Asset Protection

How to Protect Your Assets with the Wealth Preservation Fortress®

An excerpt from “Building Your Wealth Preservation Fortress®” by Alexander John Hay:

Although many people do not like to think about asset protection planning any more than they want to think about estate planning, the two are both very important and are related. Estate planning generally deals with how best to distribute your assets after death, asset protection planning has more to do with making sure you and your family get to keep what you have acquired now. This sounds simple enough, and often does not involve a great deal of effort to insure that your assets are safe and sound. However, in most cases people do not want to think about all the possible things that could cause them to lose everything they have worked so hard to create, and thus they often do not think about taking simple measures to preserve their assets from obvious and clear threats until it is too late.

The Reasons You Should Worry About Asset Protection

We live in a dangerous world, and our lives are punctuated by situations where we become liable to others for damages that may be beyond our ability to pay or otherwise resolve. A brief and non-exhaustive list of situations which often result in liabilities that destroy assets and wealth:

* Simple business transactions that have been entered into time and time again without problem can become typhoons of financial destruction due to changed conditions outside our control.
* Errors in judgment regarding simple matters that seem unimportant at the time.
* Mistakes committed by family and/or friends (or perhaps even by us).
* Family problems.
* Driving an automobile (even when we are insured and “protected”).
* Business transactions with trusted friends executed with a handshake.
* Bad luck.

It is very important that you review the possible risks you face in your personal and business life. Once this is done it is possible to determine what actions you need to take in order to protect your assets and insure that you and your family are protected. Not everyone is the same. Not everyone needs the same level of protection. It is for this reason that I have designed the Wealth Preservation Fortress®

[If you would like to read more, please click on the button to receive your Free ebook “Building Your Wealth Preservation Fortress®]

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How a US LLC can Uniquely Benefit a UK Resident

A prospective client approached me recently regarding the benefits of establishing a US Limited Liability Company (US LLC), becoming a non-resident of the UK, and in which order should he proceed. Due to the unique status of how the UK interprets US LLC status, residents of the UK can receive some very unique benefits if they neither incur US or UK “effectively connected income”. This was my answer:

Well I first must fully agree with you about non-res status. It can be a real deal changer. However, in your case it is not absolutely necessary, and I would feel free to proceed with a company formation prior to actually leaving the UK.

If you own a US LLC it will be treated very oddly because of the way that the US and the UK deal with how US LLCs are treated for tax purposes.

In the USA the default setting of the US LLC is “disregarded entity” which means it does not exist for US tax purposes. So if you do not live in the USA and you do not earn “effectively connect US source income” then you will owe no US taxes. In fact you will not even have to file tax returns. This will be the case even if you have a US bank account and do all your banking in the USA. Just receiving money in the USA, even if that money comes from US sources, does not create a tax liability. For that you need to do more; make things, store things, deliver things, maintain permanent offices and staff, etc. from inside the USA.

Now that all sounds pretty good! However, it only gets better for citizens of the UK. Even though the US considers the US LLC to be a “disregarded entity” the UK treats the US LLC as a separate entity. If the US LLC does no business in the UK and incurs no income in the UK then there will be no UK taxes due from the income earned by the US LLC. Now you will need to pay taxes on income you receive as a salary or profit distribution, but you will be able to provide yourself with many tax free benefits since the US LLC will have no taxes to pay anywhere. Money you do not distribute to yourself, or use for your personal benefit will be deferred taxation allowing you to further invest that money. Now it is wise to be careful about how you give yourself these “tax free benefits” since the UK may decide that what you are really doing is giving yourself income and then fraudulently evading taxes; not good. So don’t be greedy. If you are receiving real economic benefits while living in the UK then pay taxes on that income. Keep in mind that you get to choose how you get paid and can select the method with the least tax; profit distributions, salary, reimbursement for contract work, etc. You get to choose whatever is best for you, but again don’t be greedy.

This takes us to the interesting issue of how to really avoid UK taxes. Move out of the UK. I am not a UK attorney, and I do not even pretend to play one on TV, but it is my understanding that in order to gain full non-resident status you must do more than just leave the UK and stay out a certain number of days. You must also obtain a legal residency in some other country. In this regard there are a lot of interesting options out there.

I chose the Republic of Georgia for a number of reasons. For me it was mostly lifestyle issues and economic opportunities, but there are also a lot of tax benefits to be had here. Getting a residency is simple and easy, and it can lead to citizenship for some in under a year! I don’t know of any place else on earth where that is possible without some sort of ancestral claim or a huge investment in the country; at least not a country that I would actually want to be part of.

Some other interesting options that provide great tax benefits: Montenegro, Mexico, Malta, Latvia, etc. Each has its advantages and its disadvantages. Note, you do not necessarily have to live in the country that you have a residency. It might just be a legal formality so that you can claim non-res status. On the other hand it might be nice to combine the issue of tax status and where you like to live.

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