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.

If you have been reading my blog or newsletter for awhile, you can imagine my view on the new health care bill.  I realize this blog is primarily concerned with asset protection planning, so bear with me while I get to the ‘what’s in it for me’ question. 

I agree with most Americans that the current health care situation sucks.  It truly sucks.  It consumes 16% of our GDP and yet less than 10% of that figure actually trickles down to doctors.  Where is this money tied up?  Primarily in government regulations and litigation.  The mountain of filings and forms that must be filled out is truly a barrier to entry for any aspiring doctor.  Honestly, I cannot imagine wanting to become a doctor right now.

And the grand solution for this disaster?…..Wait for it….More government regulation.  Yes sir ladies and gentlemen, we are going to fix our problem of too much red tape, with more red tape.  3M should figure out how to capitalize on this.  A new analysis by the Joint Economic Committee and the House Ways & Means Committee just estimated that the IRS will add another 16,500 new jobs to examine and audit new tax information regarding the health care bill.  Excellent, just what we needed; more overpaid government workers to harass us each year about an already ridiculously complicated tax system that creates criminals out of citizens who are unable to decipher the code. 

As best I can tell, the CBO, congressional budget office, has yet to produce a reasonably accurate fiscal budget.  Much less predict the future 10 years out.  This new health care bill is proposed to cost taxpayers $938B, but somehow will reduce the deficit by $143B over the next decade.  Huh?  I don’t trust the accountants and economists one bit.  I mean, they never have been right, why start now.

This is a legitimate question and one I get frequently.  Many people are scared away by the term “offshore asset protection” thinking it involves something inherently illegal.  This is an unfortunate consequence of being bombarded by media.

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.

For many, this conjures images of the stereotypical Colombian drug lord laundering money in some offshore bank account in the Caymans. For others, it may bring forth images of former Enron executives with their money stashed away in Bermuda. And while this may be true for some, there are many legitimate entrepreneurs and investors at all levels who take advantage of legally protecting their assets from the very real threats that exist today.

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.

Our job is to provide you with relevant information and news as it relates to your assets.  We strive to seek out the information and relay it back to you in such a way, so you can make decisions on how to manage your wealth and your asset protection plan.  Many of you are likely individual investors and as  of last July, it seems David has won a small battle against Goliath.

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.