From the Publisher's Desk
“When you need to borrow money the Mob seems like a better deal I think. 'You don't pay me back I break both yer legs.' Is that all? You won't take my house or wreck my credit rating? Fine where do I sign. Legs? Fine. You don't even have to sign anything. ”
- Craig Ferguson
Let's face it. Banking offshore today, especially for our American friends, is a royal pain in the gluteus maximus. Our missives
for this issue and last is all about going offshore and why it is
imperative to do so right away without delay.
Going Offshore Primer Part 2--Protecting What You've Got
In Part 1 of this Going Offshore series, you read about why opening
a bank account offshore can be the simple but effective first
step to diversifying your life offshore. Having some of your cash
outside your home country is a hedge against crisis in your home
country. It's prudent even in a stable environment, as you never
know when something might occur to challenge that stability.
Once you have your offshore bank account set up, you next should
consider protecting more of your assets more formally. The questions
then are how and where.
The answers depend on many factors including your longer term
plans for living, investing, and estate planning. You could
set up an offshore trust or foundation. Those are the two most
typical asset protection entities that can also fit into an estate
plan. Corporations and LLCs have their place, as well, again,
depending on what kinds of assets you're working with.
At a recent conference, someone asked why he should bother with an
offshore trust when a U.S. trust could also protect an American's
assets and wouldn't come with the extra tax compliance issues of an
offshore trust. In fact, a U.S. trust does come with its own tax
forms, just as a foreign trust would for U.S. persons. It's just
different forms and, indeed, can amount to more reporting given
the foreign assets typically found in a U.S. trust.
The more important point, however, is that a U.S. trust doesn't
provide an American with any asset protection. You as the beneficiary
of the trust could be compelled to use trust assets to comply
with a monetary judgment against you. A U.S. trust is typically
used for estate planning purposes. It is possible to form an asset
protection trust in the United States, in certain states, but the
rules associated with preserving the asset protection are strict
(and I wouldn't be surprised if some clever attorney couldn't find
a way to break this kind of trust).
A good example of breaking the asset protection barrier is an
IRA. This is supposed to be a protected asset. However, years ago,
judges in the state of Florida began forcing people with IRA funds
to use those funds to pay current judgments. It started with a
judgment against future withdrawals from the IRA. Then another
judge decided not to make the plaintiff wait and forced the IRA
beneficiary to take an early withdrawal from his IRA, triggering
penalties and tax consequences. So much for a protected asset.
Going offshore can offer layers of asset protection. First, a
plaintiff would have to find an attorney back home willing to take
on a lawsuit against you, knowing that it could be years before any
judgment could be enforced...if one ever could be enforced. While
most U.S. attorneys are willing to work on a contingency fee basis
to file a frivolous lawsuit for anyone who walks into their offices,
they are likely to require a big fat retainer from a client when
they realize the assets that client is going after are offshore
and therefore not easily gettable.
Second, enforcing a judgment in another jurisdiction is virtually
impossible if you set up your trust or other entity in the right
jurisdiction. The plaintiff's attorney, having won his case
against you in the United States, effectively would have to start
the action all over again in the jurisdiction where you have your
structure. For this fight, the plaintiff's attorney would have to
hire a local attorney, which is an additional cost.
Finally, with a proper trust structure set up by a qualified
U.S. attorney in a favorable trust jurisdiction, you should be able
to move the assets in question to another jurisdiction should they
come under attack.
Of course, an offshore trust doesn't make sense for everyone. You
have to have enough assets to protect to warrant the expense of
setting up and maintaining the trust. A reasonable baseline figure
for that is US$500,000.
What if you have fewer assets than that? You're not left totally
in the cold. You could still benefit from some asset protection
using an offshore corporation or LLC. These could help you to get
your assets offshore, which likely would, in many cases, keep that
attorney I spoke of earlier from filing his client's frivolous
lawsuit against you.
Which entity makes sense for you? That's a loaded question, as
there are few one-size-fits-all offshore solutions. This is a big
part of the reason why many people get stuck before they even get
out of the gate or, worse, make false starts in their efforts to
One reader I spoke with recently had set up a corporation in Panama
a few years ago because his friends said he should have an offshore
corporation. He had already bought real estate in Panama, so Panama
seemed the natural choice for where to base the corporation. Today,
the guy still has the corporation, but he hasn't done anything with
it...and he doesn't know what to do with it now. Having spoken with
him, I'd say that he doesn't need a Panama corporation or an offshore
corporation at all. He probably needs a trust, a foundation, or
maybe an LLC. The costs of creating and maintaining the corporation
for years are now sunk, and the poor guy has nothing worthwhile to
show for it.
Taking your life offshore isn't hard, but you do need a plan before
you begin creating random structures adhoc. Otherwise, you risk
wasting time and money (maybe a lot of money) on unneeded entities.
Click HERE for Going Offshore Primer Part I.
See you next issue
PS - Be sure to check out our latest report "How To Legally Move Large Amounts of Assets Abroad [without any filing requirements"].
"The people never give up their liberties but under some delusion."
- Edmund Burke, 1784
To access our past missives just click here.
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