The Pros and Cons of Dual Citizenship: Is it Worth It?

Becoming a citizen of another country can be a very appealing prospect. Many countries offer benefits to citizens that are not afforded to noncitizens—voting, free/low-cost healthcare and higher education, etc.—so it’s easy to see why dual citizenship is an attractive option.

But it’s not all benefits. There are some downsides that you may find outweigh the upside. Did you know that in countries like Norway and China, in order to become a citizen, you have to give up citizenship to all other countries? 

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Hence, today’s article, where we will discuss the pros and cons of dual citizenship so you can make an informed decision before jumping into the often lengthy, involved process of becoming a legal resident in another country.

Related: Questions to Answer Before Moving Out of the US

The Pros and Cons of Dual Citizenship

Having a life that spans two countries comes with many perks, but it has its legal and financial complications, a major one of which is estate planning. 

Pro: Estate Planning is Easier When You’re a Citizen

Having assets in multiple countries—whether it’s retirement accounts or bank accounts or property—can complicate things considerably and leave you vulnerable to major financial penalties if you don’t approach them correctly.

Not only that, your will (and health care directives and power of attorney) may not even be valid in other countries.

For these reasons, when you’re preparing for life as an expat, one of the most essential members of your financial team will be a good estate planning attorney that’s familiar with international issues and what wills are recognized in which countries. You may want to consider getting an estate planning attorney in both countries to ensure they both have a deep understanding of their respective estate planning laws.

Click here to download our ebook, “The Expat’s Guide to Financial Planning.”

If you and your beneficiaries are all citizens of the US, there should be no problems executing your will. The restrictions start kicking in when gifting assets to a non-citizen, even if that non-citizen happens to be your spouse. 

If you are both American citizens, then you can pass an unlimited amount of assets to your spouse without being taxed. This is known as the “marital deduction.” If your spouse is a non-citizen, then the marital deduction does not apply at all. 

And it doesn’t stop there. Estate tax kicks in at a much lower threshold when one spouse is a non-citizen than if you are both citizens. 

Of course, all of this depends on which country you’re living in. The US has estate and/or gift tax treaties with 16 countries, including Australia.

Related: Maintaining Relationships During an International Move

Con: Dual Citizenship Could Mean Dual Taxation for Americans

When it comes to moving abroad, you want to move deliberately, not hastily. Case in point: dual taxation.

As we said above, dual citizenship is an attractive prospect. You get to move freely between your home country and your new country. You and your children can enjoy full rights in both countries, which could mean anything from the right to vote to free college and health care, depending on where you’re moving. 

pros and cons of dual citizenshipBut it’s not without its issues. 

Being a full citizen in two countries could mean you are under the tax laws of two countries. While most countries tax based on where you currently reside, the US is one of only two countries in the world (Eritrea being the other) that taxes its citizens globally, no matter where you live. US citizens and permanent residents are required to pay taxes on their income, no matter where they live and work. 

Tax treaties have helped limit double taxation in many countries, including Australia. But even with a tax treaty, the IRS still requires you to file a US tax return every year (and no, you can’t give up your US citizenship for tax purposes!).

Pro: Low-cost (Possibly Free) Healthcare and Higher Education

Free healthcare and higher education are not really a thing in the US, but they are offered to citizens of many countries around the world. 

By earning citizenship in a country like Canada or the UK or Australia, you have access to very low-cost or even free healthcare. 

The average cost of health insurance for an Australian citizen is $2,000 per year. In the US, insurance costs nearly four times that, with an average pricetag of $7,470 per year. In addition, the average hospital stay in the US costs $11,700, as opposed to a little more than $5,000 in Australia.

Click here to download our ebook, “The Expat’s Guide to Financial Planning.”

Con: Becoming a Citizen can be a Long, Expensive Process

After you become a permanent resident in Australia—a process which can cost anywhere from $2,000 to $16,000—citizenship is still four years away. 

Of course, you can hire a Migration Agents Registration Authority (at a cost of anywhere from $150 to $6,000, depending on what kind of help you need) to help you walk through the process and potentially help you get through it faster.

As you can see, pursuing citizenship in another country is not as simple as it may sound. By weighing the pros and cons, we hope you are able to make the decision that is right for you.

Want to make sure you fully understand the pros and cons of an international move? Click here to schedule a consultation with Dr. Kim Hall, our Global Financial Planner.

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