Back to the Future: Planning
for the Rest of your Life

Welcome to a special edition of A-Letter! Today's comment is by Chuck Dolce, who was our on-the-scene reporter at this past week's Offshore Advantage Academy on Paradise Island, The Bahamas.

Dear A-Letter Reader,

This past weekend wrapped up the Offshore Advantage Academy, here on Paradise Island, The Bahamas.

The event's grand finale was on Saturday, so at least you didn't have to worry about the latest piece of bad news hitting the markets. This momentary peace of mind made Saturday a great day to start planning for the future.

And our speakers had plenty of ideas including offshore annuities, insurance, retirement plans and the dreaded "T" word - taxes.

Again, the honorable Bob Bauman took the lead to try and shed some light on what can be extremely beneficial offshore solutions. They could be your answers to maximizing your privacy, protection and financial flexibility.

Access Those Juicy Offshore Profits, Protect Your Assets and Defer Taxes - all with One Solution

Annuities and life insurance, when set up offshore, can offer enormous advantages. You can use both as a "wrapper" for making certain global investments - which are not normally available to U.S. persons.

Annuities also offer significant benefits in the areas of increased asset protection. Issues such as fraudulent conveyances (improperly transferring money) are almost never an issue when dealing with them. They allow you to defer gains on much of your income and offer a much wider array of offshore investments.

The downside is that you can't exert direct control over your investments in these vehicles. There are potentially severe penalties for withdrawing your money before age 59 and loans against your annuity can be taxable as well.

Still, you can deal with these issues in other ways. And most importantly, the benefits in large part outweigh the drawbacks. The most important thing is to educate yourself as much as possible in all the details.

Life insurance has its own set of benefits as well. Certain policies offer tax-free buildup of capital that you also can borrow against. Typically, there are no explicit reporting rules regarding life insurance but it's important to note that if your policy is used as a wrapper for owning offshore securities, there may be requirements to report it as an offshore account.

Taking your capital offshore is often discouraged by U.S. advisors as well as the IRS for obvious reasons. It's in their interest to keep your money here. But reputable offshore custodians and trustees will help you easily and most importantly - safely - take your capital offshore. In fact that's the reason we're all here.

The Sovereign Society is a unique group that checks all the resources they offer their members. You can be sure that the advice you get from the experts here at the Offshore Advantage Academy is the best available.

Attend the Academy for Yourself -
at a Fraction of the Price

And there's still time to get all this information - the presentations, recommendations, slides, charts and graphs - for yourself at the special price I mentioned last week. For only US$127 you can get everything, including all the critical information from today on life insurance, annuities, retirement accounts and taxes. Don't let this deal slip away.

Marc Sola of NMG Financial Services touched on the most important thing you need to achieve your offshore investing goals - a holding structure that will optimize your investments and give you adequate access to offshore vehicles.

Too many times individuals attend conferences like these and leave with a head full of great new ideas only to find that implementing them becomes nearly impossible. To solve this Marc recommended using offshore life insurance companies to represent your interests. He offered five components that make up the ideal insurance holding structure as well as the five types of policies that can meet virtually all your needs.

Death, Taxes and...Death?

Our next three presenters moved onto the subject of taxation. Frankly, I find it ironic that all three concur that the United States - a country founded in opposition to the idea of punitive taxation - has evolved and now has the most complex and, in some cases, onerous tax codes in the world. The truth is, there's no easy way to discuss the depth of detail that each covered, but I'll give it a try.

Mark Nestmann, privacy expert with The Nestmann Group stepped to the plate first to discuss reporting requirements. The bottom line, unfortunately, is that if you are a U.S. citizen, you have to report all your worldwide income to some degree taxable. Even Non-Resident Aliens are limited to six months of residency in which they can report only U.S. income. After that, they become liable for their global income as well.

He offered a word of warning when looking at plans that claim they can somehow disconnect you from the U.S. tax system or turn gains into losses for tax purposes. According to Mark, avoid them like the plague. They are almost always scams.

The only way to completely disconnect from the U.S. tax code is to expatriate. Even that could carry enormous implications if you have a net worth of over US$2 million. And gains are gains in the eyes of the IRS and representing them as anything but will cost you more that the taxes you're trying to avoid.

