A few weeks ago I went to the local mall here in Tartu to buy some dress clothes.  I am not what you would call a ‘suit kinda guy’.  But I was going to an investment conference in Zurich and thought the usual jeans and a t-shirt may be a bit too casual. 

Whenever I am at the malls in different countries, I enjoy looking around at what the locals spend money one.  In this mall of about 50 stores, there are 5 electronic stores and another 6 that sell mobile phones and accessories.  There are also shoe stores, clothing stores, luggage, jewelry, several food establishments, and a really nice bookstore.  Anytime I am at a mall, my thoughts go to consumption and taxation.

Lately I have been contemplating a major flaw in the US tax system.  We provide incentives for consumption and restrict production through our tax system.  Right now in the US if you put your money in a savings account you will earn less than 1% annually, not exactly a motivator to save.  And you can get a 30 year fixed mortgage on your house for 5% interest.  With money that cheap, that is a pretty good motivator to borrow.  We also have the highest corporate tax rate in the world and one of the highest personal progressive tax rates.  Companies are even taxed on dividends paid, and the investor is taxed again when he receives dividends!!!  We are taxing production and incentivizing consumption.

Contrast this with Estonia.  (Don’t get me wrong, they have their problems too, but the methodology of taxation is vastly different).  Estonian companies pay no corporate income tax!  If they retain earnings for reinvestment, there is zero tax.  Personal income is taxed at a flat 21% for all people regardless of level.  If a company pays shareholders dividends, they deduct the 21% from the dividend payment but the investor pays nothing additionally.  There is a 20% VAT (national sales tax) on all consumption.  You can borrow money at about 7% to buy a house, 20% to buy a car.  And you can earn 8% in your savings account.  The Estonian policymakers penalize you for consumption and reward you for savings.  Interesting concept…  Who do you think has a higher savings rate?

The point is the US tax system is backwards.  Just like the taxation of alcohol and cigarettes, the more you tax it, the less you get.  Do we want to keep taxing our productive activities like investing and saving money, and provide incentives for consumption?  Isn’t that what got us into this mess to begin with?

But more importantly, how do we profit from these situations and what is the implication for our asset protection planning?  Really, the options are virtually endless.  You can start by moving money into an offshore bank account and save and invest in another currency.  You can structure your business either domestically or offshore to provide you with the maximum tax advantages.  You can even move overseas to a low cost country where your money goes further.  In the near future I will discuss a couple of these strategies.

In the meantime, you should be considering how to implement your own asset protection planning strategy in order to minimize your risk and maximize your gain from this perverse tax system.  As stated before, there are several tools available to you depending on your level of wealth.  Call today for your free 30 minute consultation.

Today I want to share with you a couple of options for legally and safely getting your assets out of the US without the requirement of federal reporting.  There are really only two ways to do this.  Buy real estate or hold precious metals like gold outside of the US.  If you hold any other asset like cash, securities, private businesses, mineral rights, or anything else, the US wants to know what you are up to.  They want to know what you own, and what’s more, they want their piece. 

Real estate and precious metals are the exception here. By holding real estate or precious metals outside of the US, this gives you significant asset protection from creditors and government intervention.   To be clear though, for US citizens or residents, all worldwide income must be reported and is taxable regardless of where you live.  So if you own a beach house on the coast of Spain and rent it out for holiday, you must report the income. 

I have been recently acquainted with a man in Costa Rica who is developing a very interesting wellness resort and spa on 83 acres of forest surrounded by protected areas and a national park.  He has already built several residences, a wellness spa, a bed and breakfast, and will soon be opening several restaurants and a medical facility.  This is a great opportunity for someone looking to retire, have a second home, go on a vacation, or take advantage of investment opportunities.  Hugo, the owner, is looking for business partners to develop additional amenities like a hotel and restaurants.  With certain qualifications, Hugo has even offered to pay for your trip to check the place out.

At this point I have not visited Hugo’s place in Costa Rica.  I have read though his investment offering and I have looked extensively at his business plan.  It is very appealing.  I will be making a trip there later this year to put my boots on the ground.  I would encourage any of you that may have some interest to at least check it out.  Do your due diligence.  Hugo is even willing to pay for your  plane ticket.

Buying real estate outside of the US is a great way to hold assets and minimize your US holdings while diversifying at the same time.  As stated in previous newsletters, this is not for everyone.  If you are a small investor or business owner and uncomfortable with offshore holdings, you should just disregard this.  But for many of you reading this, you already have a vacation house, or are considering buying one, liquid investments like securities, business holdings, and are interested in ways to diversify your holdings while giving you options.  You are the ones who would benefit.

If you want to contact Hugo, please send me an email and I will forward you his contact details.  If you have further questions or would like to schedule a free 30 minute consultation, you can contact me by phone or email.  Live well.

