his family were safely installed in their Toronto condo and able to continue with their personal and family lives uninterrupted. And his business was also able to operate seamlessly.
Some feel that this sort of climatic event feels too remote to require advance planning. In response, I point out that homeowners don’t get fire insurance on their houses because they are certain they will have a fire. Rather they recognize that a fire is possible and if they don’t have both fire insurance and a fire escape plan, the impact on their family wealth…and well-being… would be catastrophic. They also recognize that wildfires are breaking out more frequently and intensively. As residents of the eastern US recently discovered, one does not need to be in the fire zone to feel the impact.
Lessons from Natural Disasters: Why a Backup Plan Matters More Than Ever
This comparison recently became a reality for one of our client families. They have a home on Maui, Hawaii and had to evacuate when the wildfires scorched part of the island. While the fires did not reach their home, it underlined the importance of both insurance and an escape plan. Incidentally, this family’s international Backup Plan had been motivated by a desire to be able to live abroad should the US continue down a path that they feared. Specifically their desire for a Backup Plan was predicated on the increases in antisemitism, racism, political divisiveness and the resulting runaway political violence in the US which most dramatically has been manifested by the current plague of mass shooting events.
So if you are concerned about
- Protecting your assets over multiple generations
- Providing education and career opportunities for children or grandchildren
- Ensuring security for yourself and your family…to protect against economic, political, social and climate uncertainties
- Reconnecting with your family lineage
- Enhancing your lifestyle
….and yes, possibly looking at your current tax structures…please contact us directly or have one of your trusted advisors do so to discuss how a Backup Plan might work for you.