But for investors looking to live offshore, there is the option of the Federal Earned Income Exemption. This tax break allows U.S. citizens living and working abroad to earn their first US$85,700 tax free. If you're married, that number goes up to US$171,400. This, of course is only a benefit if you're living in a low or zero-tax jurisdiction. Considerations to weigh carefully.

If You Want to Avoid Estate Taxes,
Better Plan to Die in 2010

Michael Chatzky of Chatzky and Associates took the podium to explain the ever-evolving tax code in 30 minutes or less.

He opened with an interesting description of federal estate taxes. In 2007 and 2008, there is an effective exclusion of US$2 million with a top tax rate of 45% for U.S. residents. In 2009, that exclusion expands to US$3.5 million. In 2010, the government is repealing the tax altogether for one year.

But in 2011, it gets reinstated as an exclusion of only US$1 million and a top tax rate of 60%. So for those of us planning to live past 2010, we'll have to look for other ways to reduce, delay or otherwise eliminate tax liabilities.

The good news is there are ways to accomplish this that can be tailored to your individual situation. The bad news is they can be very complex, spanning multiple countries' tax codes. To illustrate this, Michael debunked the commonly held misconception that owning stock in a foreign company does not automatically defer tax liability.

To determine your tax status in a foreign investment, you must determine if your interest is in a "controlled foreign corporation" or a "passive foreign investment company." Under the tax code, income from ownership in the latter is tax deferrable until you sell your holdings.

Eric Roseman expanded on reporting and tax liabilities for offshore investments. Purchasing certain offshore investments without a tax-deferred entity (like an annuity) or buying U.S. stocks in an offshore account can carry significant tax liabilities. Also, he gave another useful tip: If you're looking to trade U.S. securities in an offshore account, it is best to go to a foreign ETF on a U.S. sector.

Taking the Ultimate Offshore Step

The afternoon session covered more drastic measures than just investing offshore, obtaining a second passport and expatriating your home nation completely.

Bob Bauman again took the stage to get the ball rolling. Looking for the best locations to consider for offshore havens, he cited The Sovereign Society's own criteria that you can put to use yourself:

• Government Stability
  
  
• Legal and Judicial Stability
  
  
• The depth of available legal entities within the haven
  
  
• Financial privacy and banking secrecy laws (preferably ones that are required by law)
  
  
• Tax policies

Of course he named Switzerland as the number one haven in the world (though they are not the most favorable from a tax perspective). He went on to list the other 14 havens that the Sovereign Society recommends along with the strengths and weaknesses of each.

Mark Nestmann then took the podium again to discuss his other specialty, second citizenships. Many individuals considering a second passport may already be eligible without even knowing it. He explained that there are four main ways to get a second passport. One method is by making a financial contribution to your intended country. But you have to be very careful.

There are only three countries in the world that offer the ability to obtain a passport through investment. And beware of scams on the Internet and elsewhere that claims to be able to get you a foreign passport for US$25,000 or some such fee.

These papers are all illegal. Passports are only issued by governments, not private companies. And the penalties for using a fraudulent passport can be severe.

Moving to Reclaim Your Privacy...

Today in the U.S., there is simply no privacy anymore. A stark testament to this is the United States Banking Secrecy Act - a law that actually eliminates any remnants of secrecy.

To truly insure your privacy, protect your assets and take advantage of the broadest range of investment opportunities, you have to look offshore.

And you can still get all this incredible information with the Sovereign Society's Offshore Advantage Academy recordings. And for a fraction of the cost attendees paid. The whole conference can be yours for only US$127. I can tell you, the information you'll get from the tax portion of today's session alone would have cost me far more than that if I was talking to my accountant. Don't miss out on this opportunity.

It's been a tremendous four days here on Paradise Island. But it's back to reality soon. I think I'll pick up a souvenir or two on the way home. But the biggest thing I'll be bringing back with me are the recordings from the Offshore Advantage Academy. Make sure to get yours too.

It's been a blast reporting to you each day! Until next time...

Cheers,

Chuck Dolce
Your Conference Insider