There is nothing illegal or immoral about offshore asset protection.  In reality, it is not even difficult or complex as many would have you believe.  In many cases it is as simple as establishing an offshore entity to own assets you already own like stocks, bonds, gold or private company stock.  In some cases it involves the use of trusts.

I have touched on the tax benefits and how that can be a significant benefit, so I won’t dive into that too deep here.  But if your business meets certain requirements, it is possible to move it offshore and defer taxation…indefinitely.  One of the biggest threats to your wealth is destruction through taxation and this tool can offer you the ultimate in offshore asset protection.

Aside from tax benefits, what are the other benefits?  The ‘what’s in it for me?’ question.  Another major threat to your wealth is litigation.  Litigation poses a huge threat and takes up an enormous amount of resources in the modern age.  In recent reports, litigation amounted to 2.3% of our GDP.  Think about that for a minute.  In 2009, the US GDP was approximately $14T, which means litigation cost US citizens and businesses about $322B.  To put that in perspective, Norway’s 2007 GDP was 391B. 

My point is, litigation is a very real threat to your wealth and a very large cost.  As your wealth grows, so does the size of the bulls-eye on your back.  This is why proper asset protection planning is critically important.  And an offshore strategy is not just for the super wealthy and criminals.  It can be for you as well.

Let me illustrate a simple example.  Fred owns a small business in rural Kansas.  Fred has owned it for many, many years and has accumulated about $2m that he has begun investing in the stock market.  Fred also owns a home with land in Kansas.  Fred has a nice life, a good income, and a fair amount of investments. 

If Fred is in a car accident and the other driver is injured, the plaintiff attorney, Lucifer, will want to find out what Fred is worth in order to determine if he is to pursue Fred beyond his insurance limits or just drop it there.  Lucifer finds out Fred owns a house, a business, and a $2m investment portfolio, all in Kansas.  Easy pickings.  Lucifer takes Fred to court, court issues judgment, and Fred is cleaned out.

Fred’s neighbor, Jacob, also owns a small business in Kansas.  Jacob also has amassed a $2m investment portfolio and a nice house in Kansas.  But Jacob has moved ownership of the shares of his business to his offshore entity.  His offshore entity also owns his investment account, which is held in a bank in Luxembourg.  Jacob’s house is owned by a NV LLC, and the NV LLC and the offshore entity are wrapped up into an Integrated Asset Protection Trust (IAPT). 

While Fred and Jacob are in similar positions, assuming Jacob also has a similar traffic accident, they are in much different situations after the accident.  First of all the plaintiff attorney, Lucifer, will likely find too many roadblocks in front of Jacob’s wealth to attempt to pursue.  Where does Lucifer file a lawsuit?  Kansas, where Jacob lives?  NV, where his LLC that owns his home is registered?  Belize, where his offshore entity is registered?  Luxembourg, where his investment portfolio is held?  or Cook Islands, where his trustee office is?  As you can see this is quite a dilemma and the roadblocks are many for poor Lucifer.  Meanwhile, Jacob is safe and sound at home, sleeping peacefully knowing his assets are well protected.

Don’t be Fred.

Asset protection, simply put, involves legally protecting your assets from the threats that prevail in today’s society. There are two main threats to your wealth; litigation and government interference.

In 2008, there were nearly 1.2 million lawsuits filed in the US. If you consider there are approximately 300 million people, half of them in the workforce, this leaves about 1.2 million lawsuits for every 150 million people. But from 150 million people, less than 20% of them are really at risk to lose something in a lawsuit. That leaves 30 million people at risk. In this simplified example, 1 in every 25 at risk people were sued in 2008. 1 in 25. Not very good odds…

Are you a real estate investor? You can count on that number going much, much higher. You just never know when your next tenant opens a meth lab in the basement and blows the house up and kills someone. Are your remaining assets at risk in this case? Are you willing to risk your entire future on an event of which you have no control?

Asset protection involves anything from simple domestic LLC, up to a complex strategy involving offshore trusts and IBC’s. The strategy varies widely and is very specific to each situation. This is where proper counsel is crucial. You don’t want to find yourself on the wrong side of the law with the government. But a properly developed asset protection strategy will protect your wealth for future generations and give you that much needed ’sleep at night’ insurance.