Today I want to share with you my philosophical beliefs on capitalism and a free market in order to help you understand why asset protection planning is so important. 

Historically, capitalism has proven itself to be the only system that works efficiently, but it now seems the governments of the world are increasingly trying to regulate and tax us to the point where we give up and move to our own little Galt’s Gulch (for those of you that don’t know this term, this is from the book ‘Atlas Shrugged’ by Ayn Rand, and one of my personal favorites). 

I truly believe in the free market and it really irks me to read news headlines like “The Free Market Failure…”.  I believe this to be a myth.  We have not had a truly free market in a very long time.  The governments of the world tend to want to expand their power base and tax and regulate every sector of the market.

Fortunately, there are still opportunities to protect our assets from not only unscrupulous creditors, but also government influence.  I do not advocate tax evasion or avoidance of your financial responsibilities of any sort, but at some point, you need to realize where other parties have crossed the line and become a burden on your personal freedoms. 

In the US, we will likely reach a point soon where there will be currency controls and you won’t be allowed to move your money outside of the country and invest in world markets.  In 1933 President Roosevelt confiscated all publicly held gold and within a few short months, devalued the dollar effectively stealing the citizens’ wealth. 

We are still in the midst of the largest economic crisis in modern history and most likely there will be drastic protectionist policies put in place which will not be positive for those of you with wealth.

Entrepreneurs and investors are the growth drivers of our economy.  The creation and preservation of your wealth is what will continue to improve the prosperity of the world.  The governments’ social programs are not what the world needs for progress.  This is why asset protection planning is so crucial for economic progress in today’s world.

As a society, we need you to prosper in order to improve the living standards of all.  As the cliché goes, “a rising tide lifts all ships”.  This holds true in economics as well.  As the entrepreneurs and investors of the world increase their wealth, it improves the living standards of the whole society.

 Our firm’s mission is to provide asset protection planning that allow you to create and preserve your wealth and protect it from the two main threats of the modern world; taxes and litigation.  While not very altruistic by nature, I do want the world to prosper.  This is only achievable by allowing productive members of society to maintain and increase their wealth. 

Contact us today for your free 30 minute consultation.

I don’t usually repost other people’s blogs, but this one is pretty funny.  Please click through to read the remainder…

The Top Ten Reasons You Should Celebrate House Passage Of The Healthcare Bill

10) A nation that can afford trillions in deficits as far as the eye can see can surely afford hundreds of billions more. Right?

9) While many of Bart Stupak’s pro-life constituents might feel he has betrayed his pledge to guard the sanctity of life, they will be getting some nice new runway lights, which is kind of the same thing.  

It’s for the children. The 27-year-old children.

7) New taxes on interest income, dividends, and capital gains will surely spur a renaissance in job-creating investments.  As Paul Krugman might say, it’s textbook economics.

You can read the rest here…

If you are reading this blog, you know my focus is on asset protection planning.  Presumably we are also somewhat like-minded or else you would quickly tire of my rants.  My point being, this health care bill has a significant impact on your wealth.  And the longer you wait to act on creating an asset protection plan, the worse the problem will get.  It is highly likely that many avenues for creating offshore structures and offshore banking will be closed.

With nearly $1T pledged for this enormous bill, there are only 3 ways the federal government can pay for it; cut spending, raise taxes, or inflation.  And by inflation, I mean printing dollars.  Who here believes the Federal government will cut spending?  Anyone, anyone?  So basically we are looking at the destruction of your wealth through taxation and inflation.  If you don’t believe me, just read your old high school history books.  We only have to look as far back as the ’70’s to see what happened when we printed an extra $100B.  Tax rates skyrocketed and inflation was in the mid double digits.  And $100B now barely covers the congressional furniture and toilet seat budget…

I would like to say that I don’t mean to scare you, but I would be lying.  I want to scare you.  I want to scare you into action.  I personally believe that through true capitalism, the world prospers.  And people like you are the capitalists that make the world go ’round.  But we are on the verge of a major redistribution of wealth, and it won’t be redistributed into the hands of the productive members in society.

In the past coupl of years, public sector jobs have skyrocketed both in number and in pay.  Public sector jobs now average $11.90 per hour MORE than private sector jobs.  And the value of public sector benefits is nearly double.  The only large net employer over the past year has been in government.  Where do you think payroll funds come from?

Entrepreneurs and investors make money.  Bureaucrats consume it.  Period.  The productive members in society create and produce and the taxation from this production pays for government services.  With approximately 50% of the population now no longer paying taxes, we cannot continue on this path.  We are heading for major change.  Maybe not catastrophic, but certainly major change is coming.

And I want you to do something.  Protect your assets.  Protect yourself from litigation.  Protect yourself from over burdensome taxation.  Protect yourself from inflation.  I hope I have sparked some thoughts with you here and encourage you to take action.  Until next time, live well.