Dear A-Letter Reader:
If you have wealth, you need wealth protection. Just a few simple steps-plus some offshore advantages-can ensure your hard-earned assets remain yours and can be passed on to your family and loved ones.
#1) Keep a low profile. Owning assets in your own name is like chum in the water for the circling schools of lawsuit-happy lawyers and litigants. If people think you are rich, your chance of being sued skyrockets. One way to lower your profile is to not title your assets directly in your own name. Instead, use privacy-protected offshore corporations, family foundations or an asset protection trust (APT).
#2) Shrink the target. Let's say you own a number of rental properties. A tenant slips and falls at one of these places and decides to sue you. Unless you take precautions, total damages could amount to the value of ALL your rental properties.
Whether it's a rental property, a restaurant, or something else, segregate risks-consider creating a separate corporate entity for each liability-generating asset. Especially, never mix large liability-generating assets. For example, an apartment house should not be owned by the same company that owns a trucking company.
#3) Going offshore adds another layer of protection. Whether it's in a life insurance wrapper, retirement annuity or asset protection trust, placing your assets offshore puts them out of reach of most frivolous lawsuits. Even litigants with an ax to grind may be ready to settle for pennies on the dollar when they find out how difficult it is to locate and attempt to collect your money offshore.
For example, if you invest your retirement plan in a suitable jurisdiction-Switzerland, for instance-it can be configured to be essentially claim and judgment-proof.
#4) Avoid general partnerships. In this form of business, you're personally liable for all debts or other business liabilities the partnership incurs. Any general partner can commit the partnership (and hence every other general partner) to any legal contract (like taking out a loan). In today's litigious society, it's a high-risk way of doing business.
#5) Get Good Advice. Avoid pushy offshore hucksters-the ones claiming falsely that you can lower your tax bill to zero if you just put all your money in their "pure trust," a "constitutional trust" or a "corporation sole." Well, you might not pay any taxes, but only because these hoodwinkers will take all your money and run away with it. And you could go to jail.
Instead, work with carefully vetted bankers, investment advisors, financial experts, and legal professionals from select tax and asset haven jurisdictions. Always check references and do your homework on a service provider before sending them a single penny.
#6) Pass on your legacy with an offshore trust. In most cases, while an offshore trust will protect your assets, it won't reduce your tax bill.
However, an offshore trust can incorporate provisions that can reduce future estate tax liability. It can protect your wealth, notwithstanding efforts by the U.S. or other governments, to discourage legal offshore financial transactions and investments. Frivolous litigation, expensive legal defense costs, outrageous jury awards, and government privacy invasions all create an urgent need to protect your family and business wealth. An APT can do all that and more.
One important point to keep in mind; offshore trusts are effective only if the creator relinquishes all control over the trust, its assets and the trustee. Otherwise the APT may be declared to be a sham by a court or by the IRS or both.
#7) File those returns and reports. A certain path to asset loss is ignoring U.S. tax filing and reporting requirements or giving inaccurate or partial information. Virtually every nation now has "know your customer" laws that require bank account applicants to prove their identity, the source of their funds and their life story. Cash transfers of US$10,000 or more are reported electronically to the U.S. government. U.S. persons, on their IRS Form 1040, must say if they have an offshore account, and if activity therein exceeds US$10,000 an annual U.S. Treasury Form TD F 90-22.1 must be filed. Lying and failure to file these reports are separate felonies.
That's the way that it looks from here.
BOB BAUMAN, Editor
EDITOR'S NOTE: Today's comment was adapted from a previous edition of The Sovereign Individual, The Sovereign Society's members-only monthly newsletter. To try a risk-free membership, including a subscription to TSI, click here.