I will discuss government interference at another date as that is too deep of a topic for one reading. Until next time, live well.

You may have noticed in the past few months when you receive your shareholder ballots that if you don’t reply, your broker will send you several reminders asking for your vote.  I know I have noticed it.  And in years past, you received one notice requesting your vote and if you didn’t reply, that was the last you heard of it.

In July 2009, the NYSE Rule 452 was amended to disallow the automatic broker vote.  What  this means is that if you don’t vote, your broker cannot vote for you.  Pre-July 2009, if you didn’t vote, your broker could cast a vote on your behalf.  And 9 times out of 10, the broker would just vote yes to the board recommendations unless there was a major movement to oust executives.

Historically, only about 30% of the shareholder ballots are returned with a vote.  Which leaves 70% with no vote, and before last year, the broker likely just voted in favor of the board recommendations.  Now, without your vote, the broker cannot vote on your behalf, which makes your vote much more important.  This is great news for the small investor.  We actually have won a small battle against the Wall Street behemoths.

I have many clients inquire about trusts, but the number one question is “what happens if the trustee runs off with my money?”  This is a legitimate question, however the way our trusts are structured using LLC’s or IBC’s, it is impossible for the trustee to make decisions about your assets without your consent.  Let me illustrate a simple example;

Your stock trading account is owned by an LLC.  You are the manager of the LLC giving you full control of the use and allocation of these funds.  However, the trust is the legal owner of the LLC, thus eliminating your ownership of the funds held by the LLC.  The trustee is unable to make decsions without the settlor’s approval and you are the settlor.  In this scenario, you are the LLC manager and the settlor of the trust, but not the owner.  The trustee maintains title to the property until your demise, which at that point, your beneficiaries become the legal owners of the property.

As John D. Rockefeller said “own nothing and control everything”.  This is the ultimate goal and can easily be accomplished using an offshore trust.  By using an offshore trust, it keeps the trust assets outside the reach of US courts.  Unless there is a major crime or terrorism at play, countries like Belize and Cook Islands won’t recognize a US court ruling and thereby fully protecting your assets held within the trust.

Offshore trusts aren’t for everyone.  You must report ownership of any offshore trust to the IRS or risk severe legal penalties.  This reporting is not difficult, but it does create additional administration and for some, it isn’t worth the effort.  But if your assets have significant value and you want the ultimate in asset protection, offshore trusts are the ultimate tool.

Hugo is an interesting guy.  He holds a BS in Computer Science, a JD in General Law, an LLM in International Taxation, a Doctorate in Taxation, a Doctorate in Naturopathy, former CFP, and has traveled to over 100 countries.  Needless to say, he is experienced in international business. 

Recently I heard from Hugo.  Hugo is developing a Wellness Resort and Spa in Costa Rica near the Pan American Highway.  It is surrounded by huge national park and a wildlife refuge.  It is a very interesting concept with medical facilities, spa, hotel, bed and breakfast, and several restaurants.  And right now, Hugo is selling ten of these beautiful lakefront houses for $40,000.

To put the icing on the cake, Hugo has arranged easy, low cost financing for those able to put 30% down.  There will also be property management available for those interested in using this as an income property.  For the entrepreneurs, Hugo is looking for partners for the medical ventures and additional restaurants.  For anyone interested in an absolute bargain in a beautiful location, this deserves serious consideration. 

If you are interested, please send me an email and I will connect you directly with Hugo.  Live well.

Anyone truly interested in asset protection and diversifying your wealth should seriously take precautions and educate themselves on what is going on around them.  Whether you agree with this article or not, you should seriously consider the possibility that the author is correct in his assessment.  Our role in assisting clients with asset protection strategies involves the avoidance of risks that may befall you.  One of those risks is government interference.

Obama and ‘Redistributive Change’

Today I want you to be aware of Self-Directed IRA’s, or SDIRA’s.  Most people are unaware that you can not only manage your own IRA investments, but you can invest in whatevever asset class you chose.  Traditional IRA custodians are generally investment brokers and of course they want to sell you investment where they derive fees.  It is highly unlikely you will find an investment broker offering you commercial real estate, gold, oil field rights, vacation properties, or cattle as investment options.

But what if your very familiar with farming and you have a very good understanding of the cattle market?  This may be a very good investment for you, but your investment broker won’t sell you these types of investments and won’t allow them in your IRA.  But there is an option.

With a SDIRA (there is also a Self-Directed RothIRA but I will just group them together and call them both a SDIRA), you can invest in any asset class you wish.  You have full control of your assets and how they are managed.  Essentially, the way it works is the custodian assists you in forming an LLC which is owned by your IRA.  You become the manager of the IRA, giving you full control of the investment of funds.  You can then chose to invest this money as you see fit.  There are restrictions however, but they are minimal and certainly not a deterrent.

If you chose to buy rental properties, vacation properties, gold bullion or coins, tax lien certificates, private placement loans, or cattle – no problem.  Its your IRA and you are the manager.  There are a few custodians that are out there who can set this up for you.  One of them is a friend of mine, Steve.  He runs a company that helps his clients set up SDIRA’s (and Roth’s) in order for them to take control of their retirement savings.  Who do you think is more interested in your success – a mutual fund manager or you?  Steve can also convert your existing IRA or Roth into a SDIRA.

As I stated in yesterday’s article, 2010 is a great year to convert your  IRA into a Roth IRA.  You can take advantage of an  opportunity that  may not come again in your lifetime.  This can save you a huge amount of money over your lifetime in taxes.  And if you really want to supercharge your retirement savings, convert your IRA into a Self-Directed Roth IRA.  If you are interested in contacting Steve, please send me an email and I will provide the connection.  Live well.

The  federal government’s extreme misuse of taxpayer dollars may very well work out to be a huge opportunity for many.  Because of the astronomical deficits, the IRS has given one year opportunity for anyone to convert their IRA to a ROTH IRA.  I won’t go into details about the differences between them as you are either aware of it, or have access to a computer and can google it yourself.

Up until 2010, if you earned more than $100,000 per year, you were not allowed to convert to a ROTH.  This restriction is lifted for 2010 only.  Why would the government do this you may ask?  Short term tax revenues in a midterm election year, of course.  They are sacrificing long term tax revenue for short term gain.  If you have $100,000 in your IRA and convert to a ROTH, you will pay income taxes on the tax basis, for arguments sake, lets say you will pay $30,000.  Then your $70,000 can grow tax free forever and you can take distributions tax free.

As an added benefit, you don’t even have to pay the $30,000 in taxes in 2010.  You can make payments in 2011 and 2012.  Essentially the IRS is hoping many people convert in order to raise tax revenue over the next 3 years in lieu of the higher taxes they would collect when you reach retirement age.  I would highly suggest you seriously consider this option and talk it over with your CPA.

The Internal Revenue Service (IRS) intends to purchase sixty Remington Model 870 Police RAMAC #24587 12 gauge pump-action shotguns for the Criminal Investigation Division. The Remington parkerized shotguns, with fourteen inch barrel, modified choke, Wilson Combat Ghost Ring rear sight and XS4 Contour Bead front sight, Knoxx Reduced Recoil Adjustable Stock, and Speedfeed ribbed black forend, are designated as the only shotguns authorized for IRS duty based on compatibility with IRS existing shotgun inventory, certified armorer and combat training and protocol, maintenance, and parts.

You really have to wonder why they are buying more guns for their officers.  Or I guess I should say, why WE are buying more guns for IRS enforcement officers.  Are they concerned with their ability to collect all their proposed tax increases?  Do they really intend to show up in your office with an armed officer at your next audit?

With Obama’s $1.9T tax increase for the wealthy, maybe they plan on doing raids of your office before you flee the country with a suitcase of cash.  Who knows what they are thinking, but I seriously question my governments decision to force me to pay tax at the end of a gun.

If asset protection is important to you, now is the time to diversify.  Whether you pursue a domestic or an offshore asset protection structure, now is the time to act.  When your government is arming itself to collect your money, you should really take steps to protect your assets.  Live well